PROFESSIONAL BUSINESS MANAGEMENT AGREEMENT
This Professional Business Management Agreement (the "Agreement") is made
and entered into effective as of May 25, 2003, by and between EyeMasters, Inc.,
a Delaware corporation ("Professional Business Manager"), and X.X. Xxxxxxxxxxx,
O.D. & Associates, P.C., an Arizona professional corporation (the "Practice").
R E C I T A L S
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A. The Practice and the Business Manager previously entered into that
certain Business Management Agreement, dated on or about February 26, 2000 (the
"Terminated Business Management Agreement"), pursuant to which the Business
Manager provided certain management services to the Practice at certain offices
located adjacent to optical retail stores operating in Arizona under the name
"EyeMasters";
B. The Terminated Business Management has been terminated, effective
April 23, 2003, in accordance with its terms and the parties hereto desire to
enter into a new management agreement, upon mutually acceptable terms, governing
the provision of management services at some, but not all, of the office
locations previously covered by the Terminated Business Management Agreement;
C. The Practice desires to provide Professional Eye Care Services to
the general public at office(s) located adjacent to certain optical retail
stores operating under the name "EyeMasters" in Arizona and engage the
Professional Business Manager to provide management services at such offices
(such office locations, each to be listed on Exhibit A as attached hereto and
amended from time to time, are hereinafter referred to as the "EyeMasters
Practice Locations");
D. The Practice desires to engage Professional Business Manager to
provide equipment and such management, administrative and business services as
are necessary and appropriate for the day-to-day administration of the
non-optometric aspects of the Practice's professional eye care practice at each
of the EyeMasters Practice Locations, and Professional Business Manager desires
to provide such, upon the terms and conditions hereinafter set forth, for the
purpose of enhancing the cost-efficiency and quality of services rendered by the
Practice to its patients.
NOW, THEREFORE, for and in consideration of the mutual agreements, terms,
covenants and conditions contained herein and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
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For the purposes of this Agreement, the following terms shall have the
following meanings ascribed thereto, unless otherwise clearly required by the
context in which such term is used:
1.1 Agreement. The term "Agreement" shall mean this instrument as
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originally executed and delivered, or, if amended or supplemented, as so amended
or supplemented.
1.2 Budget. The term "Budget" shall mean an operating budget and
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capital expenditure budget for each fiscal year as prepared in accordance with
Section 3.11(a).
1.3 Clinical Duties. The term "Clinical Duties" shall mean those
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duties of Non-Professional Personnel (as defined below) which entail directly or
indirectly assisting a Professional (as defined below) in the scheduling,
examination or care of patients in the course of providing Professional Eye Care
Services, regardless of whether the performance of such duties requires
licensure under applicable state law.
1.4 Confidential Information. The term "Confidential Information"
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shall mean any information of Professional Business Manager or the Practice, as
appropriate (whether written or oral), including all business management or
economic studies, patient lists, proprietary forms, proprietary business or
management methods, marketing data, fee schedules, or trade secrets of the
Professional Business Manager or of the Practice, as applicable, whether or not
such Confidential Information is disclosed or otherwise made available to one
Party by the other Party pursuant to this Agreement. Confidential Information
shall also include the terms and provisions of this Agreement and any
transaction or document executed by the Parties pursuant to this Agreement.
Confidential Information does not include any information that the receiving
party can establish (a) is or becomes generally available to and known by the
public or optometric community (other than as a result of an unpermitted
disclosure directly or indirectly by the receiving party or its affiliates,
advisors, or Representatives); (b) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the furnishing party
or its affiliates, advisors or Representatives, provided that such source is not
and was not bound by a confidentiality agreement with or other obligation of
secrecy to the furnishing party of which the receiving party has knowledge; or
(c) has already been or is hereafter independently acquired or developed by the
receiving party without violating any confidentiality agreement with or other
obligation of secrecy to the furnishing party.
1.5 Executive Office Administrator. The term "Executive Office
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Administrator" shall mean the employee of Professional Business Manager having
executive authority and responsibility for the general and active management of
the Professional Business Manager.
1.6 EyeMasters Practice Locations. The term "EyeMasters Practice
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Locations" shall have the meaning set forth in the Recitals.
1.7 GAAP. The term "GAAP" shall mean generally accepted United States
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accounting principles.
1.8 Management Fee. The term "Management Fee" shall mean the
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Professional Business Manager's compensation established as described in Article
V hereof.
1.9 Management Services. The term "Management Services" shall mean the
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business, administrative, and management services to be provided for the
Practice and the Office hereunder, including, without limitation, the provision
of equipment, inventory and supplies, support services, personnel (excluding
Professionals) management, administration, financial record keeping, and
reporting,
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and other business office services, all as reasonably contemplated by this
Agreement and which are necessary for the conduct of the Practice's business at
the EyeMasters Practice Locations.
1.10 Non-Professional Personnel. The term "Non-Professional
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Personnel" shall mean those individuals employed primarily at the Office who are
not Optometrists or Ophthalmologists.
1.11 Office. The term "Office" shall mean the facilities and locations
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used by the Practice with respect to the EyeMasters Practice Locations, all
business operations related to the Practice's optometric and/or therapeutic
optometric practice at the EyeMasters Practice Locations, and all related
business operations of the Practice which are to be administered by Professional
Business Manager under this Agreement.
1.12 Office Expense. The term "Office Expense" shall mean all direct
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out-of-pocket operating and non-operating expenses incurred by the Professional
Business Manager in the provision of Management Services to the Office and shall
include all operating and non-operating expenses incurred by the Practice
relating to the items set forth in this Section. The Professional Business
Manager shall be reimbursed by the Practice for any reasonable Office Expense
incurred by the Professional Business Manager in the provision of services to
the Practice hereunder, upon request by the Professional Business Manager.
Office Expense shall not include any Professional Business Manager Expense,
Practice Expense or Shareholder Expense or any state, local or federal income or
franchise tax. Without limitation, Office Expense shall include the following
expenses to the extent relating to the EyeMasters Practice Locations:
(a) comprehensive general and professional liability insurance
covering the Office, employees of the Practice in connection with the operation
of the Office and employees of Professional Business Manager in connection with
the operation of the Office;
(b) the expense of using, leasing, purchasing or otherwise
procuring and maintaining the Office premises (e.g., rent expense and related
charges);
(c) all expenses reflected in the budget that are not Professional
Business Manager Expenses, Practice Expenses or Shareholder Expenses;
(d) reasonable costs and expenses (to the extent not covered by
insurance) of lawsuits or claims against the Professional Business Manager or
its personnel, or the Practice, its Professional(s), or its other personnel
related to their performance of duties at the Office or their interest in assets
used in connection with the Office, provided that if any of the Professional
Business Manager or its personnel, or the Practice, its Professional(s), or its
other personnel do not prevail in the lawsuit or claim or settle the matter with
a material payment by the party (the party at "fault"), such costs and expenses
shall be deemed a Professional Business Manager Expense in the event of
Professional Business Manager's fault or the fault of its personnel and a
Practice Expense in the event of fault by the Practice, its Professional(s), or
its other personnel whereupon the Practice and such Professional(s) or other
personnel shall be jointly responsible for the immediate reimbursement of the
sums advanced by Professional Business Manager; provided further that
Professional Business Manager shall not advance such costs and expenses from the
Account if the Practice Advisory Council concludes that (i) it is unlikely that
the Professional Practice Account will be reimbursed if the party involved will
not prevail in the lawsuit or claim, or (ii) a reasonable
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third person would believe that obtaining a reimbursement of the advanced sums
will be difficult to achieve; and the Parties acknowledge that nothing in this
Section shall create any liability on the part of a Professional who would
otherwise be shielded from personal liability by the corporate or limited
liability structure of the Practice; and
(e) key person life and disability insurance premiums related to
policies which the Parties agree to acquire on the life of the Practice's
Shareholders or Professionals, whereupon any proceeds shall be paid to the
Professional Practice Account, unless the Parties agree to a specific split of
the proceeds. Should only the Practice choose to obtain key person life
insurance, the Practice shall pay all premiums as a Practice Expense and shall
receive all proceeds. Further, if only the Professional Business Manager
chooses to obtain such insurance, Professional Business Manager shall pay all
premiums as a Professional Business Manager Expense and shall receive all
proceeds. The Practice shall cause its Shareholders and Professionals to submit
to a medical examination necessary to obtain such insurance.
Expenses contemplated in this paragraph (other than Section 1.12(d)) shall
be in the Budget or approved by the Practice Advisory Council, and where
reasonably determinable, are intended to be reasonable and customary based upon
similar relationships generally existing between national practice management
companies and practices they manage. The expenses related to individuals who
are consultants of or employed by Professional Business Manager and who provide
services benefiting the Practice with respect to the EyeMasters Practice
Locations shall be borne by the Professional Business Manager and the
Professional Business Manager shall not be entitled to reimbursement therefore
(other than through the payment of the Management Fee). The Parties acknowledge
that certain expenses not specifically set forth above and associated with
performing the services hereunder may benefit both Parties or be difficult or
impractical to allocate between the Parties (e.g., utility costs, telephone
service costs, overhead charges, costs of personnel (other than Professionals
and Optical Technicians), costs of marketing materials and costs of equipment
provided hereunder). Accordingly, other benefits provided to the Practice, and
expenses incurred, by the Professional Business Manager, with respect to the
EyeMasters Practice Locations (other than Office Expenses, Professional Business
Manager Expenses, Practice Expenses or Shareholder Expenses) shall be
compensated through the payment of the Management Fee and the Professional
Business Manager shall not be entitled to reimbursement therefore.
Notwithstanding anything to the contrary herein, unless expressly designated as
a Professional Business Manager Expense, a Practice Expense or a Shareholder
Expense in this Agreement or any exhibit thereto, all direct out-of-pocket
expenses incurred by Professional Business Manager in providing services
pursuant to this Agreement shall be considered Office Expenses.
1.13 Optical Technicians. The term "Optical Technician" shall mean
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each optical technician employed by the Practice.
1.14 Optometrist. The term "Optometrist" shall mean each individually
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licensed Optometrist, if any, who is employed or otherwise retained by or
associated with the Practice, and shall meet at all times the qualifications
described in Section 4.3 and Section 4.4.
1.15 Ophthalmologist. The term "Ophthalmologist" shall mean each
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individually licensed Ophthalmologist, if any, who is employed or otherwise
retained by or associated with the Practice, and shall meet at all times the
qualifications described in Section 4.3 and Section 4.4.
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1.16 Parties. The term "Parties" shall mean the Practice and
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Professional Business Manager.
1.17 Permitted Shareholder Expense. The "Permitted Shareholder
-------------------------------
Expense" shall mean the amount equal to base salary of $200,000, employee
benefits, reasonable and customary professional dues, subscriptions, continuing
education and technical training expenses, and related payroll taxes as provided
to the Shareholder under the President's Employment Agreement described in
Section 4.3 hereof.
1.18 Practice. The term "Practice" shall have the meaning set forth in
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the Recitals.
1.19 Practice Advisory Council. The term "Practice Advisory Council"
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shall have the meaning set forth in Section 2.6 of this Agreement.
1.20 Practice Expenses. The term "Practice Expenses" shall mean, to
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the extent relating to the EyeMasters Practice Locations, (a) all reasonable
non-shareholder Professionals' and Optical Technicians' salaries, benefits,
payroll taxes and other direct costs related to their services to the Practice
(including reasonable and customary professional dues, subscriptions, continuing
education and technical training expenses, and severance payments), (b)
reasonable and customary professional liability insurance expenses of
Professionals; (d) reasonable travel costs for continuing education, technical
training and necessary business travel for non-shareholder Professionals and
Optical Technicians; (e) to the extent not covered by insurance and subject to
the advance provisions contained herein, the defense costs and expenses of any
litigation or claims brought against the Practice, its Professionals, or its
other personnel by any third party in which the Practice, its Professionals, or
its other personnel do not prevail or the matter settles with a material payment
and the Practice, its Professionals, or other personnel are at fault, and any
liability judgment or material settlement assessed against the Practice or its
Professionals or other personnel; (f) certain equipment expenses described in
Sections 3.2(c) and 3.2(d) of this Agreement; (g) interest on any funds advanced
to the Practice by Professional Business Manager to the extent that Professional
Business Manager is a net lender in accordance with the terms of this Agreement;
(h) any income taxes or franchise taxes of the Practice; and (i) consulting,
accounting, or legal fees which relate solely to the Practice or relate to a
dispute with Professional Business Manager. Notwithstanding the foregoing, the
term Practice Expenses shall specifically exclude (i) business travel requested
by Professional Business Manager, which shall be an Office Expense, (ii) any and
all compensation or expenses attributable to Shareholders, which shall be
Shareholder Expenses (except reasonable and customary expenses for malpractice
insurance which shall be a Practice Expense), (iii) "tail" insurance coverage
for Shareholders, which shall be a Shareholder Expense, or (iv) such other items
agreed to in advance in writing by the Parties hereto. During this Agreement,
for so long as a current Shareholder of the Practice is an employee of,
contractor to, or Shareholder of the Practice, such Shareholder shall be deemed
to be a Shareholder for the purposes of this definition. Such expenses are to
be approved annually in the Budget.
1.21 Professional. The term "Professional" shall mean any Optometrist
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or Ophthalmologist.
1.22 Professional Business Manager. The term "Professional Business
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Manager" shall have the meaning set forth in the Recitals hereto.
1.23 Professional Business Manager Expense. The term "Professional
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Business Manager Expense" shall mean an expense or cost incurred by the
Professional Business Manager, for which the Professional Business Manager is
financially liable and is not entitled to reimbursement from the Practice.
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Professional Business Manager Expense shall specifically include: (a) any income
or franchise taxes of the Professional Business Manager; (b) the expense of
providing, leasing, purchasing or otherwise procuring and maintaining the Office
equipment, including depreciation in the case of furniture and equipment; (c)
costs and expenses of the employees of the Professional Business Manager that
provide services at the Offices, (d) utility costs, telephone costs, marketing
materials and corporate overhead charges, and (e) any other expenses or costs
that are not reasonable and customary reimbursements based upon a national
practice management company's usual arrangement with a practice it manages.
1.24 Professional Eye Care Services. The term "Professional Eye Care
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Services" shall mean professional health care items and services, including, but
not limited to, the practice of optometry, and all related professional health
care services provided by the Practice through Optometrists, Ophthalmologists,
and other professional health care providers that are retained by or
professionally affiliated with the Practice.
1.25 Professional Practice Account. The term "Professional Practice
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Account" shall mean the bank account described in Section 3.10.
1.26 Representatives. The term "Representatives" shall mean a Party's
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officers, directors, managers, employees, or other agents.
1.27 Shareholder. The term "Shareholder" shall mean any current or
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future shareholder of the Practice.
1.28 Shareholder Expense. The term "Shareholder Expense" shall be
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limited to the following expenses: (a) Shareholders' salaries, benefits,
payroll taxes, and other direct costs as provided in the President's Employment
Agreement dated February __, 2000, as amended effective May 25, 2003 (including
reasonable and customary professional dues, subscriptions, continuing education
expenses, severance payments, and reasonable entertainment expenses and
reasonable travel costs for continuing education or other business travel but
excluding business travel requested by Professional Business Manager, which
shall be an Office Expense, and excluding any other expense of a Shareholder
approved as an Office Expense in advance by the Parties) provided that
Shareholders base salaries shall not exceed the sum of Two Hundred Thousand
Dollars ($200,000); (b) "tail" coverage malpractice insurance expenses for the
Shareholders and any malpractice insurance expenses of any Professional which
are in excess of those which are customary and reasonable; and (c) consulting,
accounting, or legal fees which relate solely to the Shareholders or relate to
any dispute with the Professional Business Manager. In addition to the
foregoing, "Shareholder Expenses" shall include any non-operating expenses of
the Practice, any extraordinary or unusual expenses of the Practice, any
unreasonable continuing education expenses, entertainment expenses or travel
costs and any costs or expenses with respect to requests by the Practice that
are not approved by the Professional Business Manager (e.g., costs of additional
Non-Professional personnel at the locations, costs of marketing or advertising
in excess of advertising proposed by the Professional Business Manager). In
determining whether to approve such excess expenditures requested by the
Practice, the Professional Business Manager shall use its judgment based upon
its experience in other professional management relationships. The Practice
shall reimburse the Professional Business Manager for any Shareholder Expense
incurred by the Professional Business Manager. Unless expressly designated as a
Management Fee, a Professional Business Manager Expense, an Office Expense, or a
Practice Expense in this Agreement or in any exhibit hereto or in any written
agreement of the Parties, any expense incurred by the
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Practice shall be considered a Shareholder Expense. Notwithstanding the above,
the Practice may require certain Professionals to pay certain expenses incurred
for them specifically. Nothing in this Section shall create personal liability
on the part of the Practice's Shareholders.
1.29 Term. The term "Term" shall mean the initial and any renewal
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periods of duration of this Agreement as described in Section 6.1.
ARTICLE II
APPOINTMENT OF PROFESSIONAL BUSINESS MANAGER
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2.1 Appointment. The Practice hereby appoints Professional Business
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Manager as its sole and exclusive agent for the management and administration of
the business functions and business affairs of the Office, and Professional
Business Manager hereby accepts such appointment, subject at all times to the
provisions of this Agreement. Notwithstanding any provisions in this Agreement
to the contrary, Professional Business Manager's duties, responsibilities and
authority hereunder shall only extend to the management of the EyeMasters
Practice Locations set forth on Exhibit A hereto, which may be amended from time
to time with the consent of the Practice and Professional Business Manager or as
provided in Section 6.2(c) hereof.
2.2 Authority. Consistent with the provisions of this Agreement,
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Professional Business Manager shall have the responsibility and commensurate
authority to provide Management Services for the Practice at the EyeMasters
Practice Locations. The Practice shall give Professional Business Manager
thirty (30) days' prior notice of the Practice's intent to execute any agreement
creating a binding legal obligation on the Practice to the extent relating to
the EyeMasters Practice Locations. The Parties acknowledge and agree that the
Practice, through its Professionals, shall be responsible for and shall have
complete authority, responsibility, supervision, and control over the provision
of all Professional Eye Care Services and other professional health care
services performed for patients, and that all diagnoses, treatments, procedures,
and other professional health care services shall be provided and performed
exclusively by or under the supervision of Professionals as such Professionals,
in their sole discretion, deem appropriate. Professional Business Manager shall
have and exercise absolutely no control, influence, authority or supervision
over the provision of Professional Eye Care Services.
2.3 Patient Referrals. Professional Business Manager and the Practice
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agree that the benefits to the Practice and to Professional Business Manager
hereunder do not require, are not payment for, and are not in any way contingent
upon the referral, admission, or any other arrangement for the provision of any
item or service offered by Professional Business Manager to patients of the
Practice in any facility, laboratory, center, or health care operation
controlled, managed, or operated by Professional Business Manager or upon the
referral, admission, or any other arrangement for the provision of any item or
service offered by the Practice.
2.4 Internal Decisions of the Practice. Matters involving the
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Practice's allocation of professional income among its Shareholders and the
Professional employees of the Practice, tax planning, and pension and investment
planning shall remain the responsibility of the Practice and the Shareholders of
the Practice. The Professional Business Manager may not and shall not directly
or indirectly control or attempt to control, dictate or influence, directly or
indirectly, the professional judgment, including, but not
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limited to, the level or type of care or services rendered, the manner of
practice, or the practice of the Practice or any Professional employed by the
Practice.
2.5 Practice of Optometry. The Parties acknowledge that Professional
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Business Manager is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of optometry. To the
extent any act or service herein required to be performed by Professional
Business Manager should be construed by a court of competent jurisdiction or by
the Board of Optometry to constitute the practice of optometry, the requirement
to perform that act or service by Professional Business Manager shall be deemed
waived and unenforceable. Although Professional Business Manager shall provide
Non-Professional Personnel to the Practice and Professional Business Manager
shall manage the administrative aspects of their employment, all
Non-Professional Personnel shall be subject to the direction, supervision, and
control of the Practice and its Professionals in the performance of any and all
Clinical Duties and in the performance of Clinical Duties shall not be subject
to any direction or control by, or liability to, Professional Business Manager.
Professional Business Manager may not and shall not control or attempt to
control, directly or indirectly, the professional judgment, the manner of
practice, or the practice of the Practice or any Professional employed by the
Practice. In this regard, Professional Business Manager shall not attempt to
dictate, influence, or control the scope, level, or type of Professional Eye
Care Services provided to patients of the Office, the frequency of patient
contacts at the Office (except to the extent necessary to establish the Budget),
the discipline of any Professionals who are Practice employees, the fees charged
for Professional Eye Care Services provided to patients of the Office (except to
the extent necessary to establish the Budget or negotiate managed care
contracts), or any other matter that impinges on the professional judgment of
the Practice or any Professional employed by the Practice.
2.6 Formation and Operation of the Practice Advisory Council. The
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Parties hereby establish a Practice Advisory Council which shall be responsible
for advising Professional Business Manager and the Practice with respect to
developing the Office and implementing management and administrative policies
for the overall operation of the Office and for providing dispute resolution on
certain matters. The Practice Advisory Counsel shall consist of four (4)
members. Professional Business Manager shall designate, in its sole discretion,
two (2) members of the Practice Advisory council or may have one (1) member with
two (2) votes. The Practice shall designate, in its sole discretion, two (2)
members of the Practice Advisory Council or may have one (1) member with two (2)
votes. The Practice Advisory Council members selected by the Practice shall be
full-time Professional employees of the Practice. Each Party's representatives
to the Practice Advisory Council shall have the authority to make decisions on
behalf of the respective Party. Except as may otherwise be provided, the act of
a majority of the members of the Practice Advisory Council shall be the act of
the Practice Advisory Council, provided that the affirmative vote of the
Practice member(s) shall be required on all votes of the Practice Advisory
Council relating to or affecting the provision of Professional Eye Care
Services. The decisions, resolutions, actions, or recommendations of the
Practice Advisory Council shall be implemented by Professional Business Manager
or the Practice, as appropriate.
2.7 Duties and Responsibilities of the Practice Advisory Council. The
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Practice Advisory Council shall review, evaluate, make recommendations, and
where specifically authorized herein and permitted by law, make decisions with
respect to the following matters, to the extent relating to the EyeMasters
Practice Locations:
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(a) Facility Improvements and Expansion. Any renovation and
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expansion plans and capital equipment expenditures with respect to the
Practice's facilities at the EyeMasters Practice Locations shall be reviewed by
the Practice Advisory Council which shall make recommendations to the Practice
with respect to proposed changes therein. Such renovation and expansion plans
and capital equipment expenditures shall be based upon economic feasibility,
optometry support, productivity and then-current market conditions.
(b) Marketing and Public Relations. The Practice Advisory Council
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shall review and make recommendations to the Practice with respect to all
marketing and public relations services and programs promoting the Practice's
Professional Eye Care Services and ancillary services rendered by the Practice
at the EyeMasters Practice Locations.
(c) Patient Fees; Collection Policies. The Practice Advisory
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Council shall review and make recommendations to the Practice concerning the fee
schedule and collection policies for all Professional Eye Care Services and
ancillary services rendered by the Practice at the EyeMasters Practice
Locations.
(d) Ancillary Services. The Practice Advisory Council must
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approve any new non-professional ancillary services to be rendered by the
Practice at the EyeMasters Practice Locations and the pricing, continuation of,
access to, and quality of such services.
(e) Provider and Payor Relationships. The Practice Advisory
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Council shall review and make recommendations to the Practice regarding the
establishment or maintenance of relationships between the Practice and
institutional health care providers and third-party payors, and the Practice
shall review and approve all agreements with institutional health care providers
and third-party payors. The Practice Advisory Council shall also make
recommendations to the Practice concerning discounted fee schedules, including
capitated fee arrangements of which the Practice shall be a party, and the
Practice shall review and approve all such capitated fee arrangements.
(f) Strategic Planning. The Practice Advisory Council may make
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recommendations to the Practice concerning development of long-term strategic
planning objectives for the Practice.
(g) Capital Expenditures. The Practice Advisory Council shall
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make recommendations to the Practice concerning the priority of major capital
expenditures, and shall review and approve any commitment to make any capital
expenditures relating to the Office involving amounts in excess of $15,000
individually, or $50,000 in the aggregate, in any one fiscal year, which amounts
may be increased from time-to-time by agreement of the Parties.
(h) Fee Dispute Resolution. At the request of Professional
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Business Manager or the Practice, the Practice Advisory Council shall make
recommendations to Professional Business Manager with respect to any dispute
concerning a set off or reduction in Management Fees.
(i) Grievances Referrals. The Practice Advisory Council shall
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consider and make recommendations to Professional Business Manager and the
Practice regarding grievances pertaining to matters not specifically addressed
in this Agreement as referred to it by Professional Business Manager or the
Practice's Board of Directors.
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(j) Termination of Professional Business Manager's Personnel. The
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Practice Advisory Council shall review and approve any decision by the
Professional Business Manager to terminate any of Professional Business
Manager's personnel primarily located at the Office who occupy office manager or
high level positions.
(k) Approval of New Offices or Dispensary. The Practice Advisory
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Council shall approve any move of any current Office location or expansion to an
additional Office location.
Except in those specific instances set forth above in which the Practice
Advisory Council has been granted the authority to make decisions binding upon
the Professional Business Manager and the Practice, it is acknowledged and
agreed that recommendations of the Practice Advisory Council are intended for
the advice and guidance of Professional Business Manager and the Practice and
that the Practice Advisory Council does not have the power to bind Professional
Business Manager or the Practice. Where discretion with respect to any matter
is vested in Professional Business Manager or the Practice under the terms of
this Agreement, Professional Business Manager or the Practice, as the case may
be, shall have ultimate responsibility for the exercise of such discretion,
notwithstanding any recommendations of the Practice Advisory Council.
Professional Business Manager and the Practice shall, however, take such
recommendations of the Practice Advisory Council into account in good faith in
the exercise of such discretion.
2.8 Professional Health Care Decisions. Notwithstanding anything herein
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to the contrary, all decisions required by applicable law to be made solely by
health care professionals will be made solely by the appropriate Professionals.
The Practice shall have ultimate and exclusive authority concerning issues
related to:
(a) The extent, type, availability levels, and scope of
Professional Eye Care Services to be provided (provided, however, that the
Practice Advisory Council shall have the authority set forth in Section 2.7(d)
with respect to non-professional ancillary services);
(b) The scheduling and availability of Professional Eye Care
Services;
(c) Recruitment of Professionals to the Practice, including the
specific qualifications and specialties of recruited Professionals;
(d) Any optometric related functions;
(e) Fee schedules;
(f) Frequency, volume and/or scheduling of patient encounters;
(g) The discipline of any Professionals or Non-Professional
Personnel with respect to the performance of Professional Eye Care Services or
Clinical Duties, as applicable; and
(h) Any other decisions required by applicable law to be made
solely by Professionals and not by non-Professionals.
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2.9 Meetings of the Practice Advisory Council. The Practice Advisory
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Council shall meet on a regular basis as mutually agreed by the Parties. A
special meeting of the Practice Advisory Council may be called by Professional
Business Manager or the Practice upon two (2) weeks' notice, except in the event
of an emergency, in which case a special meeting may be called by Professional
Business Manager or the Practice upon three (3) business days' notice. Meetings
may be held telephonically or by any other means agreeable to the Parties.
ARTICLE III
OBLIGATIONS AND RESPONSIBILITIES OF BUSINESS MANAGER
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3.1 Management Services. Professional Business Manager shall provide
--------------------
all Management Services as are necessary and appropriate for the day-to-day
administration of the business aspects of the Practice's operations at the
EyeMasters Practice Locations, pursuant to the terms of this Agreement.
Professional Business Manager shall operate in a reasonable and customary manner
with due consideration to the Practice's past business practices and shall
operate in accordance with all applicable laws, rules and regulations which are
necessary and material to the Professional Business Manager's performance of the
Management Services. Professional Business Manager will provide in good faith
and with due diligence its services consistent with management services
generally provided in the operations of optometric practice similar in size,
type and operations in the Practice Areas. All reasonable costs and expenses
related to Professional Business Manager's duties contained in this Article III
shall be Office Expenses unless limited or excluded as an Office Expense
pursuant to the terms of this Agreement. Subject to Section 6.2(c),
Professional Business Manager hereby consents and agrees to provide all
Management Services to all Office facilities and locations at the EyeMaster
Practice Locations; provided, however, that during the Term of this Agreement
the Practice shall not engage any individual or entity other than Professional
Business Manager to provide Management Services to the Practice at the
EyeMasters Practice Locations without the consent and approval of the Practice
Advisory Council.
3.2 Office, Facilities and Equipment.
-----------------------------------
(a) Professional Business Manager shall procure, for or on behalf
of the Practice, lease (or sublease agreements) for the EyeMasters Practice
Locations that are deemed by the Parties to be reasonable, necessary and
appropriate, and the expense associated therewith shall be an Office Expense.
Professional Business Manager shall consult with the Practice regarding the
condition, use and needs of Office facilities, offices and improvements. The
Practice shall pay when due all rents and expenses of the Office, including
without limitation expenses for leasehold or facility improvements. Such rents
and expenses shall be Office Expenses.
(b) To the extent required to provide Office space to the
Practice, Professional Business Manager shall negotiate and administer all
leases of and agreements for Office facilities at the EyeMasters Practice
Locations on behalf of the Practice, provided, however, that Professional
Business Manager shall consult with the Practice on all professional or clinical
matters relating thereto and that the Practice shall consent to any lease
negotiated by Professional Business Manager, which consent shall not be
unreasonably withheld. The Parties acknowledge that the initial rental payments
for the Office space at the EyeMasters Practice Locations shall be as set forth
on Exhibit A attached hereto. Notwithstanding any
11
provision in this Agreement to the contrary, Professional Business Manager shall
not have any duty or obligation to negotiate or enter into leases or subleases
on behalf of the Practice with respect to Office facilities that will have terms
in excess of the then current term of this Agreement and the Practice
acknowledges that such leases or subleases will be coterminous with this
Agreement.
(c) Professional Business Manager shall provide all equipment,
fixtures, office supplies, furniture and furnishings as are reasonable and
approved in the Budget for the operation of the Office and the provision of
Professional Eye Care Services at the EyeMasters Practice Locations. If the
Practice wishes to choose additional equipment, which the Professional Business
Manager determines not to acquire or lease, the Practice may acquire or lease
such equipment, and the expense related thereto shall be deemed a Practice
Expense.
(d) Professional Business Manager shall provide, finance, or cause
to be provided or financed health care related equipment as reasonably required
by the Practice with respect to the EyeMasters Practice Locations. The Practice
shall have final authority in all health care equipment selections; provided,
however, that if the Practice chooses to acquire health care equipment for the
EyeMasters Practice Locations which is not in the Budget and which Professional
Business Manager reasonably chooses not to acquire, expenses related thereto
shall be treated as a Practice Expense and such equipment shall be owned by the
Practice; provided further that following such acquisition or lease by the
Practice, if the Practice Advisory Council determines after a period of six
months of use such equipment is reasonably certain to result in material profit
to Professional Business Manager (taking into account the cost or expense and
anticipated revenues associated with such equipment) then Professional Business
Manager shall acquire such equipment from the Practice by either (at
Professional Business Manager's option), paying cash or by assuming the
liability associated with such equipment, or if such equipment is then being
leased by the Practice, by assuming such lease. In the event of such an
acquisition by Professional Business Manager, it shall reimburse the Practice
for previous expenses applied thereto. Notwithstanding any provision in this
Agreement to the contrary, the Practice acknowledges and agrees that the health
care related equipment currently at the EyeMasters Practice Locations and
provided under the Terminated Business Management Agreement is sufficient and
satisfactory for the operation of the EyeMasters Practice Locations. Except for
equipment which Professional Business Manager elects not to acquire or lease
which is acquired or leased by the Practice pursuant to Section 3.2(c) or (d),
all health care and non-health care equipment, other than Professional-owned
automobiles, acquired for the use of the Practice at the EyeMasters Practice
Locations shall be owned by Professional Business Manager and the depreciation
and related capital charge shall be a Professional Business Manager Expense.
Professional Business Manager may make recommendations to the Practice on the
relationship between its health care equipment decisions and the overall
administrative and financial operations of the Practice at the EyeMasters
Practice Locations.
(e) Professional Business Manager shall be responsible for the
repair and maintenance of the Office, consistent with the Practice's
responsibilities under the terms of any lease or other use arrangement, and for
the prompt repair, maintenance, and replacement of all equipment other than such
repairs, maintenance and replacement necessitated by the gross negligence or
willful misconduct of the Practice, its Professionals or other personnel
employed by the Practice, the repair or replacement of which shall be a Practice
Expense and not an Office Expense. Replacement equipment shall be acquired
where Professional Business Manager in good faith determines, in consultation
with the Practice, that such replacement is necessary or where the Budget has
made allowances for such replacement.
12
3.3 Health Care Supplies. Professional Business Manager shall order,
----------------------
procure, purchase and provide on behalf of and as agent for the Practice all
reasonable health care supplies relating to the EyeMasters Practice Locations
unless otherwise prohibited by federal and/or state law. Furthermore,
Professional Business Manager shall ensure that the Office is at all times
adequately stocked with the health care supplies that are necessary and
appropriate for the operation of the Office and required for the provision of
Professional Eye Care Services at the EyeMasters Practice Locations. The
ultimate oversight, supervision and ownership for all health care supplies is
and shall remain the sole responsibility of the Practice and all costs and
expenses relating to such supplies shall be an Office Expense. As used in this
provision, the term "health care supplies" shall mean all drugs,
pharmaceuticals, products, substances, items or devices whose purchase,
possession, maintenance, administration, prescription or security requires the
authorization or order of a licensed health care provider or requires a permit,
registration, certification or other governmental authorization held by a
licensed health care provider as specified under any federal and/or state law.
3.4 Support Services. Professional Business Manager shall provide or
-----------------
arrange for all printing, stationery, forms, postage, duplication or
photocopying services, and other support services as are reasonably necessary
and appropriate for the operation of the Office and the provision of
Professional Eye Care Services therein.
3.5 Quality Assurance, Risk Management, and Utilization Review.
----------------------------------------------------------------
Professional Business Manager shall assist the Practice in the Practice's
establishment and implementation of procedures to ensure the consistency,
quality, appropriateness, and necessity of Professional Eye Care Services
provided by the Practice at the EyeMasters Practice Locations, and shall
provide, administrative support for the Practice's overall quality assurance,
risk management, and utilization review programs relating to the EyeMasters
Practice Locations. Professional Business Manager shall perform these tasks in
a manner to ensure the confidentiality and non-discoverability of these program
actions to the fullest extent allowable under state and federal law.
3.6 Licenses and Permits. Professional Business Manager shall, on
----------------------
behalf of and in the name of the Practice, coordinate all development and
planning processes, and apply for and use reasonable efforts to obtain and
maintain all federal, state and local licenses and regulatory permits required
for or in connection with the operation of the Office and the equipment
(existing and future) located at the EyeMasters Practice Locations, other than
those relating to the practice of optometry or the administration of drugs by
Professionals retained by or associated with the Practice. The expenses and
costs associated with obtaining and maintaining permits with respect to the
Office shall be deemed Office Expenses.
3.7 Personnel.
---------
(a) Selection and Retention of Professional Business Manager's
--------------------------------------------------------------
Personnel. Except as specifically provided in Section 4.3 of this Agreement,
------
Professional Business Manager shall, in consultation with the Practice, employ
or otherwise retain and shall be responsible for selecting, hiring, training,
supervising, and terminating, all management, administrative, technical,
clerical, secretarial, bookkeeping, accounting, payroll, billing and collection
and other personnel (excluding Professionals and Optical Technicians) as
Professional Business Manager deems reasonably necessary and appropriate for the
operation of the Office at the EyeMasters Practice Locations and for
Professional Business Manager's performance of its duties and obligations under
this Agreement. Consistent with reasonably prudent
13
personnel management policies, Professional Business Manager shall seek and
consider the advice, input, and requests of the Practice in regard to personnel
matters. Professional Business Manager shall have sole responsibility for
determining the salaries and providing fringe benefits, and for withholding, as
required by law, any sums for income tax, unemployment insurance, social
security, or any other withholding required by applicable law or governmental
requirement. Professional Business Manager reserves the right to change the
number, composition or employment terms of such personnel in the future at
Professional Business Manager's discretion; provided, however, that the
termination of any of Professional Business Manager's personnel who occupy
office manager or high level positions, and are primarily located at the Office
must receive the approval of the Practice Advisory Council. Professional
Business Manager and the Practice recognize and acknowledge that Professional
Business Manager and personnel retained by Professional Business Manager may
from time-to-time perform services for persons other than the Practice. This
Agreement shall not be construed to prevent or prohibit Professional Business
Manager from performing such services for others or restrict Professional
Business Manager from using its personnel to provide services to others.
Professional Business Manager hereby disclaims any liability relating to the
effect of its employees on the qualification of the Practice's retirement plans
under the Internal Revenue Code, and all liabilities for such classification
shall be solely the responsibility of the Practice.
(b) Termination of Professional Business Manager's Personnel. If
---------------------------------------------------------
the Practice is dissatisfied with the services of any employee of Professional
Business Manager or any personnel under Professional Business Manager's
direction, supervision and control, at the EyeMasters Practice Locations, the
Practice shall consult with Professional Business Manager. Professional
Business Manager shall in good faith determine whether the performance of that
employee could be brought to acceptable levels through counsel and assistance,
or whether such employee should be relocated or terminated. All of Professional
Business Manager's determinations regarding Professional Business Manager's
personnel shall be governed by the overriding principle and goal of providing
high quality optometric and/or therapeutic optometric support services.
Employee assignments shall be made to assure consistent and continued rendering
of high quality optometric and/or therapeutic optometric support services. The
Professional Business Manager shall maintain established working relationships
wherever possible, and Professional Business Manager shall make every effort
consistent with sound business practices to honor the specific requests of the
Practice with regard to the assignment of employees. Notwithstanding that which
is contained in this Section 3.7(b), the Practice shall have the right and
obligation to determine the direction, supervision, and control of any personnel
while said personnel are involved in the performance of Clinical Duties at the
EyeMasters Practice Locations, including prohibiting said personnel from being
involved in the performance of Clinical Duties.
3.8 Contract Negotiations. Professional Business Manager shall
----------------------
evaluate, assist in negotiations and administer on behalf of the Practice
contracts relating to the EyeMasters Practice Locations that do not relate to
the provision of Professional Eye Care Services as set forth in this Agreement
and/or as approved in the Budget. To the extent permitted by law, Professional
Business Manager shall evaluate, assist in negotiations, administer and execute
on the Practice's behalf, all contractual arrangements with third parties as are
reasonably necessary and appropriate for the Practice's provision of
Professional Eye Care Services at the EyeMasters Practice Locations, including,
without limitation, negotiated price agreements with third-party payors,
alternative delivery systems, or other purchasers of group health care services.
The Professional Business Manager shall review and make recommendations to the
Practice regarding the establishment or maintenance of relationships between the
Practice (with respect to the EyeMasters Practice Locations) and institutional
health care providers and third-party payors, and the Practice shall review and
14
approve all agreements with institutional health care providers and third-party
payors. The Professional Business Manager shall also make recommendations to
the Practice concerning discounted fee schedules, including capitated fee
arrangements of which the Practice (with respect to the EyeMasters Practice
Locations) shall be a party, and the Practice shall review and approve all such
capitated fee arrangements. The Practice shall have the final authority with
regard to the entry into all such contractual arrangements relating to the
provision of Professional Eye Care Services at the EyeMasters Practice
Locations.
3.9 Billing and Collection As an agent on behalf of and for the
------------------------
account of the Practice, Professional Business Manager shall establish and
maintain credit and billing and collection services, policies and procedures,
and shall use reasonable efforts to timely xxxx and collect all fees for all
billable Professional Eye Care Services provided by the Practice, the
Professionals or other personnel employed or otherwise retained by the Practice
at the EyeMasters Practice Locations. In connection with the billing and
collection services to be provided hereunder, and throughout the Term (and
thereafter as provided in Section 6.3), the Practice hereby grants to
Professional Business Manager an exclusive special power of attorney and
appoints Professional Business Manager as the Practice's exclusive true and
lawful agent and attorney-in-fact (which shall be deemed revoked in the event of
termination for cause by the Practice), and Professional Business Manager hereby
accepts such special power of attorney and appointment, for the following
purposes to the extent relating to the EyeMasters Practice Locations:
(a) To xxxx the Practice's patients, in the Practice's name using
the Practice's tax identification number and on the Practice's behalf, for all
billable Professional Eye Care Services provided by the Practice to patients at
the EyeMasters Practice Locations;
(b) To xxxx, in the Practice's name using the Practice's tax
identification number and on the Practice's behalf, all claims for reimbursement
or indemnification from health maintenance organizations, self-insured
employers, insurance companies, Medicare, Medicaid, and all other third-party
payors or fiscal intermediaries for all covered billable Professional Eye Care
Services provided by the Practice to patients at the EyeMasters Practice
Locations;
(c) To collect and receive, in the Practice's name and on the
Practice's behalf, all accounts receivable generated by such xxxxxxxx and claims
for reimbursement, to administer such accounts including, but not limited to,
extending the time of payment of any such accounts; suing, assigning or selling
at a discount such accounts to collection agencies; or taking other measures to
require the payment of any such accounts; provided, however, that the Practice
shall review and approve (which approval shall not be unreasonably withheld) any
decision by Professional Business Manager to undertake extraordinary collection
measures, such as filing lawsuits, discharging or releasing obligors, or
assigning or selling accounts at a discount to collection agencies.
Professional Business Manager shall act in a professional manner and in
compliance with all federal and state fair debt collection practices laws in
rendering billing and collection services;
(d) To deposit all amounts collected on behalf of the Practice
into the Professional Practice Account which shall be and at all times remain in
the Practice's name. The Practice covenants to transfer and deliver to the
Professional Practice Account all funds received by the Practice from patients
or third-party payors for billable Professional Eye Care Services rendered at
the EyeMasters Practice Locations. Upon receipt by Professional Business
Manager of any funds from patients or third-party payors or from the Practice
pursuant hereto for billable Professional Eye Care Services rendered at the
EyeMasters
15
Practice Locations, Professional Business Manager shall immediately deposit the
same into the Professional Practice Account. Professional Business Manager shall
administer, be responsible for, and be obligated to pay for all Office Expenses;
provided, however, that Professional Business Manager shall only be liable for
Office Expenses to the extent of funds in the Professional Practice Account.
Professional Business Manager shall disburse funds from the Professional
Practice Account to creditors and other persons on behalf of the Practice,
maintaining records of such receipt and disbursement of funds;
(e) To take possession of, endorse in the name of the Practice,
and deposit into the Professional Practice Account any notes, checks, money
orders, insurance payments, and any other instruments received in payment of
accounts receivable of the Practice relating to the EyeMasters Practice
Locations; and
(f) To sign checks on behalf of the Practice, and to make
withdrawals from the Professional Practice Account for payments specified in
this Agreement. Upon request of Professional Business Manager, the Practice
shall execute and deliver to the financial institution wherein the Professional
Practice Account is maintained, such additional documents or instruments as may
be necessary to evidence or effect the special power of attorney granted to
Professional Business Manager by the Practice pursuant to this Section 3.9. The
special power of attorney granted herein shall be coupled with an interest and
shall be irrevocable except with Professional Business Manager's written
consent. The irrevocable power of attorney shall expire when this Agreement has
been terminated, all accounts receivable payable to Professional Business
Manager pursuant to this Agreement have been collected, and all Management Fees
due to Professional Business Manager have been paid. If Professional Business
Manager assigns this Agreement in accordance with its terms, the Practice shall
execute a power of attorney in favor of the assignee in a form acceptable to
Professional Business Manager.
3.10 Maintenance of Professional Practice Account.
------------------------------------------------
(a) Power of Attorney. Professional Business Manager shall have
-------------------
access to the Professional Practice Account solely for the purposes stated
herein. In connection herewith and throughout the term of this Agreement, the
Practice hereby grants to Professional Business Manager an exclusive special
power of attorney for the purposes stated herein and appoints Professional
Business Manager as the Practice's exclusive, true, and lawful agent and
attorney-in-fact, and Professional Business Manager hereby accepts such special
power of attorney and appointment, to deposit into the Professional Practice
Account all funds, fees, and revenues received from collection by Professional
Business Manager for Professional Eye Care Services rendered to patients of the
Office, and for all other professional and Office services relating to the
EyeMasters Practice Locations and to make withdrawals from the Professional
Practice Account for payments specified in this Agreement and as requested from
time-to-time by the Practice. Notwithstanding the exclusive special power of
attorney granted to Professional Business Manager hereunder, the Practice may,
upon reasonable advance notice to Professional Business Manager, draw checks on
the Account; provided, however, that the Practice shall neither draw checks on
the Professional Practice Account nor request Professional Business Manager to
do so if the balance remaining in the Professional Practice Account after such
withdrawal would be insufficient to enable Professional Business Manager to pay
on behalf of the Practice any Management Fee or reimbursement of any expense to
which Professional Business Manager may be entitled or any Office Expense,
Practice Expense or Shareholder Expense attributable to the operations of the
Office or to the provision of Professional Eye Care Services and/or any other
obligations of the Practice to the
16
extent relating to the EyeMasters Practice Locations. Limits on authority to
sign checks and purchase orders shall be mutually agreed upon by Professional
Business Manager and the Practice. The Parties acknowledge and agree that
Professional Business Manager may periodically sweep (e.g., withdraw all funds)
the Professional Practice Account for the purpose of managing the cash of the
Practice, such cash management to be in accordance with the Professional
Business Manager's own cash management practices.
(b) Payments from the Professional Practice Account. From the
---------------------------------------------------
funds collected and deposited by the Professional Business Manager in the
Professional Practice Account, the Professional Business Manager shall pay in
the following order of priority and in accordance with applicable requirements
under law or contract:
(i) any refunds owed to patients by the Practice;
(ii) all Office Expenses;
(iii) Practice Expenses (other than the cost of acquiring or
leasing equipment pursuant to Sections 3.2(c) and 3.2(d));
(iv) Permitted Shareholder Expenses;
(vi) the past due Management Fee compensation owed to the
Professional Business Manager pursuant to Section 5.1 hereof;
(vii) the current Management Fee compensation owed to the
Professional Business Manager pursuant to Section 5.1 hereof; and
(ix) all remaining Practice Expenses and Shareholder
Expenses.
The Parties acknowledge that all funds remaining after the foregoing
items are paid in full shall be the funds of the Practice, which funds may be
distributed by the Practice as additional bonuses or additional Shareholder
Expenses. Notwithstanding the foregoing priorities of payment, the Permitted
Shareholder Expenses (other than the expenses arising out of the President's
Employment Agreement) and other Shareholder Expenses shall be paid at the end of
each consecutive 12-month period of this Agreement unless otherwise consented to
by the Professional Business Manager.
(c) Additional Documents. Upon request of Professional Business
---------------------
Manager, the Practice shall execute and deliver to the financial institution
wherein the Professional Practice Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
power of attorney granted to Professional Business Manager by the Practice
pursuant to this Section 3.10. The special power of attorney granted herein
shall be coupled with an interest and shall be irrevocable except with
Professional Business Manager's written consent. The irrevocable power of
attorney shall expire when this Agreement has been terminated, all accounts
receivable payable to Professional Business Manager pursuant to this Agreement
have been collected, and all Management Fees due to Professional Business
Manager have been paid. If Professional Business Manager assigns this Agreement
in accordance with its terms, the Practice shall execute a power of attorney in
favor of the assignee in a form acceptable to
17
Professional Business Manager. Professional Business Manager shall not make any
withdrawal from the Professional Practice Account unless expressly authorized in
this Agreement.
(d) Payroll Account. A Practice payroll account in the name of
----------------
the Practice shall be established on behalf of the Practice for payroll to
non-shareholder Professionals of the Practice. Funds for this account shall be
received as Practice Expenses. The Practice, as employer of said
non-shareholder Professionals, and Professional Business Manager, as agent and
attorney of the Practice shall each have signing capacity to access the account
for payroll.
3.11 Fiscal Matters.
---------------
(a) Annual Budget. The initial Annual Budget shall be agreed upon
-------------
by the parties before the execution of this Agreement. Thereafter, annually and
at least thirty (30) days prior to the commencement of each fiscal year of the
Practice, the Professional Business Manager, in consultation with the Practice,
shall prepare and deliver to the Practice a proposed Budget, setting forth an
estimate of the Practice's revenues and expenses for the upcoming fiscal year
with respect to the EyeMasters Practice Locations. The Practice shall review
the proposed Budget and either approve the proposed Budget or request any
changes within twenty-one (21) days after receiving the proposed Budget.
Disputes concerning the Budget shall, at the request of either party hereto, be
submitted to the Practice Advisory Council. In the event the Parties are unable
to agree on a Budget by the beginning of the fiscal year, until an agreement is
reached, the Budget for the prior year shall be deemed to be adopted as the
Budget for the current year, with each line item in the Budget (with the
exception of the Management Fee which shall be established pursuant to the terms
of this Agreement) increased or decreased by one of the following, whichever is
most appropriate relative to the particular item of income or expense, (i) the
increase or decrease from the prior year in the Consumer Price Index -
Health/Medical Services for the relevant region; or (ii) the proportionate
increase or decrease in mutually agreed upon personnel costs as measured by the
increase or decrease in full-time-equivalent personnel. The Practice Advisory
Council may revise or modify the Budget from time to time during the applicable
fiscal year to reflect changing circumstances affecting the Practice.
Additionally, notwithstanding the above, no change in an adopted Budget shall be
contrary to the terms and spirit of this Agreement nor shall it have any effect
on the Management Fee expressly agreed to herein, unless approved in advance in
writing by the Parties hereto.
(b) Obligations of Professional Business Manager. Professional
-----------------------------------------------
Business Manager shall use commercially reasonable efforts to manage and
administer the operations of the Office as herein provided so that the actual
revenues, costs and expenses of the operation and maintenance of the Office
during any applicable period of the Practice's fiscal year shall be consistent
with the Budget.
(c) Accounting and Financial Records. Professional Business
-----------------------------------
Manager shall establish and administer accounting procedures, controls, and
systems for the development, preparation, and safekeeping of administrative or
financial records and books of account relating to the business and financial
affairs of the Office and the provision of Professional Eye Care Services at the
EyeMasters Practice Locations, all of which shall be prepared and maintained in
accordance with GAAP. The Practice shall have the right to inspect such records
and books of account at its expense at any time, upon reasonable notice to
Professional Business Manager. Professional Business Manager shall prepare and
deliver to the Practice (i) within sixty (60) days of the end of each of the
first three (3) fiscal quarters in each fiscal year, and (ii) within ninety (90)
days of the end of each fiscal year, a balance sheet and a profit and loss
statement
18
reflecting the financial status of the Practice in regard to the provision of
Professional Eye Care Services at the EyeMasters Practice Locations as of the
end of such period, all of which shall be prepared in accordance with GAAP
consistently applied. In addition, Professional Business Manager shall prepare
or assist in the preparation of any other financial statements or records as the
Practice may reasonably request.
(d) Sales and Use Taxes. Professional Business Manager and the
----------------------
Practice acknowledge and agree that to the extent that any of the services to be
provided by Professional Business Manager hereunder may be subject to any state
sales and use taxes, Professional Business Manager may have a legal obligation
to collect such taxes from the Practice and to remit the same to the appropriate
tax collection authorities. The Practice agrees to have applicable state sales
and use taxes attributable to the services to be provided by Professional
Business Manager hereunder treated as an Office Expense.
3.12 Reports and Records.
---------------------
(a) Health Care Records. All files and records relating to the
---------------------
operation of the Office, including without limitation, accounting, billing and
collection, and patient records shall at all times be and remain the property of
the Practice and shall remain under its possession, custody, and control.
Subject to the foregoing and to the extent permitted by applicable law,
Professional Business Manager shall, in consultation with the Practice,
establish, monitor, and maintain procedures and policies for the timely,
appropriate, and efficient preparation, filing, retrieval, and secure storage of
such records. Patient records shall be located at Office facilities so that
they are readily accessible for patient care. Patient records shall not be
removed from Office premises without the express written consent of the
Practice, except as specified herein. Patient records for patients not seen
within the last three years may be stored in a commercial storage facility or
other location Professional Business Manager shall designate, provided that
Professional Business Manager shall notify the Practice of the location of said
records. All such health care records shall be retained and maintained by the
Practice and the Professional Business Manager as agent for the Practice in
accordance with all applicable state and federal laws relating to the
confidentiality and retention thereof. In this regard, Professional Business
Manager shall use its best efforts to preserve the confidentiality of patient
records and shall use information contained in such records only as the agent
for the Practice and for the limited purposes necessary to perform the services
set forth herein.
(b) Other Reports and Records. Professional Business Manager
----------------------------
shall timely create, prepare, and file such additional reports and records as
are reasonably necessary and appropriate for the Practice's provision of
Professional Eye Care Services at the EyeMasters Practice Locations, and shall
be prepared to analyze and interpret such reports and records upon the request
of the Practice.
3.13 Recruitment of the Practice's Professionals and Optical
-------------------------------------------------------------
Technicians. Upon the Practice's request, Professional Business Manager shall
-
coordinate, supervise or perform all administrative services reasonably
necessary and appropriate to recruit potential Professionals and Optical
Technicians to become employees of the Practice at the EyeMasters Practice
Locations. It will be and remain the sole and complete responsibility of the
Practice to interview, select, contract with, supervise, control and terminate
all Professionals and Optical Technicians performing Professional Eye Care
Services or other professional services at the EyeMasters Practice Locations.
3.14 Confidential and Proprietary Information.
-------------------------------------------
19
(a) Professional Business Manager agrees that it shall not
disclose any Confidential Information of the Practice to other persons without
the Practice's express written authorization, that such Confidential Information
shall not be used in any way detrimental to the Practice, and that Professional
Business Manager will keep such Confidential Information confidential and will
ensure that its affiliates and advisors who have access to such Confidential
Information comply with these nondisclosure obligations; provided, however, that
Professional Business Manager may disclose Confidential Information to those of
its Representatives who need to know Confidential Information for the purposes
of this Agreement, it being understood and agreed by Professional Business
Manager that such Representatives will be informed of the confidential nature of
the Confidential Information, will agree to be bound by this Section, and will
be directed by Professional Business Manager not to disclose to any other person
any Confidential Information.
(b) Notwithstanding clause (a) above and subject to the
restrictions in clause (b) below, Professional Business Manager may share,
subject to the restrictions of this Section, with other professional
corporations, limited liability companies, associations, ophthalmology and
optometry practices, or health care delivery entities the practice statistics of
the Practice, including utilization review data, quality assurance data, cost
data, outcomes data, or other practice data. The Practice statistics and
confidential information may be disclosed within the Practice, to managed care
providers or other third party payors for the purpose of obtaining or
maintaining third party payor contracts or reimbursements, or to financial
analysts and underwriters; provided that any disclosure outside the Practice for
any purpose not related to managed care contracting shall not identify any
Professional by name without the Practice's consent and will not disclose or
divulge patient identifying information.
(c) Notwithstanding anything contained herein to the contrary,
Professional Business Manager shall comply with the requirements set forth in
the HIPAA Addendum attached hereto as Exhibit 3.14.
3.15 Professional Business Manager's Insurance. Throughout the Term,
-------------------------------------------
Professional Business Manager shall, as an Office Expense, obtain and maintain
with commercial carriers, through self-insurance or some combination thereof,
appropriate workers' compensation coverage for Professional Business Manager's
employed personnel provided pursuant to this Agreement, and professional,
casualty and comprehensive general liability insurance covering Professional
Business Manager, Professional Business Manager's personnel, and all of
Professional Business Manager's equipment in such amounts, on such basis and
upon such terms and conditions as Professional Business Manager deems
appropriate but which insurance is consistent with the insurance which is
maintained by the Practice pursuant to Section 4.5 of this Agreement.
Professional Business Manager shall cause the Practice to be named as an
additional insured on Professional Business Manager's professional, casualty and
comprehensive general liability policy. Upon the request of the Practice,
Professional Business Manager shall provide the Practice with a certificate
evidencing such insurance coverage. Professional Business Manager, in agreement
with the Practice, may also carry, as an Office expense, key person life and
disability insurance on any Shareholder or Professional employee of the Practice
in amounts determined reasonable and sufficient by the Professional Business
Manager. Professional Business Manager shall be the owner and beneficiary of
any such insurance. Should only the Practice choose to obtain key person life
and disability insurance, the Practice shall pay all premiums as a Practice
Expense and shall receive all proceeds. Further, if only the Professional
Business Manager chooses to obtain such insurance, Professional Business Manager
shall pay all premiums as a
20
Professional Business Manager Expense and shall receive the proceeds. The
Practice shall cause its Professionals to submit to a medical examination
necessary to obtain such insurance.
3.16 No Warranty or Representations. The Practice acknowledges that
---------------------------------
Professional Business Manager has not made and will not make any express or
implied warranties or representations that the Management Services provided by
Professional Business Manager will result in any particular amount or level of
income to the Practice. Specifically, Professional Business Manager has not
represented that its Management Services will result in higher revenues, lower
expenses, greater profits, or growth in the number of patients treated by the
Practice's Professionals.
3.17 Marketing and Public Relations. Professional Business Manager
---------------------------------
acknowledges that the Practice desires a public relations program to enhance its
optometric and/or therapeutic optometric practice and to extend the Office's
ability to provide Professional Eye Care Services to patients at the EyeMasters
Practice Locations. Subject to the Practice's approval, Professional Business
Manager shall design and implement an appropriate public relations program on
behalf of the Practice, with appropriate emphasis on public awareness of the
availability of Professional Eye Care Services at the EyeMasters Practice
Locations. The public relations program shall be conducted in compliance with
applicable laws and regulations governing advertising by the ophthalmological
and optometric professions.
3.18 Acquisition of Services and Supplies. In obtaining services,
----------------------------------------
supplies and personnel for or on behalf of the Practice pursuant to this
Agreement, Professional Business Manager shall be authorized to obtain such
services, supplies and personnel from an affiliate of Professional Business
Manager provided that the Office Expenses which are incurred by or on behalf of
the Professional Business Manager shall be consistent with the expenses of
optical dispensaries similar in size, type, and operations in the area in which
the Practice operates.
ARTICLE IV
OBLIGATIONS AND RESPONSIBILITIES OF THE PRACTICE.
------------------------------------------------
4.1 Professional Services. The Practice shall diligently conduct the
----------------------
business of an optometric and/or therapeutic optometric practice, including
utilizing its capacities to the greatest extent practicable to provide
Professional Eye Care Services to patients of the Office at the EyeMasters
Practice Locations. The Practice shall have the obligation to provide customary
services of fitting and training to contact lens patients, including but not
limited to, training with respect to the insertion and removal of contact
lenses. The Practice shall retain that number of Professionals at the
EyeMasters Practice Locations as are reasonably necessary and appropriate in the
sole discretion of the Practice for the provision of Professional Eye Care
Services at the EyeMasters Practice Locations and shall determine their
assignment and scheduled hours of practice at the EyeMasters Practice Locations.
The Practice shall provide Professional Eye Care Services to the Office's
patients in compliance at all times with ethical standards, laws, and
regulations applying to the optometric and/or therapeutic optometric
professions. The Practice shall ensure that each Professional associated with
or employed by the Practice to provide optometric and/or therapeutic optometric
care to the Office's patients at the EyeMasters Practice Locations is licensed
in each jurisdiction in which he or she provides such services. The Practice
shall establish and implement a program to monitor the quality of Professional
Eye Care
21
Services provided at the EyeMasters Practice Locations (the "Continuous Quality
Improvement Program"). The Continuous Quality Improvement Program shall be
designed to promote and maintain quality care consistent with accepted practices
prevailing from time to time in the area where each EyeMasters Practice Location
is situated.
4.2 Optometric and Therapeutic Optometric Practice. The Practice shall
----------------------------------------------
use and occupy the Office for the provision of Professional Eye Care Services
and shall comply with all applicable local rules and ordinances and all
standards of optometric and/or therapeutic optometric care. It is expressly
acknowledged by the parties that the optometric and/or therapeutic optometric
practice or practices conducted at the Office shall be conducted solely by
Professionals employed by or under contract with the Practice, and no other
Professional shall be permitted to use or occupy the Office without the prior
written consent of Professional Business Manager.
4.3 Employment of Professionals and Optical Technicians. Subject to Section
----------------------------------------------------
3.13 hereof, the Practice shall be responsible for the hiring, compensation,
supervision, evaluation, and termination of all Professionals and Optical
Technicians at the EyeMasters Practice Locations. At the request of the
Practice, Professional Business Manager shall be available to consult with the
Practice respecting such matters. The Practice shall be responsible for the
payment of such Professionals' and Optical Technicians' salaries and wages,
payroll taxes, benefits, and all other taxes and charges now or hereafter
applicable to them. The Practice shall employ and contract only with licensed
Professionals who meet applicable credentialing guidelines established by the
Practice. The Practice shall not in any fiscal year contract in the aggregate
with Professionals and Optical Technicians for an amount (including the cost of
associated benefits, payroll expense, and professional liability coverage) which
is greater than the amount provided for such purpose in the Budget for such
fiscal year. The Practice represents, warrants and covenants that, if requested
by the Professional Business Manager, on or before ninety (90) days from the
date of such request, it will use its best efforts to obtain, shall in the
future obtain, and shall enforce formal written employment agreements from each
of its present full-time (an average of thirty (30) or more hours per week)
Professionals, except for the President of the Practice, and those employed in
the future in the form mutually acceptable to the Practice and the Professional
Business Manager ("Employment Agreement") containing a restrictive covenant (the
"Restrictive Covenant"). The Practice further represents, warrants and
covenants that the President of the Practice has entered into an Employment
Agreement dated on or about February 26, 2000, as amended effective May 25,
2003, in the form attached as Exhibit 4.3B to the Terminated Management
Agreement, which agreement is currently and shall remain in force and effect
during the term of this Agreement without amendment unless terminated in
accordance therewith. The President shall devote his full time and attention to
the operation of the Practice and shall not provide optometric services other
than at the EyeMasters Practice Locations. The Parties acknowledge that the
primary duties of the Optical Technicians will be to assist the Professionals
with Professional Eye Care Services. If requested by the Professional Business
Manager, and the Practice in its reasonable discretion determines that time
permits, such Optical Technicians may from time to time perform services which
benefit the optical retail location adjacent to the EyeMasters Practice
Location, provided that at all such times the Optical Technicians shall remain
under the control and supervision of the Practice. In no event shall the
Practice or any of the Optical Technicians be entitled to any compensation or
reimbursement for such services provided by the Optical Technicians.
22
4.4 Professional Standards. As a continuing condition of Professional
-----------------------
Business Manager's obligations hereunder, each Professional and any other
Professional personnel retained by the Practice to provide Professional Eye Care
Services at the EyeMasters Practice Locations must (i) have and maintain a valid
and unrestricted license to practice optometry or ophthalmology in the
jurisdiction in which such Professional provides services, (ii) comply with, be
controlled and governed by, and provide Professional Eye Care Services in
accordance with, applicable federal, state and municipal laws, rules,
regulations, ordinances and orders, and the ethics and standard of care of the
optometric community wherein the Office is located, and (iii) provide on a
continual basis, quality care to its patients.
4.5 Practice's Insurance. The Business Manager shall, as a Practice
---------------------
Expense, obtain and maintain with commercial carriers chosen by the Practice
appropriate workers' compensation coverage for the Practice's employed
personnel, if any, and professional and comprehensive general liability
insurance covering the Practice and each of the Professionals involved in the
provision of Professional Eye Care Services. The comprehensive general
liability coverage with respect to each of the Professionals shall be in the
minimum amount of One Million Dollars ($1,000,000) and professional liability
coverage shall be in the minimum amount of One Million Dollars ($1,000,000) for
each occurrence and One Million Dollars ($1,000,000) annual aggregate. The
insurance policy or policies shall provide for at least thirty (30) days'
advance written notice to the Practice from the insurer as to any alteration of
coverage, cancellation, or proposed cancellation for any cause. Upon the
termination of this Agreement for any reason, the Practice shall continue to
carry professional liability insurance in the amounts specified herein for the
shorter period of (i) the period set forth in Arizona's statute of repose (or if
no statute of repose exists, Arizona's statute of limitations) for bringing
professional malpractice claims based upon injuries which are not immediately
discoverable plus any applicable tolling periods, or (ii) ten (10) years after
termination; or if the Practice dissolves or ceases to practice optometry, the
Practice shall obtain and maintain as a Practice Expense "tail" professional
liability coverage, in the amounts specified in this Section for the shorter
period of (i) the period set forth in Arizona's statute of repose (or if no
statute of repose exists, Arizona's statute of limitations) for bringing
professional malpractice claims based upon injuries which are not immediately
discoverable plus any applicable tolling periods, or (ii) ten (10) years. The
Practice shall be responsible for paying all premiums for Shareholder "tail"
insurance coverage and such coverage shall be a Shareholder Expense; provided,
however, that the Practice may cause its Professionals to be responsible for
paying the premiums for such "tail" insurance coverage.
4.6 Confidential and Proprietary Information. The Practice agrees that
-----------------------------------------
it shall not disclose any Confidential Information of the Professional Business
Manager to other persons without Professional Business Manager's express written
authorization, such Confidential Information shall not be used in any way
detrimental to Professional Business Manager, and the Practice will keep such
Confidential Information confidential and will ensure that its affiliates and
advisors who have access to such Confidential Information comply with these
nondisclosure obligations; provided, however, that the Practice may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Agreement, it being understood
and agreed by the Practice that such Representatives will be informed of the
confidential nature of the Confidential Information, will agree to be bound by
this Section, and will be directed by the Practice not to disclose to any other
person any Confidential Information.
4.7 Non-Competition. The Practice hereby recognizes, acknowledges, and
---------------
avers that Professional Business Manager will incur substantial costs in
providing the equipment, support services, personnel, management,
administration, and other items and services that are the subject matter of this
23
Agreement and that in the process of providing services under this Agreement,
the Practice will be privy to financial and Confidential Information, to which
the Practice would not otherwise be exposed. The Parties also recognize that
the services to be provided by Professional Business Manager will be feasible
only if the Practice operates an active practice to which the Professionals
associated with the Practice devote their full time and attention (provided,
however, the Practice or its Shareholders may hire or otherwise engage the
services of optometrists or other professionals on a part-time basis when the
Practice deems it appropriate). The Practice agrees, acknowledges, and avers
that the non-competition covenants described hereunder are necessary for the
protection of Professional Business Manager, and that Professional Business
Manager would not have entered into this Agreement without the following
covenants.
(a) Except as specifically agreed to by Professional Business
Manager in writing, the Practice covenants and agrees that during the Term of
this Agreement and for a period of one (1) year from the date this Agreement is
terminated other than if terminated by the Practice for cause, the Practice and
the Shareholders shall not directly or indirectly, engage in any activity or own
(excluding ownership of less than one percent (1%) of the equity of any publicly
traded entity and excluding ownership of the common stock of Professional
Business Manager), manage, operate, control, contract with, lend funds to, lend
its name to, maintain any interest whatsoever in, or be employed by, any
enterprise (i) having to do with the provision, distribution, promotion, or
advertising of any type of management or administrative services or products
(including, without limitation, the sale of optical lenses, frames or contact
lens) to third parties in competition with Professional Business Manager,
within a 10 mile radius of any EyeMasters Practice Location; and/or (ii)
offering any type of service(s) or product(s) to third parties substantially
similar to those offered by Professional Business Manager to the Practice
hereunder in competition with Professional Business Manager within a 10 mile
radius of any EyeMasters Practice Location. Notwithstanding the above
restriction, nothing herein shall prohibit (i) the Practice or any of its
Shareholders from providing management and administrative services to this or
their own optometry practice after the termination of this Agreement; (ii) the
Practice or its Shareholders from contracting with a third-party manager to
provide administrative or management services for its or their professional eye
care practices after termination of this Agreement; (iii) any of the Practice's
Shareholders from providing management and administrative services to their own
optometry practices after the termination of their employment relationship with
the Practice, and (iv) such Shareholders from contracting with a third-party
manager to provide administrative or management services for their professional
eye care practices after the termination of their employment relationship with
the Practice.
(b) The Practice understands and acknowledges that Professional
Business Manager shall suffer severe harm in the event that the foregoing
non-competition covenants in Section 4.7 are violated, and accordingly, if the
Practice breaches any obligation of Section 4.7, in addition to any other
remedies available under this Agreement, at law or in equity, Professional
Business Manager shall be entitled to enforce this Agreement by injunctive
relief and by specific performance of the Agreement, such relief to be without
the necessity of posting a bond, cash or otherwise. Additionally, nothing in
this Section 4.7(b) shall limit Professional Business Manager's right to recover
any other damages to which it is entitled as a result of the Practice's breach.
The time period for which the non-competition covenant is effective shall be
extended day for day for the time period the Practice is in violation of the
non-competition covenant. If any provision of the covenants is held by a court
of competent jurisdiction to be unenforceable due to an excessive time period,
geographic area, or restricted activity, the covenant shall be reformed to
comply with such time period, geographic area, or restricted activity that would
be held enforceable.
24
Following termination of this Agreement pursuant to Section 6.2(a) hereof, the
Practice shall be relieved of the restrictions imposed by this Section 4.7.
4.8 Name, Trademark. The Practice covenants and agrees that during the
---------------
term of this Agreement, the Practice shall conduct its professional practice at
the EyeMasters Practice Locations under the name of, and only under the names of
"Xxxxxxx X. Xxxxxxxxxxx & Associates," and "X.X. Xxxxxxxxxxx Consulting, P.C."
(unless otherwise consented to by Professional Business Manager) and that such
name is, or will be, duly and timely registered, qualified, or licensed under
the laws of the jurisdiction in which they are being used. The Practice
covenants and promises that, without the prior written consent of the
Professional Business Manager, the Practice will not:
(a) take any action that is reasonably likely to result in the
loss of registration, qualification or licensure of the name;
(b) fail to take any reasonably necessary action that will
maintain the registration, qualification, or licensure current;
(c) license, sell, give, or otherwise transfer the name or the
right to use the name to any optometry practice, Optometrist, professional
corporation, professional limited liability company, office or any other entity;
or
(d) cease conducting the professional practice of the Practice
under the name.
4.9 Billing Information and Assignments; Establishment of Fees. The
-------------------------------------------------------------
Practice shall promptly provide the Professional Business Manager with all
billing and other information reasonably requested by the Professional Business
Manager to enable it to xxxx and collect the Office's fees and other charges and
reimbursement claims pursuant to Section 3.9, and the Practice shall use its
best efforts to procure consents to assignments and other approvals and
documents necessary to enable the Professional Business Manager to obtain
payment or reimbursement from third parties for such fees, other charges and
claims.
4.10 Provider Agreements. The Practice shall have ultimate authority
--------------------
with regard to all contractual arrangements with third parties for the
Practice's provision of Professional Eye Care Services at the EyeMasters
Practice Locations, and the Practice may at its sole discretion reject or
otherwise refuse to enter into any such contractual arrangement.
4.11 Tax Matters. The Practice shall prepare or arrange for the
------------
preparation by an accountant selected by the Practice of all appropriate
corporate tax returns and reports required of the Practice including such
returns and reports required with respect to the Professional Practice Account.
A pro rata portion of the costs and expenses relating to the preparation of such
returns and reports shall be deemed a Practice Expense.
4.12 Shareholders' Undertaking. The Practice shall cause to be
--------------------------
executed by all Shareholders of the Practice an undertaking in the form of
Exhibit 4.12 by such Shareholders to cause the Practice to abide by the
restrictive covenant described in Section 4.7 of this Professional Business
Management Agreement.
25
4.13 Limitations on Actions of the Practice. The Practice shall not
-----------------------------------------
take any of the following actions without the express prior written consent of
Professional Business Manager:
(a) Any action leading to or intended to result in the merger,
combination or consolidation of the Practice or Office with, or acquisition of
the Practice, the Office, or their businesses by, any other entity;
(b) Mortgage or encumber any of the Practice's real, personal or mixed
property as security for any indebtedness which is not contemplated by the
Budget;
(c) Pay any dividend or make any other distribution, whether in cash or
in kind, to Shareholders of the Practice, if any compensation owed by the
Practice to Professional Business Manager hereunder has not been paid in full,
and if any and all monetary obligations of the Practice to Professional Business
Manager have not been fully paid in accordance with the terms of any and all
documents governing such obligations; provided, however, that the foregoing
shall not prevent payment of Shareholder's salary, Bonus, payroll taxes thereon,
and certain Shareholder Expenses as set forth in Section 3.10(b);
(d) Dissolve or liquidate the Practice, or take any action with a view
to or likely to have the result of the dissolution or liquidation of the
Practice; or
(e) Authorize the provision of professional services such that the
income derived therefrom is not owned by the Practice; provided that no such
consent is necessary for (i) professional services performed by Professionals
during said Professionals' vacation time, or (ii) professional services
performed in connection with duties and responsibilities as a member of the
Reserves or National Guard.
4.14 Leases of Office. The Practice shall maintain and fulfill all of
-----------------
its obligations under leases or subleases of Office facilities or locations.
ARTICLE V
BUSINESS MANAGER'S COMPENSATION.
-------------------------------
5.1 Base Management Fee. The Practice and Professional Business
---------------------
Manager agree to the compensation set forth herein as being paid to Professional
Business Manager in consideration of a substantial commitment made by
Professional Business Manager hereunder and that such fees are fair and
reasonable. Each month Professional Business Manager shall be paid that
Management Fee as set forth in Exhibit 5.1 (as may be amended from time to time)
The Parties agree that in the event that additional Practice locations are
opened, or some of the Practice locations are abandoned, the Management Fee set
forth on Exhibit 5.1 shall be adjusted as mutually agreed upon by the Parties.
5.2 Reasonable Value. Payment of the Management Fee is not intended to
----------------
be and shall not be interpreted or applied as permitting Professional Business
Manager to share in the Practice's fees for Professional Eye Care Services or
any other services, but is acknowledged as the Parties' negotiated agreement as
to the reasonable fair market value of Professional Business Manager's
commitment to pay all Office Expenses and the fair market value of the
equipment, contract analysis and support, other support
26
services, purchasing, personnel, management, administration, strategic
management and other items and services furnished by Professional Business
Manager pursuant to the Agreement, considering the nature and volume of the
services required and the risks assumed by Professional Business Manager. The
Practice and Professional Business Manager recognize and acknowledge that
Professional Business Manager will incur substantial costs and business risks in
undertaking to pay all Office Expenses and in providing the support services,
personnel, marketing, management, administration, and other items and services
that are the subject matter of this Agreement. It is the intent of the Parties
that the Management Fee reasonably compensate Professional Business Manager for
the value to the Practice of Professional Business Manager's administrative
expertise, given the considerable business risk to Professional Business
Manager, in providing the Management Services that are the subject of this
Agreement.
5.3 Payment of Management Fee. To facilitate the payment of the
----------------------------
Management Fee as provided in Section 5.1 hereof, the Practice hereby expressly
authorizes Professional Business Manager to make withdrawals of the Management
Fee from the Professional Practice Account as such fee becomes due and payable
during the Term in accordance with Section 3.10(a) and after termination as
provided in Section 6.3. Professional Business Manager shall deliver to the
Practice an invoice for the Management Fee accompanied by a reasonably detailed
statement of the information upon which the Management Fee calculation is based.
5.4 Disputes Regarding Fees.
-------------------------
(a) It is the Parties' intent that any disputes regarding
performance standards of the Professional Business Manager be resolved to the
extent possible by good faith negotiation. To that end, the Parties agree that
if the Practice in good faith believes that Professional Business Manager has
failed to perform its obligations, and that as a result of such failure, the
Practice is entitled to a set-off or reduction in its Management Fees, the
Practice shall give Professional Business Manager notice of the perceived
failure and request in the notice a set-off or reduction in Management Fees.
Professional Business Manager and the Practice shall then negotiate the dispute
in good faith, and if an agreement is reached, the Parties shall implement the
resolution without further action. At the request of Professional Business
Manager or the Practice, the Practice Advisory Council shall make
recommendations to Professional Business Manager with respect to any dispute
concerning a set off or reduction in Management Fees.
(b) If the Parties cannot reach a resolution within a reasonable
time, the Parties shall submit the dispute to mediation to be conducted in
accordance with the American Arbitration Association's Commercial Mediation
Rules.
(c) If the mediation process fails to resolve the dispute, the
dispute shall be submitted by either Party to binding arbitration under Section
8.7.
ARTICLE VI
TERM AND TERMINATION
--------------------
6.1 Initial and Renewal Term. Subject to earlier termination as
---------------------------
provided herein, the Term of this Agreement will be for an initial period
commencing on May 25, 2003 and ending on May 30, 2004, and thereupon the Term
shall automatically expire unless the Parties mutually agree in writing to
extend the
27
Term beyond the current expiration date. In the event either Party desires to
extend the Term of this Agreement beyond the current expiration date, such Party
shall give the other Party written notice of such desire within seventy (70)
days of the expiration of the Agreement. The other Party has ten (10) days
within which to respond to the request to extend the Term of the Agreement. If
no response is made within such ten (10) day period, such request for extension
shall be deemed rejected. Notwithstanding any provision to the contrary, the
rights and obligations of the parties with respect to any EyeMasters Practice
Location shall terminate upon the termination of the underlying lease or
sublease pursuant to which the Practice operates such Office.
6.2 Termination.
-----------
(a) Termination by the Practice. The Practice may immediately
------------------------------
terminate this Agreement at its discretion, upon written notice pursuant to
Section 8.3, for the following reasons:
(i) If Professional Business Manager becomes insolvent by
reason of its inability to pay its debts as they mature; is adjudicated bankrupt
or insolvent; files a petition in bankruptcy, reorganization or similar
proceeding under the bankruptcy laws of the United States or shall have such a
petition filed against it which is not discharged within thirty (30) days; has a
receiver or other custodian, permanent or temporary, appointed for its business,
assets or property; makes a general assignment for the benefit of creditors; has
its bank accounts, property or accounts attached; has execution levied against
its business or property; or voluntarily dissolves or liquidates or has a
petition filed for corporate dissolution and such petition is not dismissed with
thirty (30) days;
(ii) If the Professional Business Manager fails to comply
with any material provision of this Agreement and does not correct such failure
within ninety (90) days after written notice of such failure to comply is
delivered by the Practice specifying the nature of the breach in reasonable
detail; or
(iii) Professional Business Manager commits any act of fraud,
misappropriation or embezzlement, or any other felony and as a result the
Professional Business Manager is unable to substantially perform under the terms
of this Agreement.
(b) Termination by Professional Business Manager Professional
------------------------------------------------
Business Manager may immediately terminate this Agreement at its discretion,
upon written notice pursuant to Section 8.3, for the following reasons:
(i) The revocation, suspension, cancellation or restriction
of any Shareholders' license to practice optometry in Arizona if, in the
reasonable discretion of the Professional Business Manager, the Practice will
not be financially viable after such revocation, suspension, cancellation, or
restriction.
(ii) If the Practice becomes insolvent by reason of its
inability to pay its debts as they mature; is adjudicated bankrupt or insolvent;
files a petition in bankruptcy, reorganization or similar proceeding under the
bankruptcy laws of the United States or shall have such a petition filed against
it which is not discharged within thirty (30) days; has a receiver or other
custodian, permanent or temporary, appointed for its business, assets or
property; makes a general assignment for the benefit of creditors; has its
28
bank accounts, property or accounts attached; has execution levied against its
business or property; or voluntarily dissolves or liquidates or has a petition
filed for corporate dissolution and such petition is not dismissed with thirty
(30) days;
(iii) If the Practice fails to comply with any material
provision of this Agreement, or any other agreement with Professional Business
Manager, or the President fails to comply with the provisions of the President's
Employment Agreement, and does not correct such failure within ninety (90) days
after written notice of such failure to comply is delivered by Professional
Business Manager specifying the nature of the breach in reasonable detail;
(iv) If the Practice fails to comply with Section 4.1
pertaining to the Hours of Operation of the Sublease Agreements entered into
with EyeMasters, Inc. and/or Visionary Properties, Inc., and such non-compliance
was reasonably avoidable and the Practice does not correct such failure within
five (5) days after written notice of such failure to comply is delivered by
Professional Business Manager; provided, however, that Professional Business
Manager shall only be obligated to sent two (2) such notices in any twelve (12)
month period and upon the third and/or any successive failure to comply with
such obligations in any twelve (12) month period, Practice shall automatically
be in default thereunder without the necessity of any notice or opportunity to
cure being given and Professional Business Manager shall immediately have the
right to exercise any one or more of its remedies available to it as a result of
such default without the necessity of any notice or opportunity to cure being
given to the Practice.
(v) If the Practice or any of the Practice's Professionals
commit any act of fraud, misappropriation or embezzlement, or any other felony
and as a result the Practice as an entire entity is unable to substantially
perform under the terms of this Agreement; or
(vi) If any of the material representations of the Practice
are false or incorrect when made or hereafter become materially false or
incorrect or any warranty of the Practice is materially breached.
(c) The Professional Business Manager may terminate its obligation with
regard to any individual EyeMasters Practice Location upon sixty days' prior
written notice to the Practice.
(d) Termination by Agreement. In the event the Practice and
--------------------------
Professional Business Manager shall mutually agree in writing, this Agreement
may be terminated on the date specified in such written agreement.
(e) Legislative, Regulatory or Administrative Change. In the
----------------------------------------------------
event there shall be a change in the Medicare or Medicaid statutes, federal
statutes, state statutes, case law, administrative interpretations, regulations
or general instructions, the adoption of new federal or state legislation, a
change in any third-party reimbursement system, or any finding, ruling, or
decree of any regulatory body concerning this Agreement, any of which are
reasonably likely to materially and adversely affect the manner in which either
Party may perform or be compensated for its services under this Agreement or
which shall make this Agreement or any related agreements unlawful or
unenforceable, or which would be reasonably likely to subject either Party to
this Agreement, or any member, shareholder, officer, director, employee, agent
or affiliated organization to any civil or criminal penalties or administrative
sanctions, the Parties shall immediately use their best efforts to enter into a
new service arrangement or basis for compensation for the
29
services furnished pursuant to this Agreement that complies with the law,
regulation, policy, finding, ruling, or decree, or which minimizes the
possibility of such penalties, sanctions or unenforceability, and that
approximates as closely as possible the economic position of the Parties prior
to the change. If the Parties are unable to reach a new agreement within thirty
(30) days, this Agreement shall be terminated upon thirty (30) days written
notice by either party to the other.
6.3 Effects of Termination.
------------------------
(a) Obligation After Termination. Upon termination of this
-------------------------------
Agreement, as hereinabove provided, neither Party shall have any further
obligations hereunder except for
(i) obligations accruing prior to the date of termination,
including, without limitation, payment of the Management Fee relating to
services provided prior to the termination of this Agreement;
(ii) obligations, promises, or covenants set forth herein
that are expressly made to extend beyond the Term, including, without
limitation, insurance, indemnities and non-competition provisions, which
provisions shall survive the expiration or termination of this Agreement;
(iii) the obligation of the Practice described in Section
6.4; and
(iv) the obligation of the Practice to repay amounts advanced
by Professional Business Manager to the Practice.
(b) Receipt of Collections After Termination. In effectuating the
------------------------------------------
provisions of this Section 6.3, the Practice specifically acknowledges and
agrees that if this Agreement terminates pursuant to Sections 6.1, 6.2(b) or 6.2
(d), Professional Business Manager shall continue for a period not to exceed
ninety (90) days to exclusively collect and receive on behalf of the Practice
all cash collections from accounts receivable in existence at the time this
Agreement is terminated, it being understood that
(i) such cash collections will represent compensation to
Professional Business Manager to the extent of all outstanding obligations to
Professional Business Manager by the Practice pursuant to this Agreement; for
Management Services already rendered;
(ii) Professional Business Manager shall not be entitled to
collect accounts receivable after the termination date if this Agreement is
terminated pursuant to Section 6.2(a);
(iii) the Professional Business Manager shall deduct from
such cash collections any other amounts owed to Professional Business Manager
under this Agreement, including, without limitation, ten percent (10%) of such
cash collections as its Management Fee during any period after the termination
of this Agreement while such collections are taking place and any reasonable
costs incurred by Professional Business Manager in carrying out the post
termination procedures and transactions contemplated herein; and
(iv) Professional Business Manager shall remit remaining
amounts from such collection activities, if any, to the Practice.
30
(c) Surrender of Books After Termination. Upon the expiration or
---------------------------------------
termination of this Agreement for any reason or cause whatsoever, Professional
Business Manager shall surrender to the Practice all books and records
pertaining to the Office.
6.4 Limitation of Liability. IN NO EVENT SHALL PROFESSIONAL BUSINESS
-------------------------
MANAGER BE LIABLE TO THE PRACTICE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES OR LOST PROFITS, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
PERFORMANCE OR BREACH THEREOF, EVEN IF PROFESSIONAL BUSINESS MANAGER HAS BEEN
ADVISED OF THE POSSIBILITY THEREOF; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL
NOT PREVENT RECOVERY OF ACTUAL DAMAGES ARISING OUT OF OR RELATED TO THIS
AGREEMENT.
ARTICLE VIII
INDEMNIFICATION; THIRD PARTY CLAIMS
-----------------------------------
7.1 Indemnification by the Practice. The Practice shall indemnify and
--------------------------------
hold harmless Professional Business Manager and Professional Business Manager's
shareholders, directors, officers, agents and employees, from and against all
claims, demands, liabilities, losses, damages, costs and expenses, including
reasonable attorneys' fees, resulting in any manner, directly or indirectly,
from the negligent acts or omissions or misconduct of the Practice or its
members, Shareholders, directors, officers, employees, agents or independent
contractors, including but not limited to any such claims, demands, liabilities,
losses, damages, costs and expenses which accrued or arose prior to the date of
execution of this Agreement.
7.2 Indemnification by Professional Business Manager. Professional
----------------------------------------------------
Business Manager shall indemnify and hold harmless the Practice, and the
Practice's members, Shareholders, directors, officers, agents and employees,
from and against any and all claims, demands, liabilities, losses, damages,
costs and expenses, including reasonable attorneys' fees, resulting in any
manner, directly or indirectly, from the negligent acts or omissions or
misconduct of Professional Business Manager or its shareholders, directors,
officers, employees, agents or independent contractors.
7.3 Notice of Claim for Indemnification. No claims for indemnification
-----------------------------------
under this Agreement relating to claims solely between the Parties shall be
valid unless notice of such claim is delivered to the Practice (in the case of a
claim by Professional Business Manager) or Professional Business Manager (in the
case of a claim by the Practice) within one (1) year after the Party making such
claim first obtained knowledge of the facts upon which such claim is based. Any
such notice shall set forth in reasonable detail, to the extent known by the
Party giving such notice, the facts on which such claim is based and the
resulting estimated amount of damages.
7.4 Matters Involving Third Parties.
----------------------------------
31
(a) If the Practice or Professional Business Manager receives
notice or acquires knowledge of any matter which may give rise to a claim by
another person and which may then result in a claim for indemnification under
this Agreement, then: (i) if such notice or knowledge is received or acquired
by the Practice, the Practice shall promptly notify Professional Business
Manager; and (ii) if such notice or knowledge is received or acquired by
Professional Business Manager, the Professional Business Manager shall promptly
notify the Practice; except that no delay in giving such notice shall diminish
any obligation under this Agreement to provide indemnification unless (and then
solely to the extent) the Party from whom such indemnification is sought is
prejudiced.
(b) Any Party from whom such indemnification (the "Indemnifying
Party") is sought shall have the right to defend the Party seeking such
indemnification (the "Indemnified Party") against such claim by another person
(the "Third Party Claim") with counsel of the Indemnifying Party's choice
reasonably satisfactory to the Indemnified Party so long as: (i) within fifteen
(15) days after the Indemnified Party has given notice of the Third Party Claim
to the Indemnifying Party, the Indemnifying Party notifies the Indemnified Party
that the Indemnifying Party will indemnify the Indemnified Party from and
against all adverse consequences the Indemnified Party may suffer caused by,
resulting from, arising out of or relating to such Third Party Claim; (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
satisfactory to the Indemnified Party that the Indemnifying Party has the
financial resources necessary to defend against the Third Party Claim and
fulfill its indemnification obligations; (iii) the Third Party Claim seeks money
damages; (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim (other than an optometric malpractice claim) is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party; and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7.4(b): (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (ii) the Indemnified Party
shall not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior consent of the Indemnifying
Party; and (iii) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior consent of the Indemnified Party.
(d) If any of the conditions specified in Section 7.4(b) is not
satisfied, however; (i) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it may deem advisable (and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith); (ii) the Indemnifying Party shall reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' and accountants' fees and
expenses); and (iii) the Indemnifying Party shall remain responsible for any
adverse consequences the Indemnified Party may suffer caused by, resulting from,
arising out of or relating to such Third Party Claim to the fullest extent
provided in this Agreement.
7.5 Settlement. Except as permitted by Section 7.4, a Party shall not
----------
compromise or settle any claim for which the other Party is obligated to
indemnify it without the written consent of such Party.
32
7.6 Cooperation. The Indemnified Party shall make available all
-----------
information and assistance that the Indemnifying Party may reasonably request in
conjunction with assessing, defending and settling said claim.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Administrative Services Only. Nothing in this Agreement is
------------------------------
intended or shall be construed to allow Professional Business Manager to
exercise control, authority or direction over the manner or method by which the
Practice and its Professionals perform Professional Eye Care Services or other
professional health care services. The rendition of all Professional Eye Care
Services, including, but not limited to, the prescription or administration of
medicine and drugs, shall be the sole responsibility of the Practice and its
Professionals, and Professional Business Manager shall not interfere in any
manner or to any extent therewith. Nothing contained in this Agreement shall be
construed to permit Professional Business Manager to engage in the practice of
optometry, it being the sole intention of the Parties hereto that the services
to be rendered to the Practice by Professional Business Manager are solely for
the purpose of providing non-optometric management and administrative services
to the Practice so as to enable the Practice to devote its full time and
energies to the professional conduct of its professional eye care practice and
provision of Professional Eye Care Services to its patients.
8.2 Status of Independent Contractor. The Practice and Professional
-----------------------------------
Business Manager and their shareholders are not, and shall not be deemed to be
by virtue of this Agreement, joint venturers, partners, employees or agents of
each other (except as expressly provided in this Agreement). Except as may be
expressly provided herein, neither Party shall have any authority to bind the
other without the other's express written consent; and then only to the extent
of the authority conferred by such express written consent. Each Party is an
independent contractor, and each Party shall remain professionally and
economically independent of the other. In the course of the business
relationship contemplated in this Agreement only the Practice and its
Professionals shall practice optometry and/or therapeutic optometry, and they
shall do so as independent professionals with no employment relationship to
Professional Business Manager. Professional Business Manager and the Practice
agree that the Practice shall retain absolute authority to direct the
optometric, professional, and ethical aspects of its optometric and/or
therapeutic optometric practice, any authority granted herein to Professional
Business Manager concerning the business and administrative aspects of such
practice notwithstanding. Each Party shall be solely responsible for and shall
comply with all state and federal laws applicable to that Party pertaining to
employment taxes, income tax withholding, unemployment compensation
contributions, and other employment related matters.
8.3 Notices. Any notice, demand, or communication required, permitted,
-------
or desired to be given hereunder shall be deemed effectively given when in
writing and personally delivered or mailed by prepaid certified or registered
mail, return receipt requested, addressed as follows:
The Practice: X.X. Xxxxxxxxxxx, O.D. & Associates, P.C.
c/o Xx. Xxxxxxx X. Xxxxxxxxxxx
00 X. Xxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
33
with a copy: Xxxxxx, Xxxxxx & Xxxxxx, PLLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx, X. Xxxxxx
Professional Business Manager: EyeMasters, Inc.
00000 Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
with a copy to: Xxx & Xxxxx Incorporated
000 X. Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attention: J. Xxxxxx Xxxxxxx or Xxxxxx X. Xxxxx
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
8.4 Governing Law. This Agreement shall in all respects be governed,
--------------
interpreted and construed in accordance with the laws of the State of Arizona
without giving effect to principles of comity or conflicts of laws thereof.
8.5 Jurisdiction and Venue. Professional Business Manager and the
------------------------
Practice hereby consent to the personal jurisdiction and venue of the state and
federal courts in the judicial circuit where the Practice has its principal
corporate office, and do hereby waive all questions of personal jurisdiction and
venue, including, without limitation, the claim or defense that such courts
constitute an inconvenient forum.
8.6 Assignment. Except as may be herein specifically provided to the
----------
contrary, this Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that the Practice may not assign this Agreement
without the prior written consent of Professional Business Manager, which
consent may be withheld. Professional Business Manager may assign or transfer
its rights and obligations under this Agreement only in the following
situations: (a) pursuant to a merger of Professional Business Manager into
another entity or the sale of substantially all of the assets of Professional
Business Manager; (b) pursuant to the sale and/or assignment of all of this
Agreement with the Practice's consent, which shall not be unreasonably withheld;
(c) pursuant to a transfer or assignment of this Agreement to one of
Professional Business Manager's subsidiaries; affiliates, or sister corporations
or (d) pursuant to any transfer or assignment to or by any financial lender of
the Professional Business Manager, and this Agreement is subordinate to the
rights of such lender. After such assignment and transfer, the Practice agrees
to look solely to such assignee or transferee for performance of this Agreement.
34
8.7 Arbitration. Any and every dispute of any nature whatsoever that
-----------
may arise between the Parties, whether sounding in contract, statute, tort,
fraud, misrepresentation, discrimination or any other legal theory, including,
but not limited to, disputes relating to or involving the construction,
performance or breach of this Agreement or any other agreement between the
Parties, whether entered into prior to, on, or subsequent to the date of this
Agreement, or those arising under any federal, state or local law, regulation or
ordinance, shall be determined by binding arbitration in accordance with the
then-current commercial arbitration rules of the American Arbitration
Association, to the extent such rules do not conflict with the provisions of
this paragraph. The arbitration shall be conducted by a single neutral
arbitrator. The Parties shall endeavor to select a neutral arbitrator by mutual
agreement. If such agreement cannot be reached within thirty (30) calendar days
after a dispute has arisen which is to be decided by arbitration, any Party or
the Parties jointly shall request the American Arbitration Association to submit
to each Party an identical panel of fifteen (15) persons. Alternate strikes
shall be made to the panel, commencing with the Party bringing the claim, until
the name of one (1) person remains. The Parties may, however, by mutual
agreement, request the American Arbitration Association to submit additional
panels of possible arbitrators. The person thus remaining shall be the
arbitrator for such arbitration. The arbitrator shall have the power to
determine all matters incident to the conduct of the arbitration, including
without limitation all procedural and evidentiary matters and the scheduling of
any hearing. The award made by the arbitrator shall be final and binding upon
the Parties thereto and the subject matter thereof. The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. Sec.Sec. 1-16, and
judgment upon the award rendered by the arbitrator may be entered by any court
having jurisdiction thereof. The arbitrator shall have no authority to award
punitive or exemplary damages or any statutory multiple damages, and shall only
have the authority to award compensatory damages, arbitration costs, attorney's
fees, declaratory relief, and permanent injunctive relief, if applicable.
Unless otherwise agreed by the parties, the arbitration shall be held in Dallas,
Texas. This Section 8.7 shall not prevent either Party from seeking a temporary
restraining order or temporary or preliminary injunctive relief from a court of
competent jurisdiction in order to protect its rights under this Agreement. In
the event a Party seeks such injunctive relief pursuant to this Agreement, such
action shall not constitute a waiver of the provisions of this Section 8.7,
which shall continue to govern any and every dispute between the Parties,
including without limitation the right to damages, permanent injunctive relief
and any other remedy, at law or in equity.
8.8 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT WAIVES
--------------------
ANY RIGHT TO TRIAL BY JURY OF ANY DISPUTE OF ANY NATURE WHATSOEVER THAT MAY
ARISE BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO, THOSE DISPUTES RELATING TO,
OR INVOLVING IN ANY WAY, THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS
AGREEMENT OR ANY OTHER AGREEMENT BETWEEN THE PARTIES, THE PROVISIONS OF ANY
FEDERAL, STATE OR LOCAL LAW, REGULATION OR ORDINANCE NOTWITHSTANDING. By
execution of this Agreement, each of the parties hereto acknowledges and agrees
that it has had an opportunity to consult with legal counsel and that he/she it
knowingly and voluntarily waives any right to a trial by jury of any dispute
pertaining to or relating in any way to the transactions contemplated by this
Agreement, the provisions of any federal, state or local law, regulation or
ordinance notwithstanding.
8.9 Waiver of Breach. The waiver by either Party of a breach or
------------------
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
35
8.10 Enforcement. In the event either Party resorts to legal action to
-----------
enforce or interpret any provision of this Agreement, the prevailing Party shall
be entitled to recover the costs and expenses of such action so incurred,
including, without limitation, reasonable attorneys' fees.
8.11 Gender and Number. Whenever the context of this Agreement
-------------------
requires, the gender of all words herein shall include the masculine, feminine,
and neuter, and the number of all words herein shall include the singular and
plural.
8.12 Additional Assurances. Except as may be herein specifically
----------------------
provided to the contrary, the provisions of this Agreement shall be
self-operative and shall not require further agreement by the Parties; provided,
however, at the request of either Party, the other Party shall execute such
additional instruments and take such additional acts as are reasonable and as
the requesting Party may deem necessary to effectuate this Agreement.
8.13 Consents, Approvals, and Exercise of Discretion. Whenever this
--------------------------------------------------
Agreement requires any consent or approval to be given by either Party, or
either Party must or may exercise discretion, and except where specifically set
forth to the contrary, the Parties agree that such consent or approval shall not
be unreasonably withheld or delayed, and that such discretion shall be
reasonably exercised.
8.14 Force Majeure. Neither Party shall be liable or deemed to be in
--------------
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either Party's employees, or any other similar cause
beyond the reasonable control of either Party unless such delay or failure in
performance is expressly addressed elsewhere in this Agreement. Notwithstanding
the same, the Parties hereto agree to continue this Agreement to the best degree
they can so long as reasonably possible and the Practice shall not be excused
from its obligations under Sections 4.1, 6.4 and 6.5 pursuant to this Section
8.14.
8.15 Severability. The Parties hereto have negotiated and prepared the
------------
terms of this Agreement in good faith with the intent that each and every one of
the terms, covenants and conditions herein be binding upon and inure to the
benefit of the respective Parties. Accordingly, if any one or more of the
terms, provisions, promises, covenants or conditions of this Agreement or the
application thereof to any person or circumstance shall be adjudged or rendered
to any extent invalid, unenforceable, void or voidable for any reason whatsoever
by a court of competent jurisdiction, an arbitration tribunal, a regulatory
agency, or statute, such provision shall be reformed, construed and enforced as
if such unenforceable provision had not been contained herein, and each and all
of the remaining terms, provisions, promises, covenants and conditions of this
Agreement or their application to other persons or circumstances shall not be
affected thereby and shall be valid and enforceable to the fullest extent
permitted by law. To the extent this Agreement is in violation of applicable
law, then the Parties agree to negotiate in good faith to amend the Agreement,
to the extent possible consistent with its purposes, to conform to law.
8.16 Press Releases and Public Announcements. Except as otherwise
-------------------------------------------
required by law or by applicable rules of any securities exchange or association
of securities dealers, neither the Practice nor the Professional Business
Manager shall issue any press release, make any public announcement or otherwise
36
disclose any information for the purpose of publication by any print, broadcast
or other public media, relating to the transactions contemplated by this
Agreement, without the prior approval of the other Party.
8.17 Divisions and Headings. The division of this Agreement into
------------------------
articles, sections, and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
8.18 Amendments and Execution. This Agreement and any amendments
--------------------------
hereto shall be in writing and executed in multiple copies on behalf of the
Practice by its President, and on behalf of Professional Business Manager by an
officer. Each multiple copy shall be deemed an original, but all multiple
copies together shall constitute one and the same instrument.
8.19 Licenses, Permits and Certificates. Professional Business Manager
----------------------------------
and the Practice shall each obtain and maintain in effect, at all times during
the term of this Agreement, all licenses, permits and certificates required by
law which are applicable to the performance of their respective obligations
pursuant to this Agreement.
8.20 No Third Party Beneficiaries. Except as otherwise provided
-------------------------------
herein, this Agreement shall not confer any rights or remedies upon any person
other than Professional Business Manager and the Practice and their respective
successors and permitted assigns.
8.21 Compliance with Applicable Laws. Professional Business Manager
----------------------------------
and the Practice shall comply with all applicable federal, state and local laws,
regulations, rules and restrictions in the conduct of their obligations under
this Agreement.
8.22 Language Construction. The Practice and Professional Business
----------------------
Manager acknowledge that each Party hereto and its counsel have reviewed and
revised this Agreement and agree that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting Party shall
not be employed in the interpretation of this Agreement.
8.23 Mutual Release. The Practice and Professional Business Manager
-------
both hereby unconditionally and irrevocably release, remise, acquit, forever
discharge and covenant not to xxx the other for any and all claims that the
other had, asserted or could have asserted against the other arising out of the
relationship between the Parties or the Terminated Business Management Agreement
on the effective date of this Agreement or any time prior thereto.
37
8.23 Entire Agreement. With respect to the subject matter of this
-----------------
Agreement, this Agreement supersedes all previous contracts and constitutes the
entire agreement between the Parties. Neither Party shall be entitled to
benefits other than those specified herein. No prior oral statements or
contemporaneous negotiations or understandings or prior written material not
specifically incorporated herein shall be of any force and effect, and no
changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to become
effective on the date stipulated in such amendment(s). The Parties specifically
acknowledge that, in entering into and executing this Agreement, the Parties
rely solely upon the representations and agreements contained in this Agreement
and no others.
8.24 Authority. Professional Business Manager and the Practice hereby
---------
warrant and represent to each other that they have the requisite corporate
authority to execute and deliver this Agreement in their respective names.
IN WITNESS WHEREOF, the Practice and Professional Business Manager have
caused this Agreement to be executed by their duly authorized representatives,
all as of the day and year first above written.
"The Practice"
X.X. XXXXXXXXXXX, O.D. & ASSOCIATES, P.C.
By:
Xxxxxxx X. Xxxxxxxxxxx, O.D., President
"Professional Business Manager"
EYEMASTERS, INC.
By:
Title: ____________________________________________
38
EXHIBIT A
PRACTICE LOCATIONS
Address Monthly Rental Rate
1. #70 Fiesta Crossing $1,000
0000 X. Xxxx Xxxxxx Xxxx
Xxxx, XX 00000-0000
2. #95 Metrocenter $2,000
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
3. #101 Xxxxxx Shores $1,000
0000 X. Xxxxxx Xxxx
Xxxx, XX 00000-0000
4. #122 Desert Sky $2,000
0000 X. Xxxxxx Xxxx
Xxxxxxx, XX 00000-0000
5. #000 Xxxxxxxxx Xxxx $1,000
0000 X. Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000-0000
6. #134 Scottsdale Pavillions $1,000
0000 X. Xxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
7. #000 Xxxxxxxxx Xxxxx Center $5,000
0000 Xxxx Xxxxxxxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
8. #000 Xxxxxxxxxx Xxxxxxx Xxxxxx $1,000
0000 X. Xxxxxxxxx Xxxx #0000
Xxxxxxxxxx, XX 00000
9. #000 Xxxxxxxxx Xxxxxxxxx Xxxxx Xxxxxx $2,000
0000 X. Xxx Xxxx, Xxxxx 0X
Xxxxxxx, Xxxxxxxx Xxxxxx, Arizona
10. #14 Chandler $1,000
0000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx
39
11. #00 Xxxxxxxxxxxx Xxxxxxx $2,000
5555 - 0000 X. Xxxxxxxx Xxxxxx
Xxxx, Xxxxxxx
40
EXHIBIT 3.14
HIPAA ADDENDUM
Practice is receiving and Business Manager is providing business management
services in connection with the operation of Practice, pursuant to the terms of
the Professional Business Management Agreement . This Addendum sets forth
certain terms that will apply to the relationship between Practice and Business
Manager including that relationship arising out of the Professional Business
Management Agreement , and which are required by the privacy regulations
promulgated pursuant to the Health Insurance Portability and Accountability Act,
as amended ("HIPAA"). The parties agree as follows:
1. Definitions. Unless otherwise specified in this Addendum, all
-----------
capitalized terms not otherwise defined shall have the meanings established for
---
purposes of Title 45 parts 160 and 164 of the United States Code of Federal
Regulations, as amended from time to time. For purposes of clarification, the
following terms shall have the definitions as set forth herein below:
(a) Privacy Rule. "Privacy Rule" shall mean the HIPAA Regulations as
-------------
codified in 45 CFR Parts 160 and 164.
(b) Protected Health Information. "Protected Health Information" or "PHI"
------------------------------
shall mean any information, whether oral or recorded in any form or medium: (i)
that relates to the past, present, or future physical or mental condition of an
individual; the provision of health care to an individual; or the past, present,
or future payment of the provision of health care to an individual; and (ii)
that identifies the individual, or with respect to which there is reasonable
basis to believe the information can be used to identify the individual, and
shall have the meaning given to such term in the Privacy Rule.
2. Professional Business ManagementAgreement. If any provisions of this
-------------------------------------------
Addendum conflict with any of the terms of the Professional Business Management
Agreement or any other agreement between the parties, the terms of this Addendum
shall control.
3. HIPAA Compliance.
-----------------
3.1 This Section 3 applies only in the event that Business Manager is
receiving from, or creating or receiving on behalf of Practice, Protected Health
Information ("PHI"), as defined in the Privacy Rule, pursuant to any agreement
or other relationship between the parties.
3.2 Business Manager understands and acknowledges that it may receive PHI
from or create or receive PHI on behalf of Practice during the performance of
the Professional Business Management Agreement. Business Manager may not use or
disclose of PHI except for the purpose of performing Business Manager'
obligations under the Professional Business Management Agreement and as
permitted under the Professional Business Management Agreement and Addendum, if
such use or disclosure of PHI would not violate the Privacy Rule if done by
Practice. Business Manager may (a) use and disclose the PHI in its possession
for its proper management and administration, provided that disclosures are
required by law, or Business Manager obtains reasonable assurances from the
person to
41
whom the information is disclosed that it will remain confidential and used or
further disclosed only as required by law or for the purpose for which it was
disclosed to the person, and the person notifies the Business Manager of any
instances of which it is aware in which the confidentiality of the information
has been breached; and (b) de-identify any and all PHI, provided that Business
Manager de-identifies the PHI in accordance with the Privacy Rule.
3.3 With regard to its use and/or disclosure of PHI, Business Manager
hereby agrees that Business Manager shall:
(a) not use or disclose any PHI except as permitted by the Professional
Business Management Agreement, this Addendum, or required by law;
(b) not use or further disclose the PHI in a manner that would violate the
requirements of applicable law, if done by Practice;
(c) at all times maintain and use appropriate safeguards to prevent use or
disclosure of any PHI other than as permitted or required by the Professional
Business Management Agreement or this Addendum;
(d) report to Practice any use or disclosure of any PHI of which it becomes
aware that is not permitted by the Professional Business Management Agreement or
this Addendum;
(e) ensure that any subcontractor or agent to whom it provides any PHI
received from Practice agrees in writing to the same conditions and restrictions
that apply to Business Manager with regard to the PHI, including, without
limitation, all of the requirements of this Section;
(f) within ten days of receiving a written request from Practice make
available to Practice the PHI necessary for Practice to respond in accordance
with the Privacy Rule to an individual's request for access to PHI;
(g) within ten days of receiving a written request from Practice,
incorporate any amendments or corrections to the PHI from Practice, in
accordance with the Privacy Rule;
(h) within ten days of receiving a written request from Practice, make
available the information required for Practice to provide an accounting of
disclosures, in accordance with the Privacy Rule;
(i) document such disclosures of PHI and information related to such
disclosures as would be required for Practice to respond to a request by an
individual for an accounting of disclosures of PHI in accordance with the
Privacy Rule.
(j) make Business Manager' internal practices, books, and records relating
to the use and disclosure of PHI received from Practice available to the
Secretary of the United States Health and Human Services for purposes of
determining Practice's compliance with applicable law (in all events, shall
immediately notify upon receipt by Business Manager of any such request, and
shall provide Practice with copies of any such materials); and
(k) within ten days of the termination of the Professional Business
Management Agreement, return to Practice or destroy all PHI related to that
Professional Business Management Agreement, and retain no copies in any form
whatsoever. If return or destruction is not feasible, Business Manager agrees
to extend any and all protection contained in this Addendum to any PHI retained
after termination and limit further uses and disclosures to those purposes that
make the return or destruction infeasible.
3.4 Upon Practice's knowledge of a material breach of this Addendum by
Business Manager, Practice shall provide Business Manager notice of such breach
and afford Business Manager an
42
opportunity to cure such breach; provided, however, that if Business Manager
fails to cure the breach within the time specified by Practice based upon the
extent and seriousness of the breach, Practice may immediately terminate the
Professional Business Management Agreement.
4. Construction. The terms and conditions of this Addendum required by the
------------
Privacy Rule shall be construed in light of any applicable interpretation of
and/or guidance on the Privacy Rule issued by HHS or the Office of Civil Rights
("OCR") from time to time.
5. Effective Date. Each term and condition of this Addendum required by the
--------------
Privacy Rule shall be effective on the compliance date applicable to Practice
under the Privacy Rule. All other provisions of this Addendum shall be
effective upon the date this Addendum is executed by all parties below. This
Addendum shall survive any termination of the Professional Business Management
Agreement.
43
EXHIBIT 4.12
SHAREHOLDERS' UNDERTAKING TO MAINTAIN PRACTICE'S
----------------------------------------------------
CORPORATE EXISTENCE AND ENFORCE COVENANT
--------------------------------------------
NOT TO COMPETE
----------------
As an inducement to the Professional Business Manager to enter into this
Professional Business Management Agreement with the Practice or as required in
the Professional Business Management Agreement, each of the undersigned
person(s), having an ownership interest in the Practice, irrevocably and
unconditionally covenants and agrees to maintain in good standing the corporate
existence of the Practice under the laws of the state of Arizona and to cause
the Practice to abide by the restrictive covenant contained in Section 4.7. The
undersigned persons further unconditionally covenant and agree to indemnify and
hold harmless Professional Business Manager from and against any and all claims
requirements, demands, liabilities, losses, damages, costs and expenses,
including reasonable attorneys' fees, resulting in any manner from the failure
of the Practice to remain in good standing under the laws of Arizona the failure
of the Practice to abide by the restrictive covenants in Section 4.7 of the
Professional Business Management Agreement. The undersigned acknowledges that
he or she has received adequate consideration for the execution hereof. This
undertaking may be assumed by a successor to Shareholder or Shareholders,
whereupon the undersigned shall be released to the extent of such assumption,
provided that any such successor Shareholder executes a form similar to this.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such Shareholder's name.
Date: May ___, 2003 ____________________________
Xxxxxxx X. Xxxxxxxxxxx, O.D.
EXHIBIT 5.1
BASE MANAGEMENT FEE
---------------------
The Management Fee shall be equal to the sum of $25,000 each month for the
eleven practice locations identified below.
1. #70 Fiesta Crossing
0000 X. Xxxx Xxxxxx Xxxx
Xxxx, XX 00000-0000
2. #95 Metrocenter
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
3. #101 Xxxxxx Shores
0000 X. Xxxxxx Xxxx
Xxxx, XX 00000-0000
4. #122 Desert Sky
0000 X. Xxxxxx Xxxx
Xxxxxxx, XX 00000-0000
5. #000 Xxxxxxxxx Xxxx
0000 X. Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000-0000
6. #134 Scottsdale Pavillions
0000 X. Xxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
7. #000 Xxxxxxxxx Xxxxx Center
0000 Xxxx Xxxxxxxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
8. #000 Xxxxxxxxxx Xxxxxxx Xxxxxx
0000 X. Xxxxxxxxx Xxxx #0000
Xxxxxxxxxx, XX 00000
2
9. #000 Xxxxxxxxx Xxxxxxxxx Xxxxx Center
0000 X. Xxx Xxxx, Xxxxx 0X
Xxxxxxx, Xxxxxxxx Xxxxxx, Xxxxxxx
10. #14 Chandler
0000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx
11. #00 Xxxxxxxxxxxx Xxxxxxx
5555 - 0000 X. Xxxxxxxx Xxxxxx
Xxxx, Xxxxxxx
3
