MANAGEMENT AGREEMENT
between
SHADY GROVE FERTILITY CENTERS, P.C.
and
LEVY, SAGOSKIN AND XXXXXXXX, M.D., P.C.
THIS MANAGEMENT AGREEMENT, dated March 11, 1998, by and between Shady
Grove Fertility Centers, P.C., a Maryland corporation, with a place of business
at 00000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxx 00000 ("Shady Grove"
or "Management Company") and Levy, Sagoskin and Xxxxxxxx, M.D., P.C., a Maryland
professional services corporation, with its principal place of business at 0000
Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 ("PC").
RECITALS:
PC specializes in gynecological services, treatment of human
infertility encompassing the provision of in vitro fertilization and other
assisted reproductive services ("Infertility Services"). PC provides Infertility
Services through Xxxxxxx X. Xxxx, M.D., Xxxxxx X. Xxxxxxxx, M.D. and Xxxxxx X.
Xxxxxxxx, M.D. (collectively referred to as "Physicians") as well as other
physician employees. Physicians have entered into employment agreements with PC.
Management Company is in the business of owning certain assets and
providing management and administrative services to medical practices
specializing in the provision of Infertility Services, and furnishing such
medical practices with the necessary facilities, equipment, personnel, supplies
and support staff.
PC desires to utilize the services of Management Company to perform
management and administrative functions, on its behalf, to permit PC to devote
its efforts on a concentrated and continuous basis to the rendering of
Infertility Services to its patients .
In addition, PC desires access to capital to fund its growth and
development and Management Company desires to provide such capital or access to
capital as provided herein.
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NOW THEREFORE, in consideration of the above recitals which the parties
incorporate into this Agreement, the mutual covenants and agreements herein
contained and other good and valuable consideration , PC hereby agrees to
purchase from Management Company the management and administrative services
("Management Services") herein described and Management Company agrees to
provide the Management Services on the terms and conditions provided herein.
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
1.1.1 "Assets" shall mean those fixed assets utilized in
connection with the operation of PC's medical practice, including, but
not limited to, fixed assets and leasehold improvements.
1.1.2 "Adjustments" shall mean adjustments for refunds,
discounts, contractual adjustments, professional courtesies and other
activities that do not generate a collectible fee as reasonably
determined by Management Company and PC.
1.1.3 "Base Management Fee" shall mean a monthly fee paid by
PC to Management Company in an amount equal to a percentage of PC's
monthly Physician and Other Professional Revenues. The Base Management
Fee shall cover the cost of management services provided by Management
Company corporate staff to PC, as more specifically described in
Section 2.3.
1.1.4 "Facilities" shall mean the medical offices and clinical
spaces of PC, including any satellite locations, related businesses and
all medical group business operations of PC, which are utilized by PC
in its medical practice.
1.1.5 "Fiscal Year" shall mean the 12-month period beginning
January 1 and ending December 31 of each year.
1.1.6 "Infertility Services" shall mean gynecological
services, treatment of human infertility encompassing the provision of
in vitro fertilization and other assisted reproductive services
provided by PC or any Physician Employee and Other Professional
Employee.
1.1.7 "Other Professional Employee" shall mean a non-physician
individual who provides services, including nurse anesthetists,
physician assistants, nurse practitioners, psychologists, and other
such professional employees who generate professional charges, but
shall not include Technical Employees.
1.1.8 "Physician-Employee" shall mean an individual, including
a Physician- Stockholder, who is an employee of PC or is otherwise
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under contract with PC to provide professional services to PC patients
and is duly licensed as a physician in the applicable jurisdiction of
Maryland, Virginia and/or the District of Columbia where such
Physician- Employee treats PC's patients.
1.1.9 "Physician and Other Professional Revenues" shall mean
all fees, whether received or accrued, and actually recorded each month
(net of Adjustments) by or on behalf of PC as a result of professional
medical services personally furnished to patients by
Physician-Employees and Other Professional Employees and other fees or
income earned in their capacity as professionals, whether rendered in
an inpatient or outpatient setting, including but not limited to,
medical director fees or technical fees from medical ancillary
services, consulting fees and ultrasound fees from businesses owned or
operated by Physician- Stockholders. Physician and Other Professional
Revenues shall not include (i) board attendance fees and other
compensation in connection with board memberships; provided, the
compensation for board related activities does not exceed $5,000 in the
aggregate, annually, per Physician-Stockholder and (ii) other services
where Physician does not provide professional medical services such as
testimony and consultation for litigation-related proceedings,
lectures, passive investments, fundraising, or writing ("Permitted
Services"), the compensation from which Permitted Services Physician
may retain without limit. Physician and other Professional Revenues
with respect to PC's Shared Risk Program shall be treated in accordance
with Exhibit 1.1.9 attached hereto
1.1.10 "Physician-Stockholder" shall mean any physician, duly
licensed to practice medicine in a jurisdiction where PC provides
Infertility Services, who is or becomes a stockholder of PC.
1.1.11 "Predistribution Earnings" ("PDE") shall mean (i)
Physician and Other Professional Revenues, less (ii) Cost of Services
and the Base Management Fee.
1.1.12 "Receivables" shall mean and include all rights to
payment for services rendered or goods sold, accounts, receivables,
contract rights, chattel paper, documents, instruments and other
evidence of patient indebtedness to PC, policies and certificates of
insurance relating to any of the foregoing, and all rights to payment,
reimbursement or settlement or insurance or other medical benefit
payments assigned to PC by patients or pursuant to any Preferred
Provider, HMO, capitated payment agreements or other agreements between
PC and a payer, recorded each month (net of Adjustments).
1.1.13 "Revenues" shall mean the sum of all Physician and
Other Professional Revenues.
1.1.14 "Technical Employees" shall mean technicians such as
embryologists and other laboratory personnel, ultrasonographers and
phlebotomist who provide services to PC.
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ARTICLE 2
COST OF SERVICES AND BASE MANAGEMENT FEE
2.1 "Cost of Services" shall mean all ordinary and necessary expenses
of PC and all direct ordinary and necessary operating expenses of Management
Company, without xxxx-up, incurred in connection with the management of PC,
including, without limitation, the following costs and expenses, whether
incurred by Management Company or PC:
2.1.1 Salaries and fringe benefits of all employees of
Management Company working directly in the
management, operation or administration (including,
without limitation, Other Professional Employees and
Technical Employees) providing services at PC
Facilities, along with payroll taxes or all other
taxes and charges now or hereafter applicable to such
personnel, and services of independent contractors;
2.1.2 Expenses incurred in the recruitment of additional
physicians for PC, including, but not limited to
employment agency fees, relocation and interviewing
expenses and any actual out-of-pocket expenses of
Management Company personnel in connection with such
recruitment effort;
2.1.3 Direct marketing expenses of PC, such as direct costs
of printing marketing materials prepared by
Management Company;
2.1.4 Any sales and use taxes assessed against PC related
to the operation of PC's medical practice;
2.1.5 Lease payments, depreciation expense (determined
according to GAAP), taxes and interest directly
relating to the Facilities and equipment, and other
expenses of the Facilities described in Section 3.2
below;
2.1.6 Legal fees paid by Management Company or PC to
outside counsel in connection with matters specific
to the operation of PC such as regulatory approvals
required as a result of the parties entering into
this Agreement; provided, however, legal fees
incurred by the parties relative to completion of
this Agreement or as a result of a dispute between
the parties under this Agreement shall not be
considered a Cost of Services;
2.1.7 Fringe benefits provided to Physician-Employees,
including long-term disability;
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2.1.8 All insurance necessary to operate PC including fire,
theft, general liability and malpractice insurance
for Physician-Employees of the PC;
2.1.9 Professional licensure fees and board certification
fees of Physician- Employees, and Other Professional
Employees rendering Infertility Services on behalf of
PC;
2.1.10 Membership in professional associations and
continuing professional education for
Physician-Employees and Other Professional Employees;
2.1.11 Quality Improvement Program described in Section 3.8
herein;
2.1.12 Cost of filing fictitious name permits pursuant to
this Agreement;
2.1.13 Cost of supplies, medical and administrative, and all
direct general and administrative expenses, including
but not limited to travel and entertainment expenses,
car allowances (including car leases), dues and
subscriptions, car and other business related
expenses, such as cellular telephone, relative to PC;
and
2.1.14 Such other costs and expenses directly incurred by
Management Company necessary for the management or
operation of PC.
2.2 Notwithstanding anything to the contrary contained herein, Cost of Services
shall not include costs of the following:
2.2.1 Costs or expenses not in the ordinary course of
business unless approved by PC;
2.2.2 Any federal or state income taxes of PC or Management
Company other than as provided above;
2.2.3 The Base Management Fee and the Additional Management
Fee; or
2.2.4 Any amount paid to any Physician-Employee, including
salary or draw (all of which come out of PDE).
2.3 The "Base Management Fee" and the "Additional Management Fee"
described in Article 7 of this Agreement shall constitute Management Company's
sole compensation for all indirect costs of Management Company including all
legal, accounting, financial, marketing, management and administrative
assistance provided by Management Company corporate and regional staff which are
not provided for in Section 2.1.
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ARTICLE 3
DUTIES AND RESPONSIBILITIES OF MANAGEMENT COMPANY
3.1 MANAGEMENT SERVICES AND ADMINISTRATION.
3.1.1 PC hereby appoints Management Company as PC's sole and
exclusive manager and administrator of all of its day-to-day business
functions and grants Management Company all the necessary authority to
carry out, with PC's advice and consent, its duties and
responsibilities pursuant to the terms of this Agreement to provide the
Management Services. Physician-Employees of PC and only
Physician-Employees of PC will perform the medical functions of its
practice. Management Company will have no authority, directly or
indirectly, to perform, and will not perform, any medical function.
3.1.2 Management Company will, on behalf of PC, xxxx patients
and collect professional fees for Infertility Services rendered by PC
at the Facilities, outside the Facilities for PC's hospitalized
patients, and for all other Infertility Services rendered by any
Physician- Employee or Other Professional Employee. PC hereby appoints
Management Company for the term hereof to be its true and lawful
attorney-in-fact, for the following purposes: (i) to xxxx patients in
PC's name and on its behalf; (ii) to collect Receivables resulting from
such billing in PC's name and on its behalf; (iii) to receive payments
from insurance companies, prepayments received from health care plans,
and all other third-party payors; (iv) to take possession of and
endorse in the name of PC (and/or in the name of any Physician Employee
or Other Professional Employee rendering Infertility Services to
patients of PC) any notes, checks, money orders, and other instruments
received in payment of Receivables; and (v) to initiate the institution
of legal proceedings in the name of PC, with PC's advice and consent,
to collect any accounts and monies owed to PC, to enforce the rights of
PC as creditor under any contract or in connection with the rendering
of any service, and to contest adjustments and denials by governmental
agencies (or its fiscal intermediaries) as third-party payors.
3.1.3 Management Company represents that it will provide all
billing services in compliance with applicable laws and third-party
payor requirements, and will ensure all necessary documentation
supports all claims made for payment.
3.1.4 Management Company will provide the administrative
services function of supervising and maintaining (on behalf of PC) all
files and records relating to the operations of the Facilities,
including but not limited to accounting and billing records, including
for billing purposes, patient medical records, and collection records.
Patient medical records shall at all times be and remain the property
of PC and shall be located at the Facilities and be readily accessible
for patient care. Management Company's management of all files and
records shall comply with all applicable state and federal laws and
regulations, including without limitation, those pertaining to
confidentiality of patient records. The medical records
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of each patient shall be expressly deemed confidential and shall not be
made available to any third party except in compliance with all
applicable laws, rules and regulations. Management Company shall have
access to such records in order to provide the Management Services
hereunder, to perform billing functions, and to prepare for the defense
of any lawsuit in which those records may be relevant. The obligation
to maintain the confidentiality of such records shall survive
termination of this Agreement. PC shall have unrestricted access to all
of its records at all times.
3.1.5 Management Company will supply to PC all reasonably
necessary clerical, accounting, bookkeeping and computer services,
printing, postage and duplication services, medical transcribing
services, and any other necessary or appropriate administrative
services reasonably necessary for the efficient operation of PC's
medical practice at the Facilities.
3.1.6 Subject to PC's prior approval, Management Company shall
design and implement an appropriate marketing and public relations
program on behalf of PC, with appropriate emphasis on public awareness
of the availability of Infertility Services from PC. The public
relations program shall be conducted in compliance with applicable laws
and regulations governing advertising by the medical profession. PC
shall approve all advertising and marketing materials prior to use.
3.1.7 Management Company, upon request of PC, will assist PC
in recruiting additional physicians, including such administrative
functions as advertising for and identifying potential candidates,
checking credentials, and arranging interviews; provided, however, PC
shall interview and make the ultimate decision as to the suitability of
any physician to become associated with PC. All physicians recruited by
Management Company and accepted by PC shall be employees of or
independent contractors to PC.
3.1.8 Management Company will assist PC in negotiating any
managed care contracts to which PC desires to become a party.
Management Company will provide administrative assistance to PC in
fulfilling its obligations under any such contract.
3.1.9 Management Company will arrange for legal and accounting
services as may be reasonably required in the ordinary course of PC's
operation, including the cost of enforcing any physician contract
containing restrictive covenants. Nothing contained herein is intended
to authorize Management Company to settle any claim made by or against
PC.
3.1.10 Management Company will negotiate for and cause
premiums to be paid with respect to the insurance provided for in
Article 11.
3.1.11 Management Company will take such other reasonable
actions to collect fees and pay expenses of the Facilities in a timely
manner as are deemed reasonably necessary to facilitate the operation
of PC's medical practice at the Facilities.
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3.2 FACILITIES. Management Company will provide the Facilities
necessary for the operation of PC's medical practice, as set forth in Exhibit
3.2 hereto, including but not limited to, the use of the Facilities, all
furniture, equipment and furnishings necessary for the Facilities, all repairs,
maintenance and improvements thereto, utility (telephone, electric, gas, water)
services, customary janitorial services, refuse disposal and all other services
reasonably necessary in conducting the Facilities' physical operations.
Management Company will provide for the cleanliness of the Facilities, and
timely maintenance and cleanliness of the equipment, furniture and furnishings
located therein. Management Company will consult with PC regarding the
condition, use and needs for the Facilities, equipment, services and
improvements thereto. PC shall have the right to review all proposed leases for
office space and Management Company shall consult with PC with respect to the
terms of such leases and use its best efforts to ensure that the leases provide
for reasonable assignment. Additionally, Management Company shall use its best
efforts to ensure that equipment leases provide for reasonable assignment.
Management Company shall have no right to close any Facility without the advice
and consent of PC.
3.3 EXECUTIVE DIRECTOR AND OTHER PERSONNEL.
3.3.1 EXECUTIVE DIRECTOR. Subject to the agreement and
approval of PC, which approval shall not be unreasonably withheld,
Management Company will hire and appoint an Executive Director to
manage and administer all of the day-to-day business functions of the
Facilities. Salary and fringe benefits paid to the Executive Director
shall be determined by Management Company. At the direction,
supervision and control of Management Company, the Executive Director,
subject to the terms of this Agreement, will implement the policies
agreed upon by Management Company and PC and will generally perform the
administrative duties assigned to the Executive Director by Management
Company.
3.3.2 PERSONNEL. Management Company will provide Other
Professional Employees, Technical Employees, support and administrative
personnel, clerical, secretarial, bookkeeping and collection personnel
reasonably necessary for the efficient operation of PC at the
Facilities. Such personnel will be under the direction, supervision and
control of Management Company, with Technical Employees and Other
Professional Employees subject to the professional supervision of PC.
If PC is dissatisfied with the services of any person delivering
non-professional services, PC will consult with Management Company.
Management Company shall in good faith determine whether the employment
of that employee warrants termination. Management Company's obligations
to utilize nonprofessional personnel will be governed by the overriding
principle and goal of facilitating the PC's provision of high quality
medical care and laboratory services. Management Company will make
every effort to honor the specific requests of PC with regard to the
assignment of Management Company's employees, including the Executive
Director and Management Company will follow the provisions of Section
5.2.10 with respect to the hiring or firing of certain key personnel.
3.4 FINANCIAL PLANNING AND GOALS. Management Company will prepare, for
the approval of the Joint Practice Management Board (as defined in Section 5.1),
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an annual capital and operating budget (the "Budget") reflecting the anticipated
Revenues and Cost of Services, sources and uses of capital for growth of PC's
practice and for the provision of Infertility Services at the Facilities.
Management Company will present the Budget to PC for its approval at least
thirty (30) days prior to the commencement of the Fiscal Year. Management
Company will indicate the targeted profit margin for PC's practice at the
Facilities which will be reflected in the Budget. If the parties can not agree
on the Budget for PC for any Fiscal Year during the term of this Agreement, the
Budget for the preceding Fiscal Year will serve as the Budget until such time as
the dispute can be resolved.
3.5 AUDITS AND STATEMENTS. Management Company will prepare annual
financial statements for operations of PC at the Facilities within ninety (90)
days of the close of the Fiscal Year. Management Company shall prepare monthly
financial statements containing a balance sheet and statement of operations,
which shall be delivered to PC within thirty (30) days after the close of each
calendar month.
3.6 TAX PLANNING AND TAX RETURNS. Management Company will not be
responsible for any tax planning or tax return preparation for PC, but will
provide support documentation in connection with the same. Such support
documentation will not be destroyed without PC's consent.
3.7 INVENTORY AND SUPPLIES. Management Company shall order and purchase
inventory and supplies, and such other materials which are requested by PC to
enable PC to deliver Infertility Services in a cost-effective quality manner.
3.8 QUALITY IMPROVEMENT. Management Company shall assist PC in
fulfilling its obligations to maintain a Quality Improvement Program and in
meeting the goals and standards of such program.
3.9 RISK MANAGEMENT. Management Company shall assist PC in the
development of a Risk Management Program and in meeting the standards of such
Program.
3.10 PERSONAL POLICIES AND PROCEDURES. Management Company shall develop
personnel policies, procedures and guidelines, to govern office behavior,
protocol and procedures, designed to insure that PC's Facilities observe all
laws and guidelines related to employment and human resources management.
3.11 LICENSES AND PERMITS. Management Company shall, on behalf of PC,
coordinate and assist PC in its application for and efforts to obtain and
maintain all federal, state and local licenses, certifications and regulatory
permits required for or in connection with the operations of PC and equipment
located at the Facilities, other than those relating to the practice of medicine
or the administration of drugs by Physician-Employees.
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ARTICLE 4
DUTIES AND RESPONSIBILITIES OF PC
4.1 PROFESSIONAL SERVICES. PC shall cause its Physician-Employees to
provide Infertility Services to PC's patients in compliance at all times with
ethical standards, laws and regulations applying to the practice of medicine in
the applicable jurisdiction which such Physician- Employee provides Infertility
Services on behalf of PC. PC shall ensure that each Physician- Employee, any
Other Professional Employee employed by PC, and any other professional provider
associated with PC is duly licensed to provide the Infertility Services being
rendered within the scope of such provider's practice. In addition, PC shall
require each Physician-Employee to maintain a DEA number and appropriate medical
staff privileges as determined by PC during the term of this Agreement. In the
event that any disciplinary actions or medical malpractice actions are initiated
against any Physician-Stockholder, Physician-Employee or other professional
provider, PC shall promptly inform the Executive Director and provide the
underlying facts and circumstances of such action, and the proposed course of
action to resolve the matter. Periodic updates, but not less than monthly, shall
be provided to Management Company.
4.2 MEDICAL PRACTICE. PC shall use and occupy the Facilities
exclusively for the purpose of providing Gynecology, Infertility Services, and
related services and shall comply with all applicable laws and regulations and
all applicable standards of medical care, including, but not limited to, those
established by the American Society of Reproductive Medicine. The medical
practice conducted at the Facilities shall be conducted solely by
Physician-Employees employed by or serving as independent contractors to PC, and
Other Professional Employees employed by PC. No other physician or medical
practitioner shall be permitted to use or occupy the Facilities without the
prior written consent of Management Company, except in the case of a medical
emergency, in which event, notification shall be provided to Management Company
as soon after such use or occupancy as possible.
4.3 EMPLOYMENT OF PHYSICIAN AND OTHER PROFESSIONAL EMPLOYEES. In the
event PC shall determine that additional physicians are necessary, PC shall
undertake and use its best efforts to locate physicians who, in PC's judgment,
possess the credentials and expertise necessary to enable such physician
candidates to become affiliated with PC for the purpose of providing Infertility
Services. PC shall cause each Physician-Employee to enter into an employment
agreement with PC in the form attached hereto as Exhibit 4.3(A)
("Physician-Stockholder Employment Agreement") if the Physician-Employee is a
shareholder or in the form of Exhibit 4.3(B) ("Physician-Employee Employment
Agreement") if the Physician-Employee is not a shareholder, or such other form
as is mutually acceptable to PC and Management Company. Except as otherwise
provided in Sections 4.6.4 and 5.2.8 of this Agreement, PC shall have complete
control of and responsibility for the hiring, compensation, supervision,
evaluation and termination of its Physician-Employees, although at the request
of PC, Management Company shall consult with PC respecting such matters.
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4.4 CONTINUING MEDICAL EDUCATION . PC shall require its
Physician-Employees to participate in such continuing medical education as PC
deems to be reasonably necessary for such physicians to remain current in the
provision of Infertility Services.
4.5 PROFESSIONAL INSURANCE ELIGIBILITY. PC shall cooperate in the
obtaining and retaining of professional liability insurance by assuring that its
Physician-Employees and Other Professional Employees, if applicable, are
insurable and participating in an on-going Risk Management Program, under
Management Company's directions.
4.6 DIRECTION OF PRACTICE PC, as a continuing condition of Management
Company's obligations under this Agreement, shall at all time during the Term be
and remain legally organized and operated to provide Infertility Services in a
manner consistent with state and federal laws. In furtherance of which:
4.6.1 PC shall operate and maintain at the Facilities a
full-time practice of medicine specializing in the provision of
Infertility Services and shall maintain and enforce the
Physician-Stockholder Employment Agreements and the Physician-Employee
Employment Agreements (collectively referred to as "Physician
Employment Agreements") or in such other form as is mutually agreed to
by the PC and Management Company in writing. PC covenants that it shall
not employ any physician, or have any physician as a shareholder,
unless said physician shall sign the applicable Physician Employment
Agreement prior to assuming the status as employee and/or shareholder.
PC covenants that should a physician become a shareholder of the PC,
that a condition precedent to the issuance of the shares shall be the
ratification of this Management Agreement.
4.6.2 PC shall not terminate the Employment Agreement(s) of
any Physician or Shareholder, except in accordance with the Employment
Agreement(s), or amend or modify the Employment Agreements in any
material manner, nor waive any material rights of the PC thereunder
without the prior written approval of Management Company, which
approval will not be unreasonably withheld; provided that PC may amend
or modify the Employment Agreements without Management Company's
consent in order to comply with applicable law. PC covenants to enforce
the terms of each Physician Employment Agreement, including but not
limited to any covenants not to compete and other terms confirming a
Physician- Employee's commitment to practice medicine solely through
the PC for a specified number of years. In addition, in the exercise of
Management Company's sole discretion, if the PC fails to pursue the
enforcement of its rights against a Physician-Employee, Management
Company shall have the right, but not the obligation, to direct,
initiate or join in a lawsuit to enforce the provisions of any
Physician Employment Agreement and PC shall assign its rights and
remedies against such Physician-Employee upon the request of Management
Company.
4.6.3 Recognizing that Management Company would not have
entered into this Agreement but for the PC's covenant to maintain and
enforce the Physician-Employment Agreements with any physician now
employed or physicians who may hereafter become employees of the PC,
and in reliance upon such Physician-Employee's observance and
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performance of all of the obligations under the Physician Employment
Agreements, any damages, liquidated damages, compensation, payment or
settlement received by the PC from a physician whose employment is
terminated, shall be paid to Management Company in proportion to
Management Company's loss or damages.
4.6.4 PC shall retain that number of Physician-Employees as
are reasonably necessary and appropriate for the provision of
Infertility Services. However, PC agrees that it will not hire more
physicians than consented to by the Joint Practice Management Board
which shall not be unreasonable in giving its consent. Each
Physician-Employee shall hold and maintain a valid and unrestricted
license to practice medicine in the applicable jurisdiction where such
Physician-Employee provides Infertility Services on behalf of PC, and
shall be board eligible in the practice of gynecology, with training in
the subspecialty of infertility and assisted reproductive medicine. PC
shall be responsible for paying the compensation and benefits, as
applicable, for all Physician-Employees, and for withholding, as
required by law, any sums for income tax, unemployment insurance,
social security, or any other withholding required by applicable law.
Management Company may, on behalf of the PC, establish and administer
the compensation with respect to such Physician-Employees in accordance
with the written agreement between the PC and each Physician Employee.
Management Company shall neither control nor direct any Physician in
the performance of Infertility Services for patients, and Management
Company will not unreasonably interfere with the employer-employee
relationship between PC and its Physician-Employees.
4.6.5 PC shall insure that Physician-Employees provide patient
care and clinical backup as required to insure the proper provision of
Infertility Services to patients of the PC at PC's Facilities set forth
in Exhibit 3.2, and/or such other location as shall be mutually agreed
to by PC and Management Company. PC shall insure that its
Physician-Employees devote substantially all of their professional
time, effort and ability to PC's practice, including the provision of
Infertility Services and the development of such practice.
4.6.6 PC covenants to obtain necessary licenses and operate
clinical laboratory and tissue bank services in accordance with all
applicable laws and regulations. PC agrees that the Medical Director(s)
or Tissue Bank Director(s) shall be Physician-Employees or Other
Professional Employees, if applicable, of the PC who meet the
qualifications required by applicable State law or regulation, and that
should there be a vacancy in any such position, PC will cause another
Physician-Employee or Other Professional Employee, if applicable, to
fill such vacancy in accordance with applicable State law.
4.6.7 PC acknowledges that it bears all medical obligations to
patients treated at the Facilities and covenants that it is responsible
for all tissue, specimens, embryos or biological material ("Biological
Materials") kept at the Facilities on behalf of the patients (or former
patients) of PC. In the event of a termination or dissolution of PC, or
the termination of this Agreement for any reason, PC and its
Physician-Stockholders will have the obligation to account to patients
and to arrange for the storage or disposal of such Biological Materials
in accordance with patient consent and the ethical guidelines of the
American Society of
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Reproductive Medicine ("Relocation Program"). Management Company, in
such event, will, at the request of the PC, assist in the
administrative details of such a Relocation Program for so long as the
PC shall request and the Management Fee shall be paid during that time.
These obligations shall survive the termination of this Agreement.
4.6.8 Except for circumstances outside the control of PC or
Physician-Stockholders, PC covenants not to terminate or dissolve as a
professional services corporation except on six months prior written
notice to Management Company. PC covenants that such a restriction will
be contained either in PC's by-laws or shareholder agreement among PC's
shareholders. In the event that such termination or dissolution occurs,
for a reason other than the death or disability of all of the
shareholders, or any successor entity fails to continue the medical
practice of PC substantially in the form contemplated by this
Agreement, PC and its individual shareholders, shall indemnify
Management Company for: (a) the actual costs of maintaining the
Facilities and any reasonably necessary Other Professional Employees
during a Relocation Program (Section 4.6.7); (b) legal costs for
relicensing; (c) recruitment of other physicians to assume the
Practice; and (d) any damages, costs, liabilities, including reasonable
attorneys fees, arising from claims, suits, causes of action or
proceedings, brought by a patient of the PC having an interest in any
Biological Materials kept at the Facilities. These obligations shall
survive the termination of this Agreement.
4.7 PRACTICE DEVELOPMENT, COLLECTION EFFORTS AND NETWORK INVOLVEMENT.
PC agrees that during the term of this Agreement, PC covenants for itself and
will use its best efforts to cause its Physician-Employees to:
4.7.1 Execute such documents and take such steps reasonably
necessary to assist billing and collecting for patient services
rendered by PC and its Physician-Employees;
4.7.2 Promote PC's medical practice and participate in
marketing efforts developed by Management Company; and
4.7.3 Participate in Management Company network activities and
programs.
4.8 PERSONNEL POLICIES PC covenants for itself and will cause its
Physician-Employees and any other employees to comply with reasonable personnel
policies and guidelines developed for the PC by Management Company and/or the
Joint Practice Management Board, which shall include administrative protocols
and policies designed to insure that the Facilities comply with all applicable
laws and regulations, federal, state and local.
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ARTICLE 5
JOINT DUTIES AND RESPONSIBILITIES
5.1 FORMATION AND OPERATION OF JOINT PRACTICE MANAGEMENT BOARD.
Management Company and PC will establish a joint practice management board
("Joint Practice Management Board") which will be responsible for developing
management and administrative policies for the overall operation of PC. The
Joint Practice Management Board will consist of designated management
representatives from Management Company, one or more PC owners, as determined by
PC, such other PC physicians, as appropriate and determined by PC, and the
Executive Director. It is the intent and objective of Management Company and PC
that they agree on the overall operations of PC. In the case of any matter
requiring a formal vote, PC shall have one (1) vote and Management Company shall
have one (1) vote. The desire is that Management Company and PC agree on matters
of operations and that, if they disagree, they will have to work cooperatively
to resolve any disagreement.
5.2 DUTIES AND RESPONSIBILITIES OF THE JOINT PRACTICE MANAGEMENT Board.
The Joint Practice Management Board shall have, among others, the following
duties and responsibilities:
5.2.1 ANNUAL BUDGETS AND PROFITABILITY. All annual capital and
operation budgets prepared by Management Company shall be subject to
the review, amendment, approval and disapproval of the Joint Practice
Management Board. PC covenants and agrees to use its best efforts to
assist the Joint Management Board in achieving the projected budgets,
in place from time to time. PC and Management Company agree that,
recognizing changes in circumstances, annual budgets and forecast are
subject to revisions and, accordingly, they will cause the Joint
Practice Management Board to modify the annual budgets, as needed,
including without limitation, staff reductions, to ensure that PC
operates in a profitable mode which means that PDE is positive on a
monthly basis. Further, PC agrees that in the event PC incurs
operational losses at any point during the term of this Agreement,
nothing herein shall obligate Management Company to incur losses under
this Agreement in order to sustain PC's operations.
5.2.2 CAPITAL IMPROVEMENTS AND EXPANSION. Except as otherwise
provided herein, any renovation and expansion plans, and capital
equipment expenditures with respect to PC shall be reviewed and
approved by the Joint Practice Management Board and shall be based upon
the best interests of PC, and shall take into account capital
priorities, economic feasibility, physician support, productivity and
then current market and regulatory conditions.
5.2.3 ADVERTISING BUDGET. All annual advertising and other
marketing budgets prepared by Management Company shall be subject to
the review, amendment, approval and disapproval of the Joint Practice
Management Board.
5.2.4 PATIENT FEES. The Joint Practice Management Board shall
review and approve the fee schedule for all physician and ancillary
services rendered by PC.
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5.2.5 ANCILLARY SERVICES. The Joint Practice Management Board
shall approve ancillary services rendered by PC.
5.2.6 PROVIDER AND PAYER RELATIONSHIPS. Decisions regarding
the establishment or maintenance of relationship with institutional
health care providers and payers shall be made by the Joint Practice
Management Board in consultation with PC; provided, however, that
unanimous consent of PC designated members of the Joint Practice
Management Board shall be necessary to discontinue any existing PC
institutional relationship.
5.2.7 STRATEGIC PLANNING. The Joint Practice Management Board
shall develop long-term strategic plans, from time to time.
5.2.8 PHYSICIAN HIRING. The Joint Practice Management Board
shall, in conjunction with PC, determine, the number and type of
physicians required for the efficient operation of PC. In addition to
any other approvals required under this Agreement or the
Physician-Stockholder Agreements, the approval of the Joint Practice
Management Board shall be required for any modifications to the
restrictive covenants contained in any physician employment agreement.
5.2.9 PROVIDER CONTRACTS. The Joint Practice Management Board
shall approve, disapprove, or amend all managed care, PPO, HMO,
Medicare risk and other provider contracts negotiated by Management
Company.
5.2.10 EXECUTIVE DIRECTOR AND KEY PERSONNEL.
(a) The selection and retention of the Executive Director
pursuant to Section 3.3.1 by Management Company shall be subject to the
recommendation of the Joint Practice Management Board. If PC is
dissatisfied with the services provided by the Executive Director, PC
shall consult with Management Company who shall, in good faith,
determine whether the performance of the Executive Director could be
brought to acceptable levels through counsel and assistance, or whether
the Executive Director should be terminated.
(b) Management Company shall follow the recommendations of the
Joint Practice Management Board with respect to the hiring, terminating
or relocating of key personnel at PC Facilities, including the
Executive Director, Operations Director and Marketing Director, in such
positions as of the Effective Date of this Agreement; provided, such
recommendations do not cause Management Company to violate any federal,
state or local laws or regulations. Management Company agrees not to
reassign responsibilities, except for line management reporting, of any
key personnel engaged by PC listed on Exhibit 5.2.10 (b) during the
first five years of this Agreement without the consent of PC.
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ARTICLE 6
LICENSE OF MANAGEMENT COMPANY NAME
6.1 GRANT OF LICENSE. Management Company hereby grants to PC an
irrevocable, exclusive and non-assignable license for the term of this Agreement
to use the name SHADY GROVE FERTILITY CENTERS and a revocable, non-exclusive and
non-assignable license with respect to any other service names, trademark names
and logos of Management Company (the "Trade Names") in conjunction with the
provision of Infertility Services by PC at the Facilities. Notwithstanding the
License granted to PC hereunder, Management Company retains the absolute right
to use and license the Trade Names, except for SHADY GROVE FERTILITY CENTERS, to
others during the term of this Agreement.
6.2 FICTITIOUS NAME PERMIT. If necessary, PC shall file or cause to be
filed an original, amended or renewal application with an appropriate regulatory
agency to obtain a fictitious name permit which allows PC to practice at the
Facilities under the Trade Names and shall take any other actions reasonably
necessary to procure protection of or protect Management Company's rights to the
Trade Names. Management Company shall cooperate and assist PC in obtaining any
such original, amended or renewal fictitious name permit.
6.3 RIGHTS OF MANAGEMENT COMPANY. PC acknowledges Management Company's
exclusive right, ownership, title and interest in and to the Trade Names and
will not at any time do or cause to be done any act or thing contesting or in
any way impairing or tending to impair any part of such right, title and
interest. In connection with the use of the Trade Names, PC shall not in any
manner represent that it has any ownership interest in the Trade Names, and PC's
use shall not create in PC's favor any right, title, or interest in or to the
Trade Names other than the right of use granted hereunder, and all such uses by
PC shall inure to the benefit of Management Company. PC shall notify Management
Company immediately upon becoming aware of any claim, suit or other action
brought against it for use of the Trade Names or the unauthorized use of the
Trade Names by a third party. PC shall not take any other action to protect the
Trade Names without the prior written consent of Management Company. Management
Company, if it so desires, may commence or prosecute any claim or suit in its
own name or in the name of PC or join PC as a party thereto. PC shall not have
any rights against Management Company for damages or other remedy by reason of
any determination of Management Company not to act or by reason of any
settlement to which Management Company may agree with respect to any alleged
infringements, imitations or unauthorized use by others of the Trade Names, nor
shall any such determination of Management Company or such settlement by
Management Company affect the validity or enforceability of this Agreement.
6.4 RIGHTS UPON TERMINATION.
6.4.1 Upon termination of this Agreement, PC shall: (i) within
30 days of the termination, cease using the Trade Names in all respects
and refrain from making any reference on its letterhead or other
publicly-disseminated information or material to its former
16
relationship with Management Company; and (ii) take any and all actions
required to make the Trade Names available for use by any other person
or entity designated by Management Company.
6.4.2 PC's failure (except as otherwise provided herein) to
cease using the Trade Names at the termination or expiration of this
Agreement will result in immediate and irreparable damage to Management
Company and to the rights of any licensee of Management Company. There
is no adequate remedy at law for such failure. In the event of such
failure, Management Company shall be entitled to equitable relief by
way of injunctive relief and such other relief as any court with
jurisdiction may deem just and proper. Additionally, pending such a
hearing and the decision on the application for such permanent
injunction, Management Company shall be entitled to a temporary
restraining order, without prejudice to any other remedy available to
Management Company. All such remedies hereunder shall be at the expense
of PC and shall not be a Cost of Services.
ARTICLE 7
FINANCIAL ARRANGEMENTS
7.1 COMPENSATION. The compensation set forth in this Article 7 is being
paid to Management Company in consideration of the substantial commitment made
and services to be rendered by Management Company hereunder and is fair and
reasonable. Management Company shall be paid the following amounts (collectively
"Compensation"):
7.1.1 an amount reflecting all Cost of Services (whether
incurred by Management Company or PC) paid or accrued by Management
Company pursuant to the terms of this Agreement;
7.1.3. during each year of this Agreement, a Base Management
Fee, paid monthly but reconciled to annual Revenues, of an amount equal
to six percent (6%) of Revenues; and
7.1.4 an Additional Management Fee, paid monthly but
reconciled to annual Revenues, in accordance with the following table:
Years 1 through 5 of this Agreement
Costs of Services plus the Base Additional Management Fee
Management Fee as a % of Revenues
50% and Below 11 1/2% of Revenues
51% to 60% 9 1/2% of Revenues
61% to 70% 7 1/2% of Revenues
71% to 80% 4% of Revenues
81% or More 0% of Revenues
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The Additional Management Fee for years 1 through 5 shall not exceed 20% of PDE
each year.
Years 6 through 20 of this Agreement
50% and Below 13 1/2% of Revenues
51% to 60% 11 1/2% of Revenues
61% to 70% 8 1/2% of Revenues
71% to 80% 5% of Revenues
81% or More 0% of Revenues
The Additional Management Fee for years 6 through 20 shall not exceed 25% of PDE
each year.
7.1.5 Management Company will reconcile the Additional
Management Fee within 90 days after each Fiscal Year end during the
term of this Agreement for purposes of determining whether the
Additional Management Fee for the Fiscal Year end exceeded the
applicable 20% or 25% of PDE. Any adjustment shall be made within 5
days of the reconciliation by Management Company remitting the
overpayment to PC.
7.1.6 In the event that Section 7.1.3 and/or Section 7.1.4 of
this Agreement is found to be illegal, unenforceable, against public
policy, or forbidden by law, by any local, state or federal agency or
department, or any court of competent jurisdiction ("Findings"), then
Sections 7.1.3 and 7.1.4 and the Base Management Fee and Additional
Service Fee shall be replaced, effective immediately and retroactive to
the date of this Agreement, by a fixed annual Management Fee, payable
in equal monthly installments ("Alternate Management Fee") on or before
the 15th business day of each month. Said Alternate Management Fee
shall be in an amount mutually agreed upon, within thirty days time
from the Findings, between Management Company and PC, but in no event
shall be less than $1,000,000 per annum. In the event of a Finding
which causes the Alternate Management Fee to become operative, the
parties shall, within sixty days of the Finding, account for all
payments made prior to the date of the Finding, and recalculate such
amounts pursuant to the formula provided in the Alternate Management
Fee. Any overpayment to Management Company resulting from the prior
application of Sections 7.1.3 and 7.1.4 shall be applied so as to
satisfy 50% of each future monthly Alternate Management Fee until the
aggregate of such overpayment is fully paid by Management Company. Any
underpayment to Management Company resulting from the prior application
of Sections 7.1.3 and 7.1.4 shall be paid to Management Company
commencing on the first day of the next full month following the date
of the Finding, in eighteen (18) equally monthly installments.
7.1.7 The right of termination provided for in Section 9.1.3
of this Agreement, if based on the fact that Section 7.1.3 and Section
7.1.4 of this Agreement have been found to be illegal, unenforceable,
void, against public policy or forbidden by law, shall only be
exercisable in the event that both (i) Sections 7.1.3 and 7.1.4 and
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(ii) the Alternate Management Fee have been so found by a local, state
or federal agency or department, or any court of competent
jurisdiction."
7.2 ACCOUNTS RECEIVABLE.
7.2.1 On or before the 15th business day of each month,
Management Company shall reconcile the Receivables of PC arising during
the previous calendar month. Subject to the terms and conditions of
this Agreement, PC hereby sells and assigns to Management Company as
absolute owner, and Management Company hereby purchases from PC all
Receivables hereafter owned by or arising in favor of PC on or before
the 15th business day of each month. All Receivables are sold on a full
recourse basis. Management Company shall transfer or pay such amount of
funds to PC equal to the Receivable less Compensation due Management
Company pursuant to Section 7.1. PC shall cooperate with Management
Company and execute all necessary documents in connection with the
purchase and assignment of such Receivables to Management Company or at
Management Company's option, to its lenders. All collections in respect
of such Receivables shall be deposited in a bank account at a bank
designated by Management Company. To the extent PC comes into
possession of any payments in respect of such Receivables, PC shall
direct such payments to Management Company for deposit in bank accounts
designated by Management Company.
7.2.2 Any Medicare or Medicaid Receivables due to PC shall be
excluded from the operation of Section 7.2.1 hereof. Any such
Receivables shall be subject to agreement of PC and Management Company
with respect to the collection thereof.
7.3 ADVANCES. Management Company agrees to advance funds to PC to meet
Cost of Services, provide working capital, relocate Facilities, acquire new
equipment or fund mergers with other physicians or physician groups into PC
("Advance"). Upon the request of PC, Management Company, in its sole discretion,
will determine whether to advance the requested funds.
7.3.1 Any Advance hereunder shall be a debt owed to Management
Company by PC and shall be repaid within 60 days after the Advance.
Upon request of PC, Shady Grove will consider repayment in
installments. To the extent PDE is available for distribution to
Physician-Stockholders for a particular month, Management Company is
authorized to deduct any outstanding Advance from the PDE prior to
distribution to the Physician-Stockholders. In the event there is
insufficient PDE to satisfy repayment of any Advance within the 60-day
period, the Physician-Stockholders shall be jointly and severally
liable to repay the Advance within the 60-day period and Management
Company shall be entitled to make demand for repayment. Failure to
repay any Advance within the specified time will be deemed a material
breach of this Agreement.
7.3.2 Interest expense will be charged on an Advance and will
be computed at the Prime Rate used by Management Company's primary bank
19
in effect at the time of the Advance. Advances shall be evidenced by a
security agreement in the form of Exhibit 7.3.2, giving Management
Company a collateral interest in all Receivables of PC and
distributions to PC Shareholders.
7.3.3 Notwithstanding Section 7.3.2, Management Company agrees
not to charge interest expense on Advances under certain limited
circumstances where Management Company, in its sole discretion,
determines an Advance relates to (i) funding a merger with other
physicians or physician groups which provides significant accretive
benefits to PC and Management Company or (ii) leasehold improvements
and permanent fixtures relative to a Facility build-out which provide
significant accretive benefits to PC and Management Company.
7.4 FACILITY RELOCATION.
7.4.1 In connection with the relocation and combining of PC's
locations at 0000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx and 00000
Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxx 00000 (the "Relocation"),
Management Company agrees to provide up to $1.5 million in financing to assist
with the build-out and equipping of the new Facility with necessary leasehold
improvements and permanent fixtures; 50% of the amount provided will bear
interest at the Prime Rate of First Union National Bank and 50% will be interest
free. Any amounts provided in excess of $1.5 million will bear interest at the
Prime Rate of First Union National Bank. In connection with the amount of the
financing which will be provided on an interest-bearing basis, Management
Company will deduct from such obligation, the build-out allowance provided
directly or by credit by the landlord of the new Facility. For example, if the
costs for the leasehold improvements and equipment costs $1.4 million and the
landlord allowance is $375,000, Management Company will provide PC with $700,000
on an interest-free basis and $325,000 on an interest-bearing basis. PC will
receive the full benefit of the landlord allowance.
7.4.2 All Cost of Services involving leasehold improvements &
equipment write offs relative to the Relocation shall be excluded Cost of
Services under Section 7.1.4 in determining the Additional Management Fee to
which Management Company is entitled.
ARTICLE 8
EXCLUSIVE MANAGEMENT RIGHT AND TERM
8.1 In consideration of the considerable investment of time and
resources in PC expected by Management Company, PC grants to Management Company
the exclusive right to manage PC during the term of this Agreement (the
"Exclusive Management Right").
8.2. The term of this Agreement shall begin on March 11, 1998 (the
"Effective Date") and shall expire twenty (20) years after such date unless
earlier terminated pursuant to Article 9, below.
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This Agreement may be renewed by either party, if within the period of 180 days
prior to the expiration date one party gives notice to the other of its
intention to continue this Agreement under the same terms and conditions as set
forth herein or under such different terms and conditions as particularly set
forth in the written notice and further providing that the other party has 30
days from the date of notice to accept, reject or modify the offer. If within 30
days, the other party does not respond or by written notice accepts, this
Agreement shall continue for an additional 10 years under the terms and
conditions as provided in the notice.
ARTICLE 9
TERMINATION OF THE AGREEMENT
9.1 TERMINATION
This Agreement may be terminated by either party in the event
of the following:
9.1.1 INSOLVENCY. If a receiver, liquidator or trustee of any
party shall be appointed by court order, or a petition to reorganize shall be
filed against any party under any bankruptcy, reorganization or insolvency law,
and shall not be dismissed within 90 days, or any party shall file a voluntary
petition in bankruptcy or make assignment for the benefit of creditors, then
either of the other parties may terminate this Agreement upon 10 days prior
written notice to the other parties.
9.1.2 MATERIAL BREACH. If either party shall materially breach
its obligations hereunder, then the other party may terminate this Agreement by
providing 30 days prior written notice to the breaching party detailing the
nature of the breach and providing the breaching party with the opportunity to
cure the breach. If the breach is not cured within such 30-day period, this
Agreement shall terminate, provided that if the breach is not curable within
such 30-day period and the breaching party is making diligent efforts to cure
the breach during such 30-day period, this Agreement shall not terminate. If
after the exercise of diligent efforts, the breaching party shall be unable to
cure the breach within 60 days from the notice of breach from the non-breaching
party, the non-breaching party in its sole discretion may extend the time in
which to cure the breach, upon request of the breaching party. In the event the
non-breaching party does not extend the time in which to cue the breach, this
Agreement will terminate at the expiration of 60 days from the original notice
of breach from the non-breaching party.
9.1.3 ILLEGALITY. Any party may terminate this Agreement
immediately upon receipt of notification by any local, state or federal agency
or court of competent jurisdiction that the conduct contemplated by this
Agreement is forbidden by law; except that this Agreement shall not terminate
during such period of time as to any party which contests such notification in
good faith and the conduct contemplated by this Agreement is allowed to continue
during such contest. If any governing regulatory agency asserts that the
services provided by Management Company under this Agreement are unlawful or
that the practice of medicine by PC as contemplated by this Agreement requires a
certificate of need, and any such assertion is not contested (or if contested,
the agency's assertion is found to be correct by a court of competent
21
jurisdiction and no appeal is taken, or if any appeals are taken and the same
are unsuccessful), this Agreement shall thereupon terminate with the same force
as if such termination date was the date originally specified in this Agreement
as the date of final expiration of the terms of this Agreement.
9.2 TERMINATION BY MANAGEMENT COMPANY FOR PROFESSIONAL DISCIPLINARY
ACTIONS. PC shall be obligated to suspend a physician whose authorization to
practice medicine is suspended, revoked or not renewed. Management Company may
terminate this Agreement upon 10 days prior written notice to PC if a
Physician's authorization to practice medicine is suspended, revoked or not
renewed and PC has failed to suspend such physician; provided, however, such
action may not be taken until PC has been given 30 days to resolve such
physician's authorization to practice medicine. PC shall notify Management
Company within five (5) days of a notice that a physician's authorization to
practice medicine is suspended, revoked or not renewed or that formal
disciplinary action has been taken against a physician which could reasonably
lead to a suspension, revocation or non-renewal of a physician's license.
ARTICLE 10
PURCHASE OF ASSETS - OBLIGATIONS AND OPTIONS
10.1 TERMINATION BY MANAGEMENT COMPANY. If Management Company
terminates this Agreement due to the insolvency of PC (Section 9.1.1), for a
material breach by PC (Section 9.1.2), or PC fails to suspend a physician whose
license is suspended, revoked or not renewed (Section 9.2), PC agrees, within 90
days of the date of termination of this Agreement, at Management Company's
option, to purchase from Management Company the Management Company's assets
utilized directly by PC in the operation of PC business (the "Assets") as set
forth in Sections 10.1.1 and 10.1.3 below.
10.1.1 The purchase price of the Assets will be the net book
value determined in accordance with GAAP, consistently applied, as at
the date of the termination.
10.1.2 In addition to purchasing the Assets, PC shall pay
Management Company (i) 100% of the preceding 12- months' revenues over
$8.73 Million and any and all outstanding unpaid Advances.
10.1.3 If a purchase is completed under Section 10.1, PC shall
assume all leases for offices and equipment used directly for the
management and operation of PC's business and may hire such employees
from Management Company as it determines are necessary to operate the
medical practice and business. In such event, PC shall be obligated to
indemnify Management Company for any and all severance or termination
obligations to Management Company employees utilized directly in
providing Management Services.
10.2 TERMINATION BY PC In the event this Agreement is terminated by PC
as a result of the insolvency of Management Company (9.1.1) or material breach
22
by Management Company(9.1.2), Management Company agrees, within 90 days of the
date of termination, at PC's option, to sell to PC the Assets as set forth in
Sections 10.1.1 together with leasehold improvements.
10.2.1 If a termination occurs under this Section 10.2, PC
shall assume all leases for offices and equipment used directly for the
management and operation of PC's business and may hire such employees
from Management Company as it determines are necessary to operate the
medical practice and business.
10.2.2 In the event PC exercise the option set forth in this
Section 10.2, closing shall occur within 90 days of the date the option
is exercised. In the event PC does not exercise the option within 90
days of termination, PC shall have relinquished its right and interest
to the Assets and Management Company shall be free to use or dispose of
the Assets as it determines with neither party having any further
obligations to the other.
10.3 TRANSFER OF OWNERSHIP
Upon receipt of payment of the purchase price and other payments due,
Management Company shall transfer ownership and possession of the Assets, and
assign all right, title and interest in and to and obligations under the
Lease(s) to PC and return to PC all security deposits. PC shall have the option
of receiving full credit on the purchase price for all liens, encumbrances or
security interest, or of having Management Company transfer ownership of the
Assets free and clear of all liens, encumbrances or security interests thereon.
ARTICLE 11
INSURANCE
11.1 PC shall carry professional liability insurance, covering itself
and its employees providing Infertility Services under this Agreement in the
minimum amount of $1 million per incident, $3 million in the aggregate, at its
own expense. If possible under the terms of the insurance coverage, PC shall use
its best efforts to cause Management Company to be named an additional insured
on such policies. Evidence of such policies shall be presented to Management
Company upon execution of this Agreement.
11.2 Management Company shall use its best efforts to cause PC to be
made an additional insured under Management Company's professional liability
coverage; provided, however, conditions for being made an additional insured
shall be (i) PC utilizing patient informed consent forms supplied by Management
Company, provided such forms are consistent with law and any guidelines issued
by the American Society of Reproductive Medicine and (ii) PC complying with
requirements of Management Company's insurance company. Management Company shall
also carry a policy of public liability and property damage insurance with
respect to the Facilities under which the insurer agrees to indemnify Management
Company and PC against all cost, expense and/or liability arising out of or
based upon any and all claims, accidents, injuries and damages customarily
23
included within the coverage of such policies of insurance available for
Management Company. The minimum limits of liability of such insurance shall be
$1 million combined single limit covering bodily injury and property damage.
Certificates of Insurance evidencing such policies and additional insured status
shall be presented to PC within thirty (30) days after such coverage is
effected.
11.3 PC and Management Company shall provide written notice to the
other at least thirty (30) days in advance of the effective date of any
reduction, cancellation or termination of the insurance required to be carried
by each hereunder.
ARTICLE 12
MISCELLANEOUS
12.1 INDEPENDENT CONTRACTOR. Management Company and PC are independent
contracting parties. In this regard, the parties agree that:
12.1.1 The relationship between Management Company and PC is
that of an independent supplier of non-medical services and a medical
practice, respectively, and, unless otherwise provided herein, nothing
in this Agreement shall be construed to create a principal-agent,
employer-employee, or master-servant relationship between Management
Company and PC;
12.1.2 Notwithstanding the authority granted to Management
Company herein, Management Company and PC agree that PC shall retain
the full authority to direct all of the medical, professional, and
ethical aspects of its medical practices;
12.1.3 Any powers of PC not specifically vested in Management
Company by the terms of this Agreement shall remain with PC;
12.1.4 PC shall, at all times, be the sole employer of the
Physician-Employees, the Other Professional Employees required by law
to be employees of PC and all other professional personnel engaged by
PC in connection with the operation of its medical practice at the
Facilities, and shall be solely responsible for the payment of all
applicable federal, state or local withholding or similar taxes and
provision of workers' compensation and disability insurance for such
professional personnel that are employees of PC;
12.1.5 No party shall have the right to participate in any
benefits, employment programs or plans sponsored by the other party on
behalf of the other party's employees, including, but not limited to,
workers' compensation, unemployment insurance, tax withholding, health
insurance, life insurance, pension plans or any profit sharing
arrangement;
12.1.6 In no event shall any party be liable for the debts or
obligations of any other party except as otherwise specifically
provided in this Agreement; and
25
12.1.7 Matters involving the internal agreements and finances
of PC, including but not limited to the distribution of professional
fee income among Physician Employees and, if applicable, Other
Professional Employees who are providing professional services to
patients of PC, and other employees of PC, disposition of PC property
and stock, accounting, tax preparation, tax planning, and pension and
investment planning (and expenses relating solely to these internal
business matters), hiring and firing of physicians, decisions and
contents of reports to regulatory authorities governing PC and
licensing, shall remain the sole responsibility of PC and the
individual Physician-Stockholder(s), except with respect to the number
of physicians the PC hires which will be based upon recommendations of
the Joint Practice Management Board.
12.2 FORCE MAJEURE. No party shall be liable to the other parties for
failure to perform any of the services required under this Agreement in the
event of a strike, lockout, calamity, act of God, unavailability of supplies, or
other event over which such party has no control, for so long as such event
continues and for a reasonable period of time thereafter, and in no event shall
such party be liable for consequential, indirect, incidental or like damages
caused thereby.
12.3 EQUITABLE RELIEF. Without limiting other possible remedies
available to a non- breaching party for the breach of the covenants contained
herein, including the right of Management Company to cause PC to enforce any and
all provisions of the Physician Employment Agreements described in Section 4.3
hereof, injunctive or other equitable relief shall be available to enforce those
covenants, such relief to be without the necessity of posting bond, cash or
otherwise. If any restriction contained in said covenants is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and remaining restrictions therein shall be enforced independently of
each other.
12.4 PRIOR AGREEMENTS; AMENDMENTS. This Agreement supersedes all prior
agreements and understandings between the parties as to the subject matter
covered hereunder, and this Agreement may not be amended, altered, changed or
terminated orally. No amendment, alteration, change or attempted waiver of any
of the provisions hereof shall be binding without the written consent of all
parties, and such amendment, alteration, change, termination or waiver shall in
no way affect the other terms and conditions of this Agreement, which in all
other respects shall remain in full force.
12.5 ASSIGNMENT; BINDING EFFECT. This Agreement and the rights and
obligations hereunder may not be assigned without the prior written consent of
all of the parties, and any attempted assignment without such consent shall be
void and of no force and effect, except that Management Company may assign this
Agreement to any affiliate, which for purposes of this Agreement, shall include
any parent or subsidiary of Management Company, without the consent of PC. The
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties' respective heirs, legal representatives, successors and
permitted assigns.
12.6 WAIVER OF BREACH. The failure to insist upon strict compliance
with any of the terms, covenants or conditions herein shall not be deemed a
26
waiver of such terms, covenants orconditions, nor shall any waiver or
relinquishment of any right at any one or more times be deemed a waiver or
relinquishment of such right at any other time or times.
12.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Maryland, irrespective of the
principal place of business of the parties hereto. Any and all claims, disputes,
or controversies arising under, out of, or in connection with this Agreement or
any breach thereof, except for equitable relief sought pursuant to Section 6.4
or Section 12.3 hereof, shall be determined by binding arbitration in the State
of Maryland, County of Baltimore (hereinafter "Arbitration"). The party seeking
determination shall subject any such dispute, claim or controversy to either (i)
JAMS/Endispute or (ii) the American Arbitration Association, and the rules of
commercial arbitration of the selected entity shall govern. The Arbitration
shall be conducted and decided by three (3) arbitrators, unless the parties
mutually agree, in writing at the time of the Arbitration, to fewer arbitrators.
In reaching a decision, the arbitrators shall have no authority to change or
modify any provision of this Agreement, including any liquidated damages
provision. Each party shall bear its own expenses and one-half the expenses and
costs of the arbitrators. Any application to compel Arbitration, confirm or
vacate an arbitral award or otherwise enforce this Paragraph shall be brought in
the Courts of the State of Maryland or the United States District Court for the
District of Maryland, to whose jurisdiction for such purposes PC and Management
Company hereby irrevocably consent and submit.
12.8 SEPARABILITY. If any portion of the provisions hereof shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such portion or provisions in circumstances other than those in
which it is held invalid or unenforceable, shall not be affected thereby, and
each portion or provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law, but only to the extent the same continues to
reflect fairly the intent and understanding of the parties expressed by this
Agreement taken as a whole.
12.9 HEADINGS. Section and paragraph headings are not part of this
Agreement and are included solely for convenience and are not intended to be
full or accurate descriptions of the contents thereof.
12.10 NOTICES. Any notice or other communication required by or which
may be given pursuant to this Agreement shall be in writing and mailed,
certified or registered mail, postage prepaid, return receipt requested, or
overnight delivery service, such as Fedex or Airborne Express, prepaid, and
shall be deemed given when received. Any such notice or communication shall be
sent to the address set forth below:
12.10.1 If for Management Company:
Shady Grove Fertility Centers, P.C.
Attention: President
00000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
27
12.10.2 If for PC:
Xxxxxxx X. Xxxx, M.D., President
Levy, Sagoskin and Xxxxxxxx, M.D., P.C.
0000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
With a copy to:
Xxx Xxxxxxx Xxxxxx, Esq.
Xxxxxxx, Xxxxxx & Green, P.C.
0000 00xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
Any party hereto, by like notice to the other parties, may designate
such other address or addresses to which notice must be sent.
12.11 ENTIRE AGREEMENT. This Agreement and all attachments hereto and
the Stock Purchase and Sale Agreement represent the entire understanding of the
parties hereto with respect to the subject matter hereof and thereof, and cancel
and supersede all prior agreements and understandings among the parties hereto,
whether oral or written, with respect to such subject matter.
12.12 NO MEDICAL PRACTICE BY MANAGEMENT COMPANY. Management Company
will not engage in any activity that constitutes the practice of medicine, and
nothing contained in this Agreement is intended to authorize Management Company
to engage in the practice of medicine or any other licensed profession.
12.13 CONFIDENTIAL INFORMATION.
12.13.1 During the initial term and any renewal term(s) of
this Agreement, the parties may have access to or become acquainted
with each other's trade secrets and other confidential or proprietary
knowledge or information concerning the conduct and details of each
party's business ("Confidential Information"). At all times during and
after the termination of this Agreement, no party shall directly or
indirectly, communicate, disclose, divulge, publish or otherwise
express to any individual or governmental or non-governmental entity or
authority (individually and collectively referred to as "Person") or
use for its own benefit, except in connection with the performance or
enforcement of this Agreement, or the benefit of any Person any
Confidential Information, no matter how or when acquired, of another
party. Each party shall cause each of its employees to be advised of
the Confidential nature of such Confidential Information and to agree
to abide by the confidentiality terms of this Agreement. No party shall
photocopy or otherwise duplicate any Confidential Information of
another party without the prior express written consent of the such
other party except as is required to perform services under this
28
Agreement. All such ConfidentialInformation shall remain the exclusive
property of the proprietor and shall be returned to the proprietor
immediately upon any termination of this Agreement.
12.13.2 Confidential Information shall not include information
which (i) is or becomes known through no fault of a party hereto; (ii)
is learned by a party from a third-party legally entitled to disclose
such information; or (iii) was already known to a party at the time of
disclosure by the disclosing party.
12.13.3 In order to minimize any misunderstanding regarding
what information is considered to be Confidential Information,
Management Company or PC will designate at each others request the
specific information which Management Company or PC considers to be
Confidential Information.
12.14 INDEMNIFICATION.
12.14.1 Management Company agrees to indemnify and hold
harmless PC, its directors, officers, employees and servants from any
suits, claims, actions, losses, liabilities or expenses (including
reasonable attorney's fees) arising out of or in connection with any
act or failure to act by Management Company related to the performance
of its duties and responsibilities under this Agreement. The
obligations contained in this Section 12.14.1 shall survive termination
of this Agreement.
12.14.2 PC agrees to indemnify and hold harmless Management
Company, its shareholders, directors, officers, employees and servants
from any suits, claims, actions, losses, liabilities or expenses
(including reasonable attorney's fees) arising out of or in connection
with any act or failure to act by PC related to the performance of its
duties and responsibilities under this Agreement. The obligations
contained in this Section 12.14.2 shall survive termination of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
SHADY GROVE FERTILITY CENTERS, P.C.
By:/s/Xxxxxxx X. Xxxx
---------------------------------------
XXXXXXX X. XXXX, PRESIDENT
LEVY, SAGOSKIN AND XXXXXXXX, M.D., P.C.
BY:/s/Xxxxxxx X. Xxxx
---------------------------------------
XXXXXXX X. XXXX, M.D., PRESIDENT
29
EXHIBIT 1.1.9
SHARED RISK PROGRAM REVENUE ACCOUNTING
30
EXHIBIT 3.2
DESCRIPTION OF OFFICE AND FACILITIES
TO BE PROVIDED BY MANAGEMENT COMPANY TO PC
0000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000
0000 Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000
0000 X Xxxxxx, XX, Xxxxx 000, Xxxxxxxxxx, XX 00000
000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000
00000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxx 00000
31
EXHIBIT 4.3 (A)
PHYSICIAN-STOCKHOLDER EMPLOYMENT AGREEMENT
(See Attached)
32
EXHIBIT 4.3 (B)
PHYSICIAN-EMPLOYEE EMPLOYMENT AGREEMENT
(See Attached)
33
EXHIBIT 5.2.10 (B)
Key Personnel Subject to Reassignment Restrictions
Xxxxx Xxxx
Xxxx Xxxxx
Xxxxxx Xxxxx
34
EXHIBIT 7.3.2
SECURITY AGREEMENT
[See attached]
35
