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EXHIBIT 10.41
MANAGEMENT SERVICES AGREEMENT
MANAGEMENT SERVICES AGREEMENT, effective as of October 31, 1997 (the
"Effective Date"), by and among EAR, NOSE & THROAT ASSOCIATES OF SOUTH FLORIDA,
P.A., a Florida professional association (the "Practice"); PSC MANAGEMENT CORP.,
a Delaware corporation ("Manager"); and PHYSICIANS' SPECIALTY CORP., a Delaware
corporation ("Parent").
WITNESSETH:
WHEREAS, Manager is a wholly-owned subsidiary of Parent and is in the
business of managing medical practices and providing management services to
individual physicians and physician practice groups;
WHEREAS, subject to the terms and conditions of this Agreement,
Practice desires to engage Manager to provide to Practice management services,
facilities, personnel, equipment and supplies necessary for the medical practice
conducted by Practice, and Manager desires to accept such engagement;
WHEREAS, Parent joins in this Agreement to guarantee the performance by
Manager of its obligations hereunder.
NOW THEREFORE, in consideration of the premises and the covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged by the
parties to this Agreement, Practice, Manager and Parent (collectively, the
"Parties") hereby agree as follows:
SECTION 1. KEY DEFINITIONS.
For purposes of this Agreement, the following are certain important
defined terms used in this Agreement (a list of defined terms is set forth on
Appendix A).
1.1 GAAP. The term "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, in
statements and pronouncements of the Financial Accounting Standards Board, in
such other statements by such other entity, or other practices and procedures as
may be approved by a significant segment of the accounting profession, which are
applicable to the
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circumstances as of the date of determination. For purposes of this Agreement,
GAAP shall be applied in a manner consistent with the practices used by Parent
and Manager.
1.2 NET PRACTICE REVENUES. The term "Net Practice Revenues" shall
mean all revenues, computed on an accrual basis as defined by GAAP, (after
taking into account adjustments for uncollectible accounts, discounts, Medicare,
Medicaid, CHAMPUS, workers' compensation, professional courtesy discounts and
other write-offs) generated by or on behalf of Practice or its employees as a
result of professional medical services furnished to patients, and other fees or
income generated by such persons in their capacity as Physician Shareholders,
Practice Employees and employees of Practice, whether rendered in an inpatient
or outpatient setting and whether generated from health maintenance
organizations, preferred provider organizations, Medicare, Medicaid or rendered
to other patients, including, but not limited to, payments received under any
capitation arrangement. The term "Net Practice Revenues" shall also include any
ancillary services revenues for services provided at the Medical Offices.
1.3 PHYSICIAN EXPENSES. The term "Physician Expenses" is defined
in Section 4.1 of this Agreement.
1.4 PHYSICIAN SHAREHOLDERS. The term "Physician Shareholders" shall
mean those individuals who are duly licensed to practice medicine in the State
and who are shareholders of Practice.
1.5 PRACTICE EMPLOYEES. The term "Practice Employees" shall mean:
(a) those individuals who are duly licensed to practice medicine in the State
and who are employees of Practice (other than Physician Shareholders), and those
individuals who are otherwise under contract with Practice to provide physician
and/or medical services to patients, specifically including nurse practitioners,
certified registered nurse anesthetists, physician assistants, Fellows, surgical
assistants, certified nurse midwives, individuals with a Masters in Social Work
degree, physical therapists, audiologists and similar speech, hearing and
language professionals, and psychologists with a Masters or a Doctorate degree;
and (b) those individuals (other than those described in Section 1.5(a))
required by law, regulatory authority or policy as of the Effective Date, who
must be billed through and by a licensed physician and who are therefore
required to be employees of the Practice.
1.6 PRACTICE EXPENSES. The term "Practice Expenses" shall mean all
expenses incurred in the operation of the medical practice of Practice at the
Medical Offices (as defined in Section 3.1) or otherwise, whether by Manager or
by Practice, including, but not limited to: (a) depreciation (including without
limitation depreciation on the assets acquired from HMFM Partnership, a Florida
partnership), amortization, salaries, benefits and other direct costs of all
employees and independent contractors of Practice (but not including salaries,
benefits or other direct costs of Practice Employees (as defined in Section 1.5)
or Physician Shareholders (as defined in Section 1.4)); (b)
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rent and other obligations under leases or subleases for the Medical Offices and
equipment used by Practice; (c) personal property taxes, use taxes and
intangible taxes assessed against assets used by Practice; (d) charitable
contributions budgeted and approved by Manager and Practice; (e) interest
expense on indebtedness of or specifically related to the medical practice of
Practice, including, without limitation, capital expenditures, provided if
funded by Manager such interest charge will be at the same rate as Manager's
senior borrowing rate, and no interest will be charged with respect to the
assets acquired from HMFM Partnership, a Florida partnership; (f) utility
expenses relating to the Medical Offices; (g) twelve and one-half percent (12
1/2%) of Net Practice Revenues to Manager as its management fee in payment for
its services and non-allocable costs incurred by Manager attributable to the
provision of management services; (h) other expenses incurred by Practice or
Manager in carrying out their respective obligations under this Agreement,
except as otherwise provided herein; (i) amounts paid by Manager in
reimbursement of Practice, pursuant to Section 4.1, for salaries and benefits
paid by Practice for those individuals described in Section 1.5(b); and (j) any
reserves reasonably deemed prudent by Manager for anticipated costs or expenses
of the medical practice of Practice.
The term "Practice Expenses" shall not include, among other things:
(1) any federal, state or local income taxes of Practice or Manager or Parent,
or the costs of preparing federal, state or local tax returns, or audit costs in
connection with preparation of Manager's or Parent's financial statements; (2)
any salaries or benefits payable to Practice Employees or Physician
Shareholders, except as covered under subsection (i) above; (3) physician
licensure fees, board certification fees and costs of membership in professional
associations for Practice Employees and Physician Shareholders; (4) costs of
continuing professional education for Practice Employees and Physician
Shareholders; (5) costs associated with legal, accounting and professional
services incurred by or on behalf of Practice other than as described in the
first sentence of Section 3.11; (6) costs of medical malpractice insurance for
Practice, its Physician Shareholders and Practice Employees, and any liability
judgments assessed against Practice, Practice Employees or Physician
Shareholders in excess of policy limits; (7) direct personal expenses of
Physician Shareholders or Practice Employees of a kind which are customarily
charged to physician shareholders and practice employees (including, but not
limited to, cellular phone expenses, car allowances, costs of employees
providing personal services to particular Physician Shareholders or Practice
Employees, and like expenses personal in nature); (8) capital expenditures
except to the extent of depreciation and amortization; (9) amortization of
acquisition costs to acquire HMFM Partnership or the constituent practices
thereof or any future practices which join or are merged into Practice; (10)
network development and management costs relating to any IPA; or (11) any costs
or expenses not designated in this Agreement as being Practice Expenses or costs
and expenses designated as the responsibility of Manager.
Practice Expenses incurred in any budget period in excess of 120% of
budgeted amounts (measured on an aggregate, not line item, basis) resulting in
more than a 20%
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decrease in the budgeted pre-tax income of Practice shall be the sole obligation
of Manager, unless incurrence of such expenses is approved by the Advisory Board
described in Section 2.1 below, such approval not to be unreasonably withheld if
the expenses are commercially reasonable in nature and amount under the
circumstances.
1.7 STATE. The term "State" shall mean the State of Florida, which
is where the medical practice of Practice is located.
SECTION 2. ADVISORY BOARD.
2.1 FORMATION AND OPERATION OF THE ADVISORY BOARD. Manager and
Practice shall establish an Advisory Board responsible for advising Manager in
connection with the development of management and administrative policies for
the overall operation of the medical practice of Practice. The Advisory Board
shall consist of four (4) members. Manager shall designate, in its sole
discretion and from time to time, two (2) members of the Advisory Board.
Practice shall designate, in its sole discretion and from time to time, two (2)
members of the Advisory Board. Except as may otherwise be provided, the act of a
majority of the members of the Advisory Board shall be the act of the Advisory
Board.
2.2 FUNCTIONS OF THE ADVISORY BOARD. The Advisory Board shall
review, evaluate and make recommendations to Practice and Manager with respect
to the following matters:
(a) Annual Budgets. All annual capital and operating budgets
prepared by Manager, as set forth in Sections 3.4 and 3.19, shall be subject to
review and approval by the Advisory Board, which shall make recommendations to
Manager with respect to proposed changes therein.
(b) Physician Employment and Recruitment. The Advisory Board
shall advise Manager and Practice with respect to the types of physicians
required for the efficient operation of the medical practice of Practice and the
content of all physician employment and recruitment contracts to be utilized by
Practice. Before any offer of employment is extended by Practice, Practice shall
provide Manager at least fifteen (15) days prior notice.
(c) Strategic Planning. The Advisory Board shall make
recommendations to Manager regarding the development of long-term strategic
planning objectives for Practice.
(d) Capital Expenditures. The Advisory Board shall make
recommendations to Manager regarding the priority of major capital expenditures
for the medical practice of Practice.
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(e) Capital Improvements and Expansion. Any renovation and
expansion plans and capital equipment expenditures with respect to the
operations of the medical practice of Practice shall be reviewed by the Advisory
Board and shall be based, in the judgment of Manager, upon economic feasibility,
physician support, productivity and then-current market conditions.
(f) Provider and Payor Relationships. The Advisory Board shall
review and advise Manager and Practice with respect to the establishment or
maintenance of relationships with institutional healthcare providers and payors.
(g) Ancillary Services. The Advisory Board shall review and
make recommendations to Manager and Practice regarding the provision of
ancillary services based upon the pricing, access to and quality of such
services.
(h) Patient Fees, Collection Policies. At least annually, the
Advisory Board shall, based upon recommendations by Manager and Practice, review
and adopt the fee schedule for all physicians and ancillary services rendered by
Practice.
(i) Advertising. The Advisory Board shall advise Practice with
respect to Practice's advertising and marketing of services, including
requirements of the Florida Medical Practice Act, as amended and the rules of
the Department of Professional Regulation established thereunder.
(j) Exceptions to Inclusion in Net Practice Revenues. The
Advisory Board will review and make recommendations to Manager and Practice with
respect to the proposed exclusion of any revenue from Net Practice Revenues.
(k) Grievance Referrals. The Advisory Board shall consider,
review and make recommendations to Manager and Practice with respect to any
matters arising in connection with the operations of Practice that are not
specifically addressed in this Agreement and as to which Manager or Practice
requests consideration by the Advisory Board.
(l) Quality Assurance and Utilization Review. The Advisory
Board shall advise Manager and Practice regarding all quality assurance and
utilization review programs undertaken by Practice either independently or in
connection with any managed care contracts maintained by Practice, and Manager
shall assist the Practice in performing the quality assurance and utilization
review functions of the Practice in consultation with the Advisory Board.
Notwithstanding any contrary provision of this Agreement, it is acknowledged and
agreed that other than as provided in Section 2.2(a), recommendations of the
Advisory Board are intended for the advice and guidance of Manager and Practice
and that the Advisory Board does not have the power to bind Manager or Practice.
Where discretion with respect to any matter is vested in Practice under the
terms of this
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Agreement, Practice shall have ultimate responsibility for the exercise of such
discretion, notwithstanding any recommendation of the Advisory Board. Where
discretion with respect to any matter is vested in Manager under the terms of
this Agreement, Manager shall have ultimate responsibility for the exercise of
such discretion, notwithstanding any recommendation of the Advisory Board.
Manager and Practice shall, however, take such recommendations of the Advisory
Board into account in good faith in the exercise of such discretion.
SECTION 3. OBLIGATIONS OF MANAGER.
3.1 PROVISION OF SERVICES. Practice hereby engages Manager for the
term of this Agreement, and Manager hereby accepts such engagement, to provide
to Practice the business management services, personnel, equipment and supplies
provided for in this Section 3 (collectively "Management Services"). Manager
shall provide the Management Services at the medical offices located at those
locations set forth on Exhibit 3.1, or at such other place or places as may be
agreed upon by the parties. The medical offices or such other places at which
the Management Services are to be provided are referred to as the "Medical
Offices."
3.2 MEDICAL OFFICES. Subject to receipt of executed lease
assignments from HMFM Partnership or its constituent practices consented to by
the landlords thereunder where required, Manager shall provide or have provided
the Medical Offices. Manager shall pay out of Net Practice Revenues all rent due
from the Effective Date forward with respect to the Medical Offices, and all
costs of repairs, maintenance and improvements, telephone, electric, gas and
water utility expenses, insurance, normal janitorial services, refuse disposal
and all other costs and expenses reasonably incurred in connection with the
operations of Practice including, but not limited to, related real or personal
property lease payments and expenses, taxes and insurance. Manager shall consult
with Practice with respect to the condition, use and needs of the Medical
Offices, as expanded, improved or relocated from time to time. The Medical
Office shall be used by the Practice and by the Manager in providing its
services under this Agreement.
3.3 FURNITURE, FIXTURES AND EQUIPMENT. Manager agrees to provide or
have provided to Medical Offices those supplies and items of furniture, fixtures
and equipment as are determined by Manager, after consultation with Practice, to
be necessary and/or appropriate for Practice's operations at the Medical Offices
during the term of this Agreement (all such items of furniture, fixtures and
equipment are collectively referred to hereinafter as the "FFE") subject,
however, to the following conditions:
(a) Practice shall have the use of the FFE only during the term
of this Agreement and title to the FFE shall be and remain in Parent and/or
Manager at all times during such term.
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(b) Manager shall be responsible for, and pay for out of Net
Practice Revenues, all repairs, maintenance and replacement of the FFE. However,
repairs or replacements costing more than $500 will be capitalized, such that
Manager shall fund same from its own moneys and charge related depreciation and
interest to Practice.
3.4 FINANCIAL PLANNING AND GOALS. Manager will prepare, in
consultation with Practice, annual capital and operating budgets reflecting, in
reasonable detail anticipated revenues and sources and uses of capital for
growth in the medical practice of Practice.
3.5 BUSINESS OFFICE SERVICES. Practice hereby appoints Manager as
its sole and exclusive manager and administrator of all business functions and
services related to Practice's services during the term of this Agreement.
Without limiting the generality of the foregoing, in providing the Management
Services, Manager shall perform the following functions:
(a) Manager shall evaluate and administer all managed care
contracts on behalf of Practice and shall consult with Practice upon request on
matters relating thereto; provided that acceptance to participate in any or all
managed care contracts shall be decided by Practice.
(b) Manager shall provide ongoing assessment of business
activity including product line analysis, outcomes monitoring and patient
satisfaction.
(c) Manager shall be responsible for ordering and purchasing
all medical and office supplies reasonably required in the day-to-day operation
of the medical practice of Practice at the Medical Offices.
(d) Manager shall make application and negotiate for the
procurement of professional liability insurance covering persons in the coverage
amounts set forth in Section 8.1. This coverage shall be made available to
Practice. Practice, however, shall have the right to obtain coverage from an
alternative provider reasonably acceptable to Manager.
(e) Manager shall xxxx and collect from payors, intermediaries
and patients all professional fees for medical services and for ancillary
services performed at the Medical Offices by Practice and Practice's employees
and agents, including, but not limited to, Physician Shareholders and Practice
Employees. For the term of this Agreement, Practice hereby grants Manager power
of attorney and appoints Manager as its true and lawful attorney-in-fact for the
following purposes:
(i) To xxxx payors, fiscal intermediaries or patients in
Practice's name, under its provider number(s) when obtained and on its behalf,
and until such time as Practice has obtained its provider number(s), xxxx, in
the Physician Shareholders' and Practice Employees' names under their respective
provider numbers
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and on their behalf, and in connection with such billing services Manager
covenants and agrees that it will use its best efforts to perform the billing
correctly and in accordance with applicable laws and regulations based on
information that Practice and the Physician Shareholders and Practice Employees
provide to Manager for such purpose;
(ii) To collect accounts receivable and claims for
reimbursement that are generated by such xxxxxxxx in Practice's name and on
Practice's behalf, and in the name and on behalf of all Physician Shareholders
and Practice Employees;
(iii) To place such accounts for collection, settle and
compromise claims, and institute legal action for the recovery of accounts in
accordance with policies adopted by the Advisory Board;
(iv) Following receipt by Practice, to take possession of
payments from patients, insurance companies, Medicare, Medicaid and all other
payors with respect to services rendered by Practice, Physician Shareholders and
Practice Employees, and Practice hereby covenants to forward such payments to
Manager for deposit;
(iv) To endorse in the name of Practice, or any Physician
Shareholder or Practice Employee, any notes, checks, money orders, insurance
payments and any other instruments received by Practice as payment of such
accounts receivable;
(v) To collect in Practice's name and on its behalf, and
in the name and on behalf of all Physician Shareholders and Practice Employees,
all Net Practice Revenues;
(vi) To pledge the accounts receivable as collateral or
otherwise encumber the accounts receivable without the approval of the Advisory
Board or Practice (all actions with respect to any discounting, selling or
encumbering accounts receivable involving Medicare or Medicaid shall not be
inconsistent with applicable laws and regulations relating thereto); and
(vii) To sign checks on behalf of Practice and make
withdrawals from Practice bank accounts for payments specified in this Agreement
and as requested from time to time by Practice.
3.6 DEPOSIT OF NET PRACTICE REVENUES. During the term of this
Agreement, all Net Practice Revenues collected shall be received directly by
Practice at the Practice location, and each business day Practice will transfer
all collected Net Practice Revenues into a bank account as specifically directed
by Manager, which depository account shall be segregated from other accounts of
Manager. Manager shall be the owner of the account and have the sole right to
make daily transfers to its operating or
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other account with its "Credit Facility Lender" (as defined in Section 5.2(b))
and to make withdrawals to pay Practice Expenses on a monthly basis. At the
direction of Practice, Manager will transfer pursuant to Section 5.1 the
remainder of Net Practice Revenues minus Practice Expenses by the fifteenth day
of each month in arrears to an account designated by Practice from which
Practice will pay Physician Expenses. Manager shall maintain its accounting
records in such a way as to clearly segregate the deposit of Net Practice
Revenues from other funds of Manager. Practice and Manager hereby agree to
execute from time to time such documents and instructions as shall be required
by the Credit Facility Lender and mutually agreed upon to effectuate the
foregoing provisions and to extend or amend such documents and instructions.
3.7 REVENUE REPORTS. Manager shall maintain revenue reports, as
determined by the books and records of Manager, with respect to the operations
of Practice. Revenue reports shall reflect the total gross revenues and Net
Practice Revenues generated by Physician, by or on behalf of the medical
practice of Practice. Manager shall provide Practice with monthly revenue
reports by the 15th day of each month with respect to the prior month and shall
provide a year-end revenue report for Practice within ninety (90) days after the
end of each calendar year. Each such report shall track Net Practice Revenues by
Physician.
3.8 SUPPORT SERVICES. Manager shall provide all reasonable and
necessary computer, management information, bookkeeping, billing and collection
services, accounts receivable and accounts payable management services, laundry,
linen, janitorial and cleaning services and management services to improve
efficiency and workflow systems and procedures, as determined by Manager after
consultation with Practice. Manager agrees to utilize in providing its services
under this Agreement, or to provide Practice with access to (via internet or
other means), Manager's proprietary capitated network management software during
the term of this Agreement, without separate royalty charge. Manager also agrees
that it will not allocate as a Practice Expense the time of Manager's national
management information systems personnel.
3.9 ADMINISTRATOR. Manager shall provide an Administrator to manage
and administer all of the day-to-day business functions and services of the
medical practice of Practice. The Administrator will be selected by Manager
subject to approval of the Advisory Board. Manager shall determine the salary
and fringe benefits of the Administrator, but shall consult with Practice with
respect thereto.
3.10 PERSONNEL. Manager shall provide such non-physician personnel
as determined by Manager, after consultation with Practice, to be reasonably
necessary for the effective operation of the medical practice of Practice at the
Medical Offices, subject, however, to the following:
(a) Manager shall provide to Practice all nurses, medical
records personnel and other medical support personnel as requested by Practice
and as shall be reasonably necessary for the operation of Practice's medical
practice at the Medical
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Offices. As to the nursing and non-physician medical support personnel provided
under this Section 3.10(a), Manager shall determine the salaries and benefits of
all such personnel, but shall consult with Practice with respect thereto.
Manager shall also recommend the assignment of all such personnel to perform
services at the Medical Offices; provided, however, that Practice shall have the
right to approve, based primarily on professional competence, the assignment of
all non-physician medical support personnel to provide services at the Medical
Offices and Manager shall, at Practice's request, reassign and replace such
personnel from time to time who are not, in Practice's reasonable and good faith
judgment, adequately performing the required professional services.
(b) Manager shall provide to Practice all business office
personnel (i.e., clerical, secretarial, bookkeeping and collection personnel)
reasonably necessary for the maintenance of patient records, collection of
accounts receivable and upkeep of the financial books of account to the extent
that same are required for, and directly related to, the operation of the
medical practice by Practice. As to the personnel provided under this Section,
Manager shall determine the salaries and fringe benefits of all such personnel,
but shall consult with Practice with respect thereto.
(c) In exercising its judgment with regard to personnel as
provided in Section 3.9 and this Section 3.10, Practice agrees not to
discriminate against such personnel on the basis of race, religion, age, sex,
disability or national origin.
(d) In recognition of the fact that personnel provided to
Practice under this Agreement may perform services from time to time for others,
this Agreement shall not prevent Manager from performing such services for
others or restrict Manager from so using such personnel. Manager will make every
effort consistent with sound business practices to honor the specific requests
of Practice with regard to the assignment of such personnel; provided, however,
that except for non-physician medical support personnel as provided in
subsection (a) above, Manager hereby retains the sole and exclusive
decision-making authority regarding all such personnel assignments.
(e) If Practice or Physician Shareholders request personal
secretarial, clerical, bookkeeping, or other non-physician medical support
personnel in addition to personnel determined to be necessary and/or appropriate
by Manager, and such additional personnel and/or services are provided by mutual
agreement between Manager and Practice, all costs and expenses incurred by
Manager in providing such additional personnel shall be paid to Manager by
Practice.
3.11 PROFESSIONAL SERVICES. Manager shall use reasonable efforts to
arrange for or render to Practice such business, legal and financial management
consultation and advice as may be reasonably required or requested by Practice
and directly related to the expansion and/or operations of Practice. Manager
shall not be responsible for any services requested by or rendered to any
individual, employee or agent of Practice
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not directly related to the operations of Practice nor shall Manager be
responsible for rendering any legal or tax advice or services or personal
financial services to Practice or any employee or agent of Practice.
3.12 PATIENT AND FINANCIAL RECORDS. Manager shall maintain all files
and records relating to the operation of Practice including, but not limited to,
customary financial records and patient files. The management of all files and
records shall comply with all applicable federal, state and local laws,
statutes, rulings, orders, ordinances and regulations ("Laws"), and all files
and records shall be located so that they are readily accessible for patient
care. Practice shall supervise the preparation of, and direct the contents of,
patient medical records, all of which shall be and remain confidential and the
property of Practice. Manager shall have reasonable access to such records and,
subject to applicable Laws and accreditation policies, Manager shall be
permitted to retain true and complete copies of such records at its expense.
Manager hereby agrees to preserve the confidentiality of such patient medical
records and to use the information in such records only for the limited purposes
necessary to perform the Management Services and, within the limits of its
responsibilities hereunder, to ensure that provision is made for appropriate
care for patients of Practice.
3.13 PHYSICIAN RECRUITMENT. At the request of Practice, Manager
shall perform administrative services relating to the recruitment of physicians
for Practice. Practice shall determine the need for additional physicians in
consultation with Manager. All such physicians recruited by Manager and accepted
by Practice shall be shareholders or employees of Practice (if such physicians
are hired as employees) and not of Manager. Any expenses incurred in the
recruitment of physicians shall be treated as Practice Expenses. Practice agrees
that all physicians hired by the Practice shall execute a Physician Employment
Agreement in a form approved by Manager (the "Physician Employment Agreements").
Practice agrees not to change the form of the Physician Employment Agreement
without Manager's prior written consent.
3.14 EXPANSION OF PRACTICE. It is acknowledged and agreed that
expansion of the medical practice shall be the responsibility of the Practice
and not the Manager. Manager will consult and advise Practice upon request
regarding Practice expansion and Practice's proposals for relationships and
affiliations with physicians and other specialists, hospitals, networks, health
maintenance organizations and preferred provider organizations. Practice will be
responsible for contacting representatives of such affiliations, hospitals,
networks, and organizations. Practice will provide prior notice to Manager of
any agreements with respect to any such matters which Practice enters into.
3.15 PERFORMANCE OF BUSINESS OFFICE SERVICES. Manager is hereby
expressly authorized to perform its business office services hereunder in
whatever reasonable manner it deems appropriate to meet the day-to-day
requirements of the non-medical business functions of Practice's medical
practice at the Medical Offices. Manager may perform some or all of the business
office functions of Practice at locations other than
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at the Medical Offices, provided that the establishment of a centralized billing
office to serve Practice shall be subject to approval of the Advisory Board.
3.16 FORCE MAJEURE. Manager shall not be liable to Practice for
failure to perform any of the services required under this Agreement in the
event of strikes, lockouts, calamities, acts of God, unavailability of supplies
or other events over which Manager has no control for so long as such event
continues and for a reasonable period of time thereafter.
3.17 PAYMENT OF PRACTICE EXPENSES AND MANAGEMENT FEE. Manager shall
pay all Practice Expenses as they become due out of Net Practice Revenues;
provided, however, that Manager may, in the name of and on behalf of Practice,
contest in good faith any claimed Practice Expenses as to which there is any
dispute regarding the nature, existence or validity thereof. Manager shall be
entitled, on a monthly basis, to pay itself from Net Practice Revenues the
amount specified in Section 1.6(g) as its management fee for providing its
services under this Agreement. Practice acknowledges and agrees that the amount
to be retained by Manager as its management fee in accordance with this
Agreement is reasonable and fair, given the undertakings of Manager as set forth
in this Agreement and the other benefits and value that accrue to Practice as a
result of Manager's services under this Agreement.
3.18 BUDGETS.
(a) As part of the Manager's responsibilities under this
Agreement, the Manager shall prepare annual capital and operating budgets for
the Practice for each budget period in accordance with the provisions of this
Section 3.18. As used herein, a budget period means a fiscal year of Practice
unless otherwise provided.
With respect to each budget period following the initial budget
period, the Manager shall prepare and deliver a preliminary draft of each such
budget to the Advisory Board at least 30 days prior to the commencement of the
budget period to which such budget relates. The Advisory Board shall provide any
comments or suggested changes to such preliminary drafts to the Manager within
15 days after receipt thereof. The Manager shall then submit a revised budget to
the Advisory Board for approval by the Advisory Board no later than 15 days
after the end of the 15-day period referred to in the immediately preceding
sentence. The Advisory Board shall then approve or disapprove of, but not modify
or amend the budget within 15 days of receiving it. The foregoing time periods
during which drafts of the budget are to be delivered and approved shall be
subject to adjustment from time to time as determined appropriate by the
Advisory Board and Manager.
If prior to the commencement of any budget period, the Advisory
Board has not yet approved the budget, then the Manager and the Advisory Board
will work diligently in good faith to obtain such approvals, and until such
approvals are obtained, with respect to the budget, (i) as to any disputed line
items, the immediately preceding
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budget period's budget shall be controlling until such time, if any as agreement
is reached on the amounts to be allocated to such disputed line items,
specifically as follows: (A) non-recurring or extraordinary items shall not be
continued from the budget for the immediately preceding budget period, (B) if
the previous budget was for a budget period of less than 12 months, it shall be
annualized, (C) all items subject to an automatic increase, such as rent and
taxes, shall be budgeted at the increased rate (D) for items such as employee
salaries and benefits, the total salary and benefits number shall be adjusted to
take into account changes in the number and classifications of employees
employed or contracted, (ii) as to any line items which are not in dispute, the
revised budgets submitted by the Manager shall control, and (E) those items
reasonably deemed medically necessary by Practice shall be acquired. With
respect to the initial budget for calendar year 1998, Manager shall deliver a
draft of the annual budget to the Advisory Board within sixty (60) days of the
date of this Agreement. If the Advisory Board has not approved the budget for
1998 within one hundred twenty (120) days of the date of this Agreement, actual
1997 costs of HMFM Partnership and its constituent partner practices shall be
deemed to be the "immediately preceding budget period's budget" for purposes of
this paragraph.
(b) The parties agree that the Manager shall have the authority
and discretion to reallocate cost and expense line items within the budget, so
long as the pre-tax income targets within such budgets are not adversely
impacted.
(c) Manager agrees that expenses of the Practice which are
shared by other practices being managed by Manager shall be allocated as
"Practice Expenses" to Practice and such other practices based on actual
expenses incurred where such expenses are directly identifiable by Manager or on
a pro rata basis in accordance with the respective "Net Practice Revenues" of
Practice and such other practices, or such other fair and reasonable basis as
Manager may determine. Such expenses shall not include Manager's corporate
overhead or costs associated with establishing a regional office for Manager.
3.19 OTHER MANAGEMENT AGREEMENTS.
Manager agrees that during the initial sixty (60) months of the term
of this Agreement (i.e., until the fifth anniversary of the date of this
Agreement), Manager (or its affiliates) will not enter into a management
services agreement providing substantially similar services to those provided
under this Agreement with any other ear, nose and throat (ENT) medical practice
("Other Practice") that is located within a ten (10) mile radius of any of the
Medical Offices, unless Manager shall first (i) provide written notice thereof
to Practice, and (ii) allow Practice fifteen (15) days to accept in writing the
first right of refusal to merge the Other Practice into Practice and an
additional thirty (30) days following such acceptance to consummate such merger.
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SECTION 4. OBLIGATIONS OF PRACTICE.
4.1 PHYSICIAN EXPENSES. Practice shall be solely responsible for
the payment, when due, of all costs and expenses ("Physician Expenses"),
incurred in connection with Practice's operations that are not Practice Expenses
and are not enumerated under subsections 1, 8, 9, 10, or 11 of the second
paragraph of Section 1.6, including, but not limited to, insurance premiums for
policies of malpractice insurance, deductibles under such policies of
malpractice insurance, any and all costs and expenses incurred with respect to
claims under such policies of malpractice insurance, salaries and benefits,
workers' compensation, retirement plan contributions, health, disability and
life insurance premiums, payroll taxes, cellular phone and automobile expenses
incurred by or in connection with the employment of all Physician Shareholders
and Practice Employees. Practice shall be responsible for paying as a Physician
Expense salaries, benefits and other similar direct costs for all Practice
Employees and Physician Shareholders. Practice shall pay all Physician Expenses
as they become due. However, Practice shall pay the salaries and benefits for
those individuals described in Section 1.5(b), but Manager shall reimburse
Practice for all such salaries and benefits and such reimbursement amounts shall
be a Practice Expense under Section 1.6.
4.2 PROFESSIONAL STANDARDS.
(a) It is expressly acknowledged by the parties to the
Agreement that all medical services provided at the Medical Offices shall be
performed solely by physicians and allied health care professionals duly
licensed to practice medicine in the State. The professional services provided
by Practice and its Physician Shareholders and Practice Employees shall at all
times be provided in accordance with applicable ethical standards and Laws
applying to the medical profession. Practice shall at all times during the term
of this Agreement be and remain legally organized and authorized to provide
medical care and services in a manner consistent with all state and federal
laws. The parties will cooperate with each other in taking steps to resolve any
utilization review or quality assurance issues which may arise in connection
with the medical practice of Practice. If any disciplinary actions or
professional liability actions are initiated against any Physician Shareholder
or Practice Employee, Practice shall immediately inform Manager of such action
and the underlying facts and circumstances. Practice agrees to implement and
maintain a program to monitor the quality of medical care provided by Practice,
and Manager shall render administrative assistance to Practice on an
as-requested basis to assist Practice in designing, implementing and maintaining
such program.
(b) Practice shall at all times during the term of this
Agreement assure that each physician of the Practice shall:
(i) maintain an unrestricted license to practice
medicine and surgery in all its branches in the State and maintain good standing
with the Medical Board of the State;
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(ii) maintain a federal Drug Enforcement Administration
certificate without restrictions, to prescribe controlled substances as are
customarily prescribed by physicians practicing in Physician's practice
specialties;
(iii) maintain hospital medical staff memberships and
clinical privileges at those facilities set forth on Part Three of Exhibit A of
the Physician Employment Agreement as amended from time to time;
(iv) perform all professional services through Practice
and in accordance with all Laws and with prevailing standards of care and
medical ethics in accordance with any Employment Agreement between Practice and
Physician and with practice protocols and policies as adopted from time to time
by Practice;
(v) maintain Physician's skills through continuing
education and training, including participation in those programs designated by
Practice from time to time;
(vi) maintain eligibility for insurance under the
professional liability policy or policies at a commercially reasonable cost as
determined by Practice carried by or on behalf of Practice for Physician's
practice specialties, to the extent Physician is to be covered by such policy or
policies pursuant to Section 5.2 of the Physician Employment Agreement;
(vii) maintain Physician's board-certified or board
eligible status in Physician's practice specialties;
(viii) qualify and maintain Physician's qualification as a
participating provider in the Medicare and State of Florida Medicaid programs;
(ix) comply with all Laws applicable to the conduct of
Physician's activities, as well as with the articles of incorporation, bylaws
and other corporate governance documents of Practice and other rules or
regulations adopted from time to time by Practice;
(x) promptly disclose to Practice (i) the commencement
or pen-dency of any legal action, administrative proceeding or investigation,
medical staff or professional disciplinary actions against Physician or (ii) the
existence of any circumstances that could reasonably be expected to form the
basis of or lead to any such action, proceeding or investigation;
(xi) abide by any guidelines adopted by Practice or any
person or entity providing management services to Practice designed to encourage
the appropriate, efficient and cost-effective delivery of medical services,
subject always to the clinical judgment of Physician, and cooperate with and
participate in all Practice
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programs regarding quality assurance, utilization review, risk management and
peer review;
(xii) maintain appropriate and accurate medical records in
accordance with accepted medical standards and Practice policies with respect to
all patients evaluated and treated; and
(xiii) satisfy such other reasonable requirements as are
established from time to time by Practice.
4.3 PROVIDER AND PAYOR RELATIONSHIPS. Practice shall have sole
responsibility for establishing or maintaining relationships with institutional
healthcare providers and third-party payors, including, but not limited to,
managed care programs, health maintenance organizations and preferred provider
organizations; provided, Practice shall not be required to sign up or contract
with any particular provider.
4.4 PHYSICIAN CONTRACTS AND POWERS OF ATTORNEY. (a) During the term
of this Agreement Practice shall maintain Physician Employment Agreements
substantially in the form of Exhibit A hereto with all Physician Shareholders
and other physician practitioners employed or otherwise retained by Practice as
Practice Employees.
(b) Practice shall require all Physician Shareholders and
physician Practice Employees to execute and deliver to Manager powers of
attorney, satisfactory in form and substance to Manager, appointing Manager as
attorney-in-fact for each such Physician Shareholder and physician Practice
Employee for the purposes set forth in Section 3.5(e) to the extent authorized
by law.
4.5 RESTRICTIVE COVENANTS.
(a) Practice acknowledges and agrees that the services
to be provided by Manager hereunder are feasible only if Practice operates a
vigorous medical practice to which its Physician Shareholders and Practice
Employees devote their full time and attention. Accordingly, Practice agrees
that, during the term of this Agreement, it shall not, without the prior written
consent of Manager, establish, operate or provide physician services at any
medical office, clinic or other healthcare facility in the State which provides
services substantially similar to those offered by Practice at the Medical
Offices other than services at healthcare facilities in a manner consistent with
past practices of Practice or, prior to the date hereof, ENT Associates of South
Florida. Notwithstanding the foregoing, in the event Manager does not consent to
establishment or operation of any new medical office or facility to which
Practice wishes to expand, Practice shall be entitled to establish such other
medical office or facility for expansion at Practice's sole cost and expense,
provided, that in such event Practice agrees that Manager shall be paid its
management fee under Section 1.6(g) hereof (or, if applicable, Section 14.6)
with respect to the Net Practice Revenues generated at such new medical office
or facility (as well as the existing Medical Offices), and Manager
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shall not be responsible under the last sentence of Section 1.6 (the definition
of "Practice Expenses") with respect to any budget overruns resulting from or
related to operating such new office or facility, or for capital expenditures or
capital costs thereof.
(b) During the term of this Agreement and for a period of
eighteen (18) months following the termination or expiration of this Agreement,
Practice shall not, in the State, alone or in conjunction with any other person
or entity, without the prior written consent of Manager, solicit or attempt to
solicit any employee, consultant, contractor or other personnel affiliated with
Manager (or who was affiliated with Manager at any point during the six months
prior to termination of this Agreement) to terminate, alter or lessen that
party's affiliation with Manager or to violate the terms of any agreement or
understanding between such employee, consultant, contractor or other person and
Manager.
(c) If this Agreement is terminated for any reason other than
by Practice pursuant to Section 6.2 (b) below, Practice shall not for a period
of eighteen (18) months following the effective date of such termination, engage
or contract with any person, firm or entity (or group of affiliated entities)
for the provision of comprehensive management services to Practice at the
Medical Offices (or at any new or replacement medical offices of Practice in the
State) substantially of the kind contemplated by this Agreement.
(d) The intellectual and other property rights in any work
product, discoveries or inventions developed or acquired by Practice, the
Physician Shareholders or Practice Employees or any other personnel or agents of
such parties (other than intellectual and other property rights developed or
acquired by a Physician Shareholder and specifically excluded in such
individual's employment agreement with Practice) during the term of this
Agreement (the "Practice IP") shall be deemed to be owned exclusively by the
Manager. The Practice hereby unconditionally and irrevocably transfers and
assigns to Manager all rights, title and interest the Practice may currently
have (or in the future may have) by operation of law or otherwise in or to any
Practice IP, including, without limitation, all patents, copyrights, trademarks,
service marks and other intellectual property rights. Practice agrees to execute
and deliver to Manager any transfers, assignments, documents or other
instruments which Manager may deem necessary or appropriate to vest complete
title and ownership of any Practice IP, and all associated rights, exclusively
in Manager. The Physician Employment Agreements shall have a provision
comparable to this paragraph (d) assigning these Practice IP rights from the
Practice physicians to Practice, in contemplation of their reassignment from
Practice to Manager as herein provided, subject only to such exclusions as are
provided in the form of Physician Employment Agreement approved by Manager.
(e) Practice acknowledges and agrees that Manager's Trade
Secrets and Confidential Information (both as defined below) represent a
substantial investment by Manager. Practice also acknowledges and agrees that
any unauthorized disclosure or
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use of any of Manager's Trade Secrets or Confidential Information would be
wrongful and would likely result in immediate and irreparable injury to Manager.
Except as required in order to perform Practice's obligations under this
Agreement, Practice shall not, without the express prior written consent of
Manager, redistribute, market, publish, disclose or divulge to any other person
or entity, or use or modify for use, directly or indirectly in any way for any
person or entity: (i) any Confidential Information during the term of this
Agreement and for a period of three (3) years after the final date of the term
of this Agreement; and (ii) any Trade Secrets at any time (during or after the
term of this Agreement) during which such information or data shall continue to
constitute a "trade secret" under applicable law. Practice further agrees to
cooperate with (and require its physicians and other personnel to comply with)
any reasonable confidentiality requirements of Manager. Practice shall
immediately notify Manager of any unauthorized disclosure or use of any of the
Trade Secrets or Confidential Information of Manager of which Practice becomes
aware. For purposes of this Agreement "Confidential Information" shall mean
valuable, non-public competitively sensitive data and information relating to
Manager's or Parent's business other than Trade Secrets (which shall have the
meaning given that term under applicable law) that is not generally known by or
readily available to competitors of Manager, including, without limitation,
computer software and management information systems provided by Manager,
practice acquisition targets, strategic expansion plans, contracting and payor
negotiations, managed care contracting strategies and fees, rates, exclusions
and other payor contract features.
(f) Unless otherwise agreed by Manager in writing, Practice
shall enforce vigorously the covenants (and any liquidated damages provisions)
of the Physician Shareholders and other physician employees of Practice set
forth in the Physician Employment Agreements (which the Parties agree will be in
substantially the form of Exhibit A) with counsel approved by Manager. Practice
and such counsel shall cooperate with Manager in any such litigation and all
major litigation decisions and strategy shall be subject to approval of Manager,
and Practice shall not compromise or settle any such litigation without
Manager's approval. In the event that the Practice recovers liquidated damages
(or other damages or costs) from any physician for breach of such a covenant,
then the Practice shall promptly remit to Manager an amount equal to any and all
such amounts so received. Manager agrees to pay the fees and disbursements of
counsel of Practice approved by it and shall not charge such fees and
disbursements of counsel as a Practice Expense. Practice shall not take any
action that, under this Agreement, is to be taken only by Manager. The Parties
agree and the Physician Employment Agreement shall provide that the actual
losses to be suffered by Manager and Practice will be difficult to ascertain,
but the liquidated damages set forth have been arrived at after good faith
effort to estimate such losses. Practice specifically acknowledges and agrees
that Manager would not have entered into this Agreement but for Practice's
covenant to enforce the Physician Employment Agreements as provided above and
that the failure of any physician to comply with such agreements will result in
Manager suffering extensive economic damages.
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(g) Manager and Practice acknowledge and agree that
Manager's remedy at law for any breach or attempted breach of the foregoing
provisions may be inadequate and that Manager shall be entitled to specific
performance, injunction or other equitable relief in the event of any such
breach or attempted breach, in addition to any other remedies which might be
available at law or in equity. If the duration, scope or geographic area
contemplated by the foregoing provisions is determined to be unenforceable by a
court of competent jurisdiction, the parties agree that such duration, scope or
geographic area shall be deemed to be reduced to the greatest scope, duration or
geographic area which would be enforceable.
4.6 PROFESSIONAL DUES AND EDUCATION EXPENSES. Practice and its
Physician Shareholders and Practice Employees shall be solely responsible for
all costs and expenses associated with membership in professional associations
and continuing professional education. Practice shall ensure that each of its
Physician Shareholders and Practice Employees participates in such continuing
medical education activities as are necessary for such physicians to remain
current in their respective specialties, including, but not limited to, the
minimum continuing medical education requirements imposed by applicable laws and
policies of applicable specialty boards.
4.7 PROVISION OF SERVICES BY PRACTICE. Practice shall maintain at
least the same quality and scope of medical practice and other health care
services provided by HMFM Partnership and its constituent practice partners
prior to the date hereof and shall use its reasonable good faith efforts to
enhance the medical practice of the Practice and to comply with all Practice
budgets. Practice shall engage a sufficient number of Physician Shareholders or
physician Practice Employees to provide services to patients of the Practice at
normal office hours at the Medical Offices and to provide coverage during all
appropriate hours of all hospitalized patients of Practice whether on any
inpatient or outpatient basis. Practice shall be responsible for coding and call
schedule with respect to all physicians in the Practice.
4.8 PHYSICIAN SHAREHOLDER AND EMPLOYMENT AGREEMENTS. Practice
represents that it has delivered to Manager a true and correct copy of the
shareholder agreement and Physician Employment Agreements between Practice and
its Physician Shareholders and will cause all new shareholders of Practice to
execute such agreements prior to becoming a shareholder (or employee) in
Practice. Practice shall not amend the shareholder agreement so as to cause the
shareholder agreement to contravene or conflict with this Agreement or the
Physician Employment Agreements between Practice and its physician employees.
Practice shall not amend any of the Physician Employment Agreements or waive any
rights thereunder without the prior consent of Manager.
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SECTION 5. FINANCING MATTERS
5.1 MECHANICS OF DRAWS. Following the end of each month, Manager
shall make an estimate of the collection percentage ("Estimated Collection
Percentage") for such month's gross Practice revenues. The Estimated Collection
Percentage may vary depending on historical collection percentages, changes in
fee schedules, changes in third party reimbursement, bad debt write-offs and
similar adjustments. The Estimated Collection Percentage will then be applied to
such month's gross Practice revenues, resulting in estimated Net Practice
Revenues for such month. An amount equal to the excess of Net Practice Revenues
over Practice Expenses will be transferred by Manager to Practice and used by
Practice to pay Physician Expenses on such 15th day. A final accounting will be
due from Manager on or before April 30 of each year of this Agreement with
respect to the immediately preceding calendar year.
5.2 ASSIGNMENT OF SECURITY INTEREST.
(a) Practice hereby exclusively and irrevocably assigns and
sets over to Manager all of Practice's rights to all revenue and accounts
receivable generated by the Physician Shareholders and Practice Employees with
respect to any services rendered prior to the effective date of expiration or
termination of this Agreement, except as otherwise provided in this Agreement,
and grants to Manager the right to retain such proceeds for its own account for
application in accordance with this Agreement, and shall obtain a like
assignment from all Physician Shareholders and Practice Employees; provided,
that in the case of revenue and accounts receivable generated as a result of
billing for services under Medicare or Medicaid such assignment shall only be an
assignment of proceeds of accounts receivable consistent with the provisions of
applicable law. Practice shall endorse (and shall cause each Physician
Shareholder or Practice Employee to endorse) any payments received on account of
such services to the order of Manager and shall take such other actions as may
be necessary to confirm to Manager the rights set forth in this Section 5.2(a).
Without limiting the generality of the foregoing, it is the
intent of the parties that the assignment to Manager of the rights described in
Section 5.2(a) above shall be inclusive of the rights of Practice and the
Physician Shareholders and Practice Employees to proceeds of payment with
respect to any services rendered prior to the effective date of any expiration
or termination of this Agreement. Practice agrees and shall cause each Physician
Shareholder and Practice Employee to agree, that Manager shall retain the right
to collect any and all accounts receivable and claims for reimbursement relating
to any such services rendered prior to the effective date of any such expiration
or termination ("Pre-Termination Accounts Receivable"), and that the proceeds
thereof will be transferred to Manager's account to be applied in accordance
with Section 3.6 and the other provisions of this Agreement.
In addition and as a supplement to Practice's obligations as otherwise
set forth herein, Practice shall, with all deliberate speed, apply for and
maintain in effect any
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and all provider and/or supplier numbers, including but not limited to Medicare
and Medicaid numbers, in Practice's name. If Practice is unable to obtain such
provider and/or supplier numbers, Practice shall cause Physician Shareholders to
maintain each of their provider numbers, including but not limited to Medicare
and Medicaid numbers, necessary or appropriate to obtain payment or
reimbursement for all medical services provided by such Physician Shareholders
and shall further cause each Physician-Shareholder who provides services to the
Practice to execute any and all documentation necessary to effectuate the
assignments of revenues to Manager as contemplated by this Agreement.
(b) Practice acknowledges that Manager and Parent may, to the
extent permitted by law, grant a security interest in the Pre-Termination
Accounts Receivable and proceeds thereof to their factor(s) or lender(s) under
Manager's or Parent's working capital credit facility (whether one or more,
"Credit Facility Lender"), as in effect from time to time. Practice agrees that
such security interest of the Credit Facility Lender is intended to be a first
priority security interest and is superior to any right, title or interest which
may be asserted by Practice or any Physician Shareholder or Practice Employee
with respect to Pre-Termination Accounts Receivable or the proceeds thereof
under this Agreement. Practice further agrees, and shall cause each Physician
Shareholder and Practice Employee to agree, that, upon the occurrence of an
event which, under the terms of such working capital credit facility, would
allow the Credit Facility Lender to exercise its right to collect
Pre-Termination Accounts Receivable and apply the proceeds thereof toward
amounts due under such working capital credit facility, the Credit Facility
Lender will succeed to all rights and powers of Manager under the powers of
attorney provided for in Sections 3.5 and 4.4 above as if such Credit Facility
Lender had been named as the attorney-in-fact therein.
(c) If, contrary to the mutual intent of Manager and Practice,
the assignment described in this Section 5.2 shall be deemed for any reason to
be ineffective, then Practice and each Physician Shareholder and Practice
Employee shall to the extent permitted by applicable Laws, effective as of the
date of this Agreement, be deemed to have granted (and Practice does hereby
grant, and shall cause each Physician Shareholder and Practice Employee to
grant) to Manager a first priority lien on and security interest in and to any
and all interests of Practice and such Physician Shareholders and Practice
Employees in any accounts receivable generated by the medical practice of
Practice and its Physician Shareholders and Practice Employees or otherwise
generated through the operations of the medical practice of Practice, and all
proceeds with respect thereto, to secure the payment to Manager hereunder of all
Practice Expenses, and this Agreement shall be deemed to be a security agreement
to the extent necessary to give effect to the foregoing. Practice shall execute
and deliver, and cause each Physician Shareholder and Practice Employee to
execute and deliver, all such financing statements as Manager may request in
order to perfect such security interest. Practice shall not grant (and shall not
suffer any Physician Shareholder or Practice Employee to grant) any other lien
on or security interest in or to such accounts
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receivable or any proceeds thereof or in or to this Agreement to any other
person or entity.
SECTION 6. TERM AND TERMINATION.
6.1 TERM. The initial term of this Agreement shall be for a period
of forty (40) years commencing on Oct. 31, 1997 and ending on Oct. 30, 2037.
This Agreement may be extended for separate and successive five-year periods
(each such five-year period referred to hereinafter as an "extended term"),
under such terms and conditions as stated herein with respect to any such
extended term; provided, however, that: (a) Practice and Manager mutually agree
to extend the term of this Agreement and mutually agree upon the documents to be
in effect during any such extended term hereto, not less than sixty (60) days
prior to expiration of the initial term or extended term then in effect; and (b)
neither Party is in material default hereunder on the date of commencement of
the extended term.
6.2 TERMINATION.
(a) Manager may terminate this Agreement, and have no further
liability or obligation hereunder, upon the occurrence of one or more of the
following events:
(i) Practice is in material breach of a monetary
obligation to Manager under this Agreement which remains uncured for a period of
60 days after receipt of written notice thereof from Manager;
(ii) Practice repeatedly fails to perform in a material
respect to any other material obligations hereunder and such repeated failure
continues for a period of forty-five (45) days after Practice's receipt of
written notice specifying such failure; provided, however, that if such failure
cannot be cured within forty-five (45) days, but is capable of being cured
within a reasonable period of time in excess of forty-five (45) days, then
Manager shall not be entitled to terminate this Agreement if Practice commences
the cure of such failure within the first forty-five (45) day period and
thereafter diligently and in good faith continues to prosecute such cure until
completion; provided, further, that if Practice or any Physician Shareholder or
Practice Employee breaches Section 3.6 of this Agreement, Manager may terminate
this Agreement immediately upon written notice to Practice.
(iii) Practice voluntarily files a petition in bankruptcy
or makes an assignment for the benefit of creditors or otherwise seeks relief
from creditors under any federal or state bankruptcy, insolvency, reorganization
or moratorium statute, or Practice is the subject of an involuntary petition in
bankruptcy which is not set aside within ninety (90) days of its filing.
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(iv) Practice is in material breach or default under any
other written agreement with Manager, subject to any applicable notice and cure
periods provided in any such agreement.
(v) Any representations and warranties made by Practice
in this Agreement prove to have been untrue or incorrect in any material
respect.
(vi) If in any 18 month period the licenses of more than
25% in number of the original Physician Shareholders or physician Practice
Employees to practice medicine in the State of Florida are suspended or revoked,
or are subjected to final disciplinary action by the State Board of Medicine or
any similar body on any grounds, other than minor, immaterial or insubstantial
grounds, or die or become mentally or physically disabled and, by reason of such
disability, are in the reasonable judgment of Manager unable to conduct medical
practice on substantially the same basis as conducted prior to such disability,
or if in any 18 month period more than 25% of the then total number of Physician
Shareholders and physician Practice Employees retire or sell their interests in
Practice or otherwise cease to practice medicine on substantially a full-time
basis as Practice Employees; provided, however, that in any such event Practice
shall have until the later of the next July 15 or one hundred twenty (120) days
from the date on which Manager gives Practice written notice of its intent to
terminate this Agreement pursuant to this Section 6.2(a)(vi) to replace the
affected physicians with other physicians satisfactory to Manager, in its
reasonable discretion; provided further, however, that (i) Manager and Practice
may agree to bring in locum tenens physicians to provide physician services
during such one hundred twenty (120) day period, and (2) Manager will not
unreasonably withhold approval of any board certified otolaryngologist approved
by local hospital credentialing for medical staff privileges.
(b) Practice may terminate this Agreement, and have no further
liability hereunder, upon the occurrence of one or more of the following events:
(i) Manager is in material breach of a monetary
obligation to Practice under this Agreement which remains uncured for a period
of 30 days after receipt of written notice thereof from Practice, and any
amounts not paid when due shall bear interest at the rate of the then prevailing
12 month Treasury xxxx;
(ii) Manager repeatedly fails to perform in a material
respect any other material obligations hereunder and such repeated failure
continues uncured for a period of forty-five (45) days after Manager's receipt
of written notice specifying such failure, provided, however, that if such
failure cannot be cured within forty-five (45) days, but is capable of being
cured within a reasonable period of time in excess of forty-five (45) days, then
Practice shall not be entitled to terminate this Agreement if Manager commences
the cure of such failure within the first forty-five (45) day period and
thereafter diligently and in good faith continues to prosecute such cure until
completion.
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(iii) Manager voluntarily files a petition in bankruptcy or
makes an assignment for the benefit of creditors or otherwise seeks relief from
creditors under federal or state bankruptcy, insolvency, reorganization or
moratorium statute, or Manager is the subject of an involuntary petition in
bankruptcy which is not set aside within ninety (90) days of its filing.
6.3 REMEDIES UPON TERMINATION.
If this Agreement is terminated pursuant to Section 6.2,
Manager's management fees under this Agreement shall be deemed earned through
the date of termination. Any management fees due Manager shall be paid within
thirty (30) days after the effective date of termination. If this Agreement is
terminated pursuant to Sections 6.2(a)(i), 6.2(a)(ii), 6.2(a)(iv), 6.2(a)(v),
6.2(b)(i) or 6.2(b)(ii) of this Agreement, the non-breaching party may pursue
such other legal or equitable relief and remedies as may be available in
addition to such proration.
6.4 REPURCHASE OF EQUIPMENT AND SUPPLIES. Upon the termination of
this Agreement prior to the end of the tenth anniversary of the date of this
Agreement (other than a termination by Practice pursuant to Section 6.2(b)),
Manager shall have the additional right to require Practice to repurchase all or
any portion of the FFE and all then unused supplies located at the Medical
Offices and other items of personal property purchased by Manager for specific
use at the Medical Offices, from Manager at a repurchase price equal to
$4,000,000 (plus such amount of the $2,250,000 contingent promissory note
delivered under the Stock Purchase Agreement of even date herewith which has
been paid and is attributable to the acquisition of any additional physician or
physician group which has joined the Practice after the date of this Agreement)
minus (1) the product of (x) $400,000 (plus such additional amount paid under
the $2,250,000 promissory note with respect to any additional physician or
physician group which has joined Practice, such additional amount then divided
by ten (10)) times (y) the number of years of the initial term which have been
completed at the time of any such termination, and minus (2) amounts paid under
the Stock Purchase Agreement of even date herewith to any constituent practice
member of HMFM Partnership owned by an original Physician Shareholder no longer
employed by Practice due to his death or disability. An example of the operation
of this provision is set forth on Exhibit 6.4 attached hereto and incorporated
herein. Exercise of this right by Manager shall be accomplished by written
notice to Practice within thirty (30) days after the termination of this
Agreement. Such notice of exercise shall also specify a time and date for a
closing to be held to consummate such purchase and sale, such closing to be
within ninety (90) days after the termination of this Agreement at the offices
of Manager in Florida, or such other location as Manager shall designate in such
written notice. At the closing Practice shall purchase such FFE and unused
supplies from Manager hereunder by delivery of cash or immediately available
funds, against delivery of a xxxx of sale from Manager transferring all its
right, title or interest in or to same. The repurchase requirements contained in
this paragraph are in addition to, and
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not in lieu of, any other rights and remedies that Manager may have under any
other agreements.
6.5 EARLY TERMINATION OF AGREEMENT. In addition to the foregoing,
in the event of termination of this Agreement prior to the fifth (5th)
anniversary of the Closing Date (the "Threshold Date") for any reason other than
pursuant to the provisions of Section 6.2(b), then all management fees under
Section 1.6(g) which would have been paid through the Threshold Date, to the
extent not yet paid (utilizing, for computation purposes, the average monthly
management fee earned by Manager for the preceding 90 day period prior to
termination) shall be immediately due and payable to Manger by the Practice.
Amounts payable pursuant to this paragraph are in addition to, and not in lieu
of, any other rights and remedies that Manager may have under any other
agreements.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
7.1 REPRESENTATIONS AND WARRANTIES OF PRACTICE. Practice hereby
represents and warrants to Manager as follows:
(a) ORGANIZATION AND GOOD STANDING. Practice is a medical practice
corporation duly organized, validly existing and in good standing under the laws
of the State. Practice has all necessary power to own all of its properties and
assets and to carry on its business as now being conducted.
(b) NO VIOLATIONS. Practice has the corporate authority to execute,
deliver and perform this Agreement and all agreements executed and delivered by
it pursuant to this Agreement, and has taken all action required by law, its
Articles or Certificate of Incorporation, its Bylaws or otherwise to authorize
the execution, delivery and performance of this Agreement and such related
documents. The execution and delivery of this Agreement does not and, subject to
the consummation of the transactions contemplated hereby, will not, violate any
provisions of the Articles or Certificate of Incorporation or Bylaws of Practice
or any provisions of or result in the acceleration of, any material obligation
under any mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree, to which Practice is a party, or by which it is
bound. This Agreement has been duly executed and delivered by Practice and
constitutes the legal, valid and binding obligation of Practice, enforceable in
accordance with its terms.
(c) PROFESSIONAL LIABILITY. No Physician Shareholder or physician
Practice Employee has ever (a) had his license to practice medicine in any state
or his Drug Enforcement Agency number suspended, relinquished, terminated,
restricted or revoked; (b) been reprimanded, sanctioned or disciplined by any
licensing board, or any federal, state or local society or agency, governmental
body or specialty board; (c) had entered against him final judgment in, or
settle without judgment, a malpractice or
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similar action for an aggregate award or amount to the plaintiff in excess of
Fifty Thousand and No/100 Dollars ($50,000.00); or (d) had his medical staff
privileges at any hospital or medical facility suspended, terminated, restricted
or revoked other than temporary suspension for failure to timely complete
medical records.
7.2 REPRESENTATIONS AND WARRANTIES OF MANAGER. Manager hereby
represents and warrants as follows:
(a) ORGANIZATION AND GOOD STANDING. Manager is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Manager has all necessary power to own all of its properties and
assets and to carry on its business as now being conducted.
(b) NO VIOLATIONS. Manager has the corporate authority to execute,
deliver and perform this Agreement and has taken all action required by law, its
Articles or Certificate of Incorporation, its Bylaws or otherwise to authorize
the execution, delivery and performance of this Agreement. The execution and
delivery of this Agreement does not and, subject to the consummation of the
transactions contemplated hereby, will not, violate any provisions of the
Articles or Certificate of Incorporation or Bylaws of Manager or any provisions
of or result in the acceleration of, any material obligation under any mortgage,
lien, lease, agreement, instrument, order, arbitration award, judgment or
decree, to which Manager is a party, or by which it is bound. This Agreement has
been duly executed and delivered by Manager and constitutes the legal, valid and
binding obligation of Manager, enforceable in accordance with its terms.
SECTION 8. INSURANCE AND INDEMNITY.
8.1 INSURANCE TO BE MAINTAINED BY PRACTICE. Practice shall provide,
or shall arrange for the provision of, and maintain throughout the entire term
of this Agreement, professional liability insurance coverage on Practice and
each of Practice's employees and agents, including, but not limited to, all
Physician Shareholders and Practice Employees, in the minimum amount of Five
Hundred Thousand and No/100 Dollars ($500,000.00) per occurrence and One Million
Five Hundred Thousand and No/100 Dollars ($1,500,000.00) annual aggregate
including "tail coverage" to the extent necessary to ensure continuity of
coverage. Practice shall provide to Manager written documentation evidencing
such insurance coverage. Practice shall, at its sole cost and expense, pay the
premium costs of all such professional liability insurance coverage during the
term of this Agreement. Practice shall provide, or shall arrange for the
provision of, and shall maintain throughout the entire term of this Agreement,
workers' compensation insurance coverage on Practice and each of its employees
and agents, including, but not limited to, all Physician Shareholders and
Practice Employees, in the amounts required by law. Practice shall provide to
Manager written documentation evidencing such insurance coverage. Practice
shall, at its sole cost and expense, pay the premium costs of all such workers'
compensation insurance coverage. Manager agrees to administer and manage the
above insurance.
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8.2 INDEMNIFICATION BY MANAGER. Manager shall indemnify and hold
harmless Practice, its shareholders, directors, officers, agents, employees and
other personnel from and against any and all claims, demands, liabilities,
losses, damages, costs and expenses (including reasonable attorney's fees, court
costs and other expenses incurred in defending against claims or otherwise
connected therewith) (hereinafter a "Loss" or "Losses") resulting in any manner,
directly or indirectly, from the gross negligence or intentional acts or
omissions of Manager, its directors, officers, employees, independent
contractors or agents.
8.3 INDEMNIFICATION BY PRACTICE. Practice shall indemnify and hold
harmless Manager, its shareholders, directors, officers, agents, employees and
other personnel from and against any all Losses resulting in any manner,
directly or indirectly, from the gross negligence, professional malpractice or
intentional acts or omissions of Practice, its Physician Shareholders, Practice
Employees or independent contractors.
8.4 INDEMNIFICATION PROCEDURE. Within 60 days after an indemnified
person under Section 8.2 or 8.3 (an "Indemnified Person") receives written
notice of the commencement of any action or other proceeding, or otherwise
becomes aware of any claim or other circumstance, in respect of which
indemnification or reimbursement is being sought under Section 8.2 or Section
8.3, such Indemnified Person shall notify the Party required to indemnify
hereunder (the "Indemnitor"). If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to employ
separate counsel at Indemnitor's expense and to control its own defense of such
action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Person, (a) there are or may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to Indemnitor and which could not be adequately
advanced by counsel chosen by Indemnitor, or (b) a conflict or potential
conflict exists between Indemnitor and such Indemnified Person that would make
such separate representation advisable; provided, however, that in no event
shall Indemnitor be required to pay fees and expenses hereunder for more than
one firm of attorneys in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
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8.5 KEY MAN INSURANCE. Practice agrees, and shall cause its
Physician Shareholders and Practice Employees to agree, that Manager may obtain,
at its sole expense (and not as a Practice Expense) and for its sole benefit,
"key man" life insurance policies on any or all Physician Shareholders and
Practice Employees. Neither Practice nor any Physician Shareholder or Practice
Employee shall have any right, title or interest in or to the proceeds of any
such insurance policies. Practice shall cause its Physician Shareholders and
Practice Employees to cooperate with Manager, as reasonably requested by Manager
from time to time, in obtaining any such insurance policies, including, but not
limited to, causing such Physician Shareholders and Practice Employees to submit
to such physical examinations and providing such information relating to
insurability as Manager may reasonably request from time to time.
SECTION 9. ASSIGNMENT.
The parties hereby agree that this Agreement shall not be assigned
or transferred by Manager or Practice without the prior written consent of the
other; provided, however, that this Agreement may be assigned, in whole or in
part, by Manager, in its sole discretion, without the consent of Practice, to
any parent, subsidiary or affiliate of Manager or to any person or entity that
acquires all or substantially all of the assets of Manager or Parent.
Notwithstanding the foregoing, the Practice agrees and consents to the Manager
granting to the Credit Facility Lender a security interest in all of the
Manager's right, title and interest in and under this Agreement as security for
the Manager's obligations under a guaranty of all of the Parent's indebtedness
and other obligations owing to the Credit Facility Lender. Any such assignment
shall not affect the guaranty by Parent of the obligations of Manager hereunder.
SECTION 10. COMPLIANCE WITH REGULATIONS.
10.1 PRACTICE OF MEDICINE. The parties hereto acknowledge that
Manager is not authorized or qualified to engage in any activity which may be
construed or deemed to constitute the practice of medicine. Neither of the
Parties shall suggest or hold Manager out to the public as being engaged in the
practice of medicine. To the extent any act or service herein required of
Manager should be construed or deemed to constitute the practice of medicine,
the performance of said act or service by Manager shall be deemed waived and
forever unenforceable. Practice and its Physician Employees and Practice
Employees shall be unfettered in the exercise of their professional medical
judgment with respect to matters under consideration which require the exercise
of such judgment.
10.2 SUBCONTRACTS. Pursuant to Title 42 of the United States Code
and applicable rules and regulations thereunder, until the expiration of four
(4) years after termination of this Agreement, Manager shall make available,
upon appropriate written request by the Secretary of the United States
Department of Health and Human Services
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or the Comptroller General of the United States General Accounting Office, or
any of their duly authorized representatives, a copy of this Agreement and such
books, documents and records as are necessary to certify the nature and extent
of the costs of the services provided by Manager under this Agreement. Manager
further agrees that if it carries out any of its duties under this Agreement
through a subcontract with a value or cost of Ten Thousand and No/100 Dollars
($10,000.00) or more over a twelve (12) month period with a related
organization, such subcontract shall contain a clause to the effect that until
the expiration of four (4) years after the furnishing of such services pursuant
to such subcontract, the related organization shall make available, upon
appropriate written request by the Secretary of the United States Department of
Health and Human Services or the Comptroller General of the United States
General Accounting Office, or any of their duly authorized representatives, a
copy of such subcontract and such books, documents and records of such
organization as are necessary to verify the nature and extent of such costs.
Disclosure pursuant to this Section shall not be construed as a waiver of any
other legal right to which Manager may be entitled under law or regulation.
SECTION 11. INDEPENDENT RELATIONSHIP.
11.1 INDEPENDENT CONTRACTOR STATUS.
(a) It is acknowledged and agreed that Practice and
Manager are at all times acting and performing hereunder as independent
contractors. Manager shall neither have nor exercise any control or direction
over the methods by which Practice, Physician Shareholders and Practice
Employees practice medicine. The primary obligation of Manager hereunder is to
provide all Management Services in a competent, efficient and satisfactory
manner. Manager shall not, by entering into and performing its obligations under
this Agreement, become liable for any of the existing obligations, liabilities
or debts of Practice unless otherwise specifically provided for under the terms
of this Agreement. In its management role, Manager will have only an obligation
to exercise reasonable care in the performance of the Management Services.
Manager shall have no liability whatsoever for damages suffered on account of
the willful misconduct or negligence of any employee, agent or independent
contractor of Practice. Each party shall be solely responsible for compliance
with all state and federal laws pertaining to employment taxes, income
withholding, unemployment compensation contributions and other employment
related statutes regarding their respective employees, agents and servants.
(b) If any court or regulatory authority shall
determine that the independent contractor relationship established hereby
violates any statutes, rules or regulations (or in the event that Manager, in
good faith, determines that there is a material risk that such a determination
would be made by any court or regulatory authority), then the parties will
negotiate in good faith to enter into an employment arrangement between Manager
and the then-current Physician Shareholders and Practice Employees which
substantially preserves for the parties the relative economic
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benefits of this Agreement. If the parties cannot reach agreement on such an
employment arrangement, Manager may terminate this Agreement upon ninety (90)
days prior written notice to Practice.
11.2 REFERRAL ARRANGEMENTS. The parties hereby acknowledge and
agree that no benefits to Practice hereunder require or are in any way
contingent upon the admission, recommendation, referral or any other arrangement
for the provision of any item or service offered by Manager or any of its
affiliates, to any patients of Practice, Practice's employees or agents.
SECTION 12. GUARANTEES.
(a) Irrevocable Guaranty by Parent. To induce Practice to execute
and deliver this Agreement, Parent hereby unconditionally and irrevocably
guarantees the Practice the full, prompt and faithful performance by Manager of
all covenants and obligations to be performed by Manager under this Agreement.
This guaranty shall be a guaranty of payment, not merely collection, and shall
be unaffected by any subsequent modification or amendment of this Agreement
whether or not Parent has knowledge of or consented to such modification or
amendment. In the event that Manager fails to fully perform all such covenants
and obligations in accordance with their terms or pay all or any part of such
sums or deliver all or any part of such property when due, Parent will perform
all such covenants and obligations in accordance with their terms or immediately
pay or deliver to Practice (or such other payee or transferee as may be provided
in any such agreement) the amount due and unpaid or the property not delivered,
as the case may be, by Manager. In the event of bankruptcy, termination,
liquidation or dissolution of Manager, this unconditional guaranty shall
continue in full force and effect. No extension of time for payment or
performance or other modification of any guaranteed obligation or covenant, or
any waiver thereof or other compromise or indulgence with respect thereto or any
release or impairment of any security for any such obligation or covenant, or
any other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or guarantor, shall be deemed a release of Parent, and no
notice to, or consent of, Parent shall be required.
(b) Irrevocable Guaranty by Physician Shareholders. To induce
Manager to execute and deliver this Agreement, each of the undersigned Physician
Shareholders, during the term of such Physician Shareholder's employment with
Practice and for a period of five (5) years thereafter, severally
unconditionally and irrevocably guarantees to Manager the full, prompt and
faithful performance by Practice of all covenants and obligations to be
performed by Practice under Sections 3.6, 4.4, 4.5, 5.2, 6.4, 6.5, 7.1(a),
7.1(b), 8.1 and 8.3 of this Agreement. This guaranty shall be a guaranty of
payment and performance, not merely collection, and shall be unaffected by any
subsequent modification or amendment of this Agreement whether or not such
guarantor has knowledge of or consented to such modification or amendment. In
the event that Practice fails to fully perform all such covenants and
obligations in accordance with their terms or pay all or any
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part of such sums or deliver all or any part of such property when due, the
Physician Shareholders will severally perform all such covenants and obligations
in accordance with their terms or immediately pay or deliver to Manager (or such
other payee or transferee as may be provided in any such agreement) the amount
due and unpaid or the property not delivered, as the case may be, by Practice.
In the event of bankruptcy, termination, liquidation or dissolution of Practice,
this unconditional guaranty shall continue in full force and effect. In the
event of any extension of time for payment or performance or other modification
of any guaranteed obligation or covenant, or any waiver thereof or other
compromise or indulgence with respect thereto or any release or impairment of
any security for any such obligation or covenant, or any other circumstance
which might otherwise constitute a legal or equitable discharge of a surety or
guarantor, no notice to, or consent of, Practice or any other Physician
Shareholder shall be required. With respect to monetary damages or amounts due
to Manager or Parent hereunder, each Physician Shareholder shall be severally
liable to the extent of his or her Base Purchase Price (as defined in that
certain Stock Purchase Agreement of even date herewith among Parent, South
Florida Otolaryngology, Inc., each Physician Shareholder, and certain other
parties thereto) for such damages or amounts.
SECTION 13. NAME; LICENSE. Practice agrees that it shall conduct its medical
practice under the name of, and only under the name of "ENT Associates of South
Florida", subject to the terms of the Trademark License between the parties of
even date herewith. In the event of any termination of the Trademark License,
Practice agrees to change the name under which it conducts its medical practice
to a distinctly different name.
SECTION 14. MISCELLANEOUS.
14.1 NOTICES. Any notice required or permitted by this Agreement or
any agreement or document executed and delivered in connection with this
Agreement shall be deemed to have been served properly if hand delivered or sent
by overnight express, charges prepaid and properly addressed, to the respective
party to whom such notice relates at the following addresses:
If to Practice:
Ear, Nose & Throat Associates of South Florida, P.A.
000 XX 00xx Xxxxxx
Xxxxx 000
Xxxx Xxxxx, XX 00000
Facsimile (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxx
Xxxxx & Xxxxxxxx, P.A.
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0000 X. Xxxxxxx Xxxxxxx, Xxxxx 000-X
Xxxx Xxxxx, Xxxxxxx 00000-0000
Facsimile (000) 000-0000
If to Manager or Parent:
PHYSICIANS' SPECIALTY CORP.
0000 Xxxxxxxxx Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy of each notice directed to Manager or Parent to:
Xxxxxxx X. Xxxxx
Xxxxxxxx Xxxxxxx LLP
NationsBank Plaza
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
or such other address as shall be furnished in writing by any party to the other
party. All such notices shall be considered received when hand delivered or one
business day after delivery to the overnight courier.
14.2 ADDITIONAL ACTS. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.3 GOVERNING LAW. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State applied without giving
effect to any conflicts-of-law principles.
14.4 CAPTIONS, ETC. The captions or headings in this Agreement are
made for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement. All Addenda and Exhibits to this Agreement are hereby incorporated
into this Agreement by this reference.
14.5 SEVERABILITY. In the event any term, covenant, condition,
agreement, section or provision hereof shall be deemed invalid or unenforceable
by a court of competent and final jurisdiction in the premises, the same shall
be severable and this
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Agreement shall not terminate or be deemed void or voidable, but shall continue
in full force and effect without such stricken provision.
14.6 CHANGES IN REIMBURSEMENT. If Medicare, Medicaid, Blue
Cross/Blue Shield or any other third party payor, or any other Federal, state or
local laws, rules, regulations or interpretations, at any time during the term
of this Agreement, prohibit, restrict or in any way materially and adversely
change the method or amount of reimbursement or payment for services rendered by
Practice pursuant to this Agreement or of the method of compensation for either
party provided for in this Agreement, then the parties shall in good faith
consider any amendment of this Agreement proposed by the other to provide for
payment of compensation in a manner consistent with any such prohibition,
restriction or limitation and which takes into account any materially adverse
change, provided such amendments are consistent with the overall economic and
other objectives of the parties set forth in this Agreement. Notwithstanding the
foregoing, in the event the management fee payable to Manager hereunder in
accordance with Section 1.6(g) is found to be unlawful for any reason, the
Parties agree that at Manager's election exercisable by written notice to
Practice the management fee payable to Manager as a Practice Expense under
Section 1.6(g) of this Agreement shall be computed at a base rate of $85,000 per
annum for each physician employed by Practice (whether as an employee or
independent contractor), such base rate to be increased annually commencing as
of January 1, 1999 in a percentage amount equal to the percentage change in
"CPIn" (as defined below) as compared to "CPIo" (as defined below), but in no
event shall such management fee as so computed in any year exceed 12.5% of Net
Practice Revenues. For purposes hereof, "CPIn" is the Historical Consumer Price
Index, most recently published as final by the Bureau of Labor Statistics, U.S.
Department of Labor, For All Urban Consumers, [Miami/Ft. Lauderdale, Florida],
All Items, Annual Average 1982-84 = 100 ("CPI") as of each new calendar year
commencing January 1, 1999; and "CPIo" is the CPI published as of the date which
is one (1) year prior to the date of CPIn which was used for such calculation.
Upon any such notice from Manager, Section 1.6(g) shall be deemed amended in
accordance with the preceding sentence effective for the period specified by
Manager in any such notice. One-twelfth (1/12) of said annual management fee
amount shall be retained monthly by Manager and shall be a Practice Expense
under this Agreement.
14.7 MODIFICATIONS. This instrument contains the entire agreement
of the parties and supersedes any and all prior or contemporaneous negotiations,
understandings or agreements between the parties, written or oral, with respect
to the transactions contemplated hereby. This Agreement may not be changed or
terminated orally, but may only be changed by an agreement in writing signed by
a duly authorized officer of Manager if Manager is the party against whom
enforcement of any such waiver, change, modification, extension, discharge or
termination is sought, or by Practice if Practice is the party against whom
enforcement of any such waiver, change, modification, extension, discharge or
termination is sought. The parties expressly acknowledge that this Section 14.7
may not be waived, modified or changed by any
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other persons except the Chief Executive Officer or Chief Financial Officer of
Manager and Practice.
14.8 NO RULES OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by Manager solely as a convenience and that all
parties and their counsel have read and fully negotiated all the language used
in this Agreement. The parties acknowledge and agree that because all parties
and their counsel participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes any language,
whether ambiguous, unclear or otherwise, in favor of, or against any party by
reason of that party's role in drafting this Agreement.
14.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
14.10 BINDING EFFECT. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto, and their successors and permitted
assigns. Subject to the foregoing sentence, no person not a party hereto shall
have any right under or by virtue of this Agreement.
14.11 ENFORCEMENT RIGHTS. Practice acknowledges that both Practice
and Manager will be directly or indirectly affected by the enforcement of
Practice's contractual and other legal rights against third parties and by
Practice's enforcement of the rights of third parties the enforcement rights of
which were delegated to Practice by such third parties, and that Manager may
need from time to time to take legal action against third parties to enforce
such rights. Therefore, Practice hereby appoints Manager its nonexclusive true
and lawful attorney-in-fact to enforce any and all rights of Practice, other
than any rights Practice may have against Manager, and to enforce the rights of
third parties the enforcement rights of which were delegated to Practice by such
third parties, to the extent not contrary to applicable law. Practice agrees to
execute any instrument reasonably requested by Manager to evidence such
appointment or to reappoint Manager as such attorney-in-fact upon any
termination of the appointment made hereby. Such appointment is coupled with an
interest and irrevocable.
14.12 COSTS OF ENFORCEMENT. If either party files suit in any court
against the other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable costs, including reasonable attorneys' fees,
from the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if any)
is rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those attorneys' fees actually incurred in obtaining a
judgment in favor of the prevailing party.
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IN WITNESS WHEREOF, Practice, Manager and Parent have duly executed
this Agreement on the day and year first above written.
PSC MANAGEMENT CORP. EAR, NOSE & THROAT ASSOCIATES
OF SOUTH FLORIDA, P.A.
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. XxXxxxxxx, M.D.
------------------------------- ----------------------------------
Title: Vice President Title: Vice President
---------------------------- ------------------------------
PHYSICIANS' SPECIALTY CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Title: Vice Chairman & Secretary
----------------------------
The undersigned, constituting all of the Physician Shareholders, hereby
ratify and confirm the above Agreement and agree to be bound by its terms,
including, but not limited to, Section 12(b) hereof.
/s/ Xxxxxx Xxxx-Xxxxxxxx, M.D.
----------------------------------------
Xxxxxx Xxxx-Xxxxxxxx, M.D.
/s/ Xxxxx X. Xxxxxxxx, M.D.
----------------------------------------
Xxxxx X. Xxxxxxxx, M.D.
/s/ Xxxxxxx X. XxXxxxxxx, M.D.
----------------------------------------
Xxxxxxx X. XxXxxxxxx, M.D.
/s/ W. Xxxx Xxxxxxxx, M.D.
----------------------------------------
W. Xxxx Xxxxxxxx, M.D.
/s/ Xxxxxxx X. Xxxxxx, M.D.
----------------------------------------
Xxxxxxx X. Xxxxxx, M.D.
/s/ Xxxx X. Xxxxxx, M.D.
----------------------------------------
Xxxx X. Xxxxxx, M.D.
/s/ Xxxxxx X. Xxxxxxx, M.D.
----------------------------------------
Xxxxxx X. Xxxxxxx, M.D.
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APPENDIX A
DEFINITIONS
Defined Term Section
------------ -------
Confidential Information 4.6(e)
CPI 14.6
Credit Facility Lender 5.2(b)
Effective Date Preamble
Extended Term 6.1
FFE 3.3
GAAP 1.2
Indemnified Person 8.4
Key Man 8.5
Laws 3.12
Manager Preamble
Medical Offices 3.1
Net Practice Revenues 1.3
Other Practice 3.19
Parent Preamble
Parties Background
Physician Employment Agreements 3.13
Physician Expenses 4.1
Physician Shareholders 1.4
Practice Preamble
Practice IP 4.6(d)
Practice Employees 1.5
Practice Expenses 1.6
PSC Background
Reasonable attorneys' fees 14.11
State 1.7
Threshold Date 6.5
