MANAGEMENT AGREEMENT
AGREEMENT effective as of the 1st day of April, 1997, among Pinecrest
Healthcare Consultants, Inc., a Florida corporation, ("Manager"), and OPTION
CARE, INC., a California corporation, with its principal office at 000 Xxxxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"Option Care"), and each of the Option Care affiliated providers which are
listed on Exhibit A attached hereto, as amended from time to time, and which
become signatories to this Agreement (hereinafter collectively referred to as
the "Providers").
W I T N E S S E T H:
WHEREAS, each of the Providers owns and operates or desires to own and
operate one or more infusion therapy programs and other outpatient healthcare
services programs located within the State of Florida (hereinafter collectively
referred to as the "Programs");
WHEREAS, those Providers which are owned by Option Care shall be
referred herein as "OCI Providers" and Providers not owned by Option Care shall
be referred to as "Allied Providers;
WHEREAS, Manager provides management services suited to and designed
for the operation of Programs; and
WHEREAS, Manager desires to provide management services to Option Care
and the Providers for the Programs, and Option Care and the Providers desire to
procure such services from Manager for the Programs, pursuant to the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. RETENTION OF MANAGER; AUTHORITY
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(a) Subject to the terms and conditions of this Agreement,
Option Care and the Providers hereby retain Manager to provide management
services for the Programs. Manager hereby accepts such retention. Manager agrees
it shall devote its full business time and effort exclusively to the management
of the Programs for the Providers.
(b) Pursuant to this Agreement, Manager shall have the
authority and responsibility to manage, supervise and administer the day-to-day
operations of the OCI Providers' Programs subject at all times to each OCI
Provider's authority over the governance, management and operations of the
Program, and Manager's compliance with (i) the policies and procedures adopted
by Option Care's Human Resources, Reimbursement, MIS, Accounting and Corporate
Compliance Departments, (ii) specific and general directives from Option Care's
and each Provider's governing board and management, and (iii) all applicable
laws, rules and regulations, including without limitation, as applicable, the
Medicare Conditions of Participation for Home Health Agencies, now set forth at
42 C.F.R. ss.484.1 et seq., and if applicable, the Medicare Conditions of
Participation for Hospices, now set forth at 42 C.F.R. ss.418.50 et seq., as
amended or recodified from time to time or any substitute or successor
regulations (collectively, the "Conditions").
(c) Notwithstanding anything contained in this Agreement,
Manager has no authority to perform any of the following acts on behalf of
Option Care or the Providers without Option Care's (or if an Option Care
franchised office, the Provider's) prior written approval: enter into, terminate
or amend contracts; handle Program funds; execute other documents or
instruments; incur indebtedness; hire or fire personnel; or bring or respond to
lawsuits or administrative claims.
(d) Option Care or any Provider may request in writing that
Manger remove a specific Manager employee who is rendering on-site services at a
Program location for cause. Cause for removal must be documented in the written
request to Manger. Cause for purposes of this Subsection includes, but is not
limited to, non-performance and failure to follow reasonable directives from
Option Care or the Provider. Within a reasonable time of receiving such a
request from Option Care or a Provider, Manager agrees to remove the person in
question from the program site and provide a replacement reasonable acceptable
to Option Care and the Provider.
2. MANAGEMENT OBLIGATIONS OF MANAGER AS TO OCI PROVIDERS
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During the term of this Agreement, as to each OCI Provider,
subject to the limitations set forth in Section 1, Manager shall either (i)
directly perform the services listed in this Section 2 or (ii) where Option Care
has retained a General Manager for an OCI Provider, oversee and supervise that
General Manager in the performance of the responsibilities set forth in this
Section 2 and ensure that all requirements at this Section 2 are met.:
(a) Manage the general operations of each Program, as follows:
(i) Provide senior management either of the Provider
or Option Care, as determined by Option Care from time to time, with
consultation at Provider's location or Option Care headquarters (with the site
to be determined by Option Care) regarding Program operation and development;
(ii) Maintain, timely renew and supplement all local,
state and federal applications, certifications, licenses, forms and permits
necessary or appropriate for the operation of the Program and provide Option
Care's corporate headquarters with copies of all such items;
(iii) Seek and maintain the Program's compliance with
all governmental laws, rules and regulations, including the Conditions, as
applicable;
(iv) Supervise the preparation for and assist in the
conduct of the Program's regulatory surveys and inspections, as follows:
(1) If applicable, obtain and maintain
appropriate state licensure for each Program. Manager will use its best efforts
to assist the Program in remedying any deficiencies identified by the state
licensing authority;
(2) Obtain and maintain certification to participate in
Medicare, Medicaid and other reimbursement programs in which the Program
participates. Manager will use its best efforts to assist the Program in
remedying any deficiencies identified by such Programs; and
(3) Obtain and maintain for each Program certification by
the Joint Commission of Accreditation of Healthcare Organizations or such
alternative accrediting body with which Option Care elects to participate (the
"Accreditor"). Manager will use its best efforts to assist the Program in
remedying any deficiencies identified by the Accreditor.
(v) Negotiate and maintain and enhance the Program's contractual
arrangements with payors and service providers and lessors and vendors;
(vi) Supervise plant and equipment maintenance and repair;
(vii) Implement and maintain operating, organizational, office
and personnel policies and procedures for the Program, utilizing Option Care's
policies and procedures where available;
(viii) Subject to approval of Option Care's Human Resources
Department, assist and advise the Program regarding personnel matters;
(ix) Ensure that appropriate insurance coverages for each Program
are maintained, including without limitation professional liability insurance
coverage;
(x) Assist the Provider and Option Care's Director of Management
Information Systems in supervision and management of the Program's data
processing operations and system;
(xi) Ensure that all staff employed in the operation of the
Programs comply with Option Care's Corporate Compliance and other universally
applicable Option Care policies and procedures; and
(xii) Provide other daily management, and sales and
administrative functions, as necessary.
(b) Develop each Program's services and relations, through marketing,
community and professional awareness and educational programs and activities;
(c) Oversee and manage the clinical and professional staff and
clinical and professional operations of each Program, as follows:
(i) Assist the Program in the recruiting of qualified clinical
personnel and assist and advise the Program with respect to other clinical
personnel matters;
(ii) Assist with the design and implementation of Continuous
Quality Improvement Strategies (CQI) and patient satisfaction measures for the
Program which CQI shall be consistent for all Programs and compatible with
Option Care's CQI;
(iii) Assist in the development and implementation of quality
assurance and utilization review policies for the Program compatible with Option
Care policies and consistent for each Program;
(iv) Conduct training programs and seminars for professional and
non-professional, administrative and clinical personnel of the Program, as
necessary (including, without limitation, OSHA training and corporate compliance
training).
(v) Hold staff development and departmental meetings with
Provider and Manager personnel, as necessary;
(vi) Provide to Option Care analyses and evaluations of Program
staffing patterns in relation to patient mix, scope of services and number of
disciplines;
(vii) Maintain each Programs medical records system; and
(viii) Perform medical record/utilization review audits, as
necessary.
(d) Manage the financial affairs of each Provider's Program(s), as
follows; provided, however, that all financial statements will be prepared by
Option Care:
(i) Subject to the direction of Option Care's Chief Financial
Officer or his/her designee, monitor payments to the program and the depositing
of receipts into accounts of the Program;
(ii) Oversee the Program's collection systems;
(iii) Oversee daily cash flow and assist with cash flow
management;
(iv) Monitor and review the posting of cash receipts;
(v) Review and monitor Medicare/Medicaid logs;
(vi) Supervise the follow-up on outstanding receivables;
(vii) Review and monitor transaction logs;
(viii) Oversee the processing and payment of the Program's
accounts payable and payroll to the extent these functions are not performed at
Option Care's corporate headquarters;
(ix) Prepare the annual budget for the Program for presentation
to and approval by Option Care management;
(x) Oversee the Provider's accounting staff;
(e) Manage the aspects of the operations of each Program that are
affected by third party reimbursement, as follows:
(i) Prepare monthly cost reports, if applicable, for purposes of
internal management information;
(ii) Oversee the Provider's reimbursement staff; ensure the
preparation of all quarterly interim rate computations, periodic reimbursement
reports, annual cost reports and other required data and reports for the
Provider's submission to the Program's Medicare fiscal intermediary, Medicaid
and other third party payors, as may be necessary under the provisions of laws,
rules, regulations and general instructions of Medicare, Medicaid or any other
local, state, federal or other program in which the Program participates;
(iii) Ensure the Provider's reimbursement staff follows
applicable law and Option Care reimbursement policies for the Program;
(iv) Monitor all applicable cost cap and therapy limitations
published by third party payors in light of applicable requirements;
(v) Notify Option Care of and supervise the preparation for and
assist in the conduct of Medicare and Medicaid audits, and attend all exit
conferences;
(vi) Review initial reimbursement settlements and proposed audit
adjustments and prepare commentary for Option Care's approval for submission to
the relevant authorities (e.g., the Medicare fiscal intermediary), as necessary;
(vii) Provide advice and assistance to the Provider in connection
with the pursuit and prosecution of reimbursement appeals; and
(viii) Assist the Provider in maintaining and updating an
appropriate charge structure for its Program.
(f) Throughout the term of this Agreement, Manager shall submit
monthly and annual progress reports to Option Care. Manager's progress reports
will address, , Manager's success in meeting defined goals and objectives for
services and each Program's operations, and each Program's business plan and
such other items as agreed upon by Option Care and Manager. Annual progress
reports shall include a report of current staffing and changes thereto over the
period, and a report of services delivered by Manager to the Programs.
3. OBLIGATIONS OF MANAGER AS TO ALLIED PROVIDERS
---------------------------------------------
During the term of this Agreement, as to each Allied Provider,
subject to the limitations set forth in Section 1, Manager shall:
(a) Assist with the general operations of each Allied Provider's
Program, as follows:
(i) Provide senior management of the Allied Provider with
consultation at Provider's location regarding Program operation and development;
(ii) Ensure that each Allied Provider timely renews and
supplements all local, state and federal applications, certifications, licenses,
forms and permits necessary or appropriate for the operation of the Program;
(iii) Ensure that each Allied Provider offices maintains the
Program's compliance with all governmental laws, rules and regulations,
including the Conditions, as applicable;
(iv) Assist in the preparation for and the conduct of the
Program's regulatory surveys and inspections, as follows:
(1) Manager will use its best efforts to assist the Program
in remedying any deficiencies identified by the state licensing authority;
(2) Assist the Allied Provider with obtaining and
maintaining certification to participate in Medicare, Medicaid and other
reimbursement programs in which the Program participates. Manager will use its
best efforts to assist the Program in remedying any deficiencies identified by
such programs; and
(3) Assist the Allied Provider with obtaining and
maintaining for each Program certification by the Joint Commission of
Accreditation of Healthcare Organizations or such alternative accrediting body
with which Option Care elects to participate (the "Accreditor"). Manager will
use its best efforts to assist the Program in remedying any deficiencies
identified by the Accreditor.
(v) Assist the Allied Provider with negotiating and maintaining
and enhancing the Program's contractual arrangements with payors and service
providers and lessors and vendors;
(vi) Assist Allied Provider in maintaining plant and equipment
maintenance and repair;
(vii) Monitor implemented and maintenance of operating,
organizational, office and personnel policies and procedures for the Program,
utilizing Option Care's policies and procedures where available;
(viii) Subject to approval of Option Care's Human Resources
Department, assist and advise the Program regarding personnel matters;
(ix) Monitor status of appropriate insurance coverages for each
Program, including without limitation professional liability insurance coverage;
(x) Assist the Allied Provider in supervision and management of
the Program's data processing operations and system;
(xi) Monitor whether all staff employed in the operation of the
Programs comply with Option Care's Corporate Compliance and other universally
applicable Option Care policies and procedures; and
(xii) Provide other daily management, and sales and
administrative assistance, as necessary.
(b) Assist each Program with marketing, community and professional
awareness and educational programs and activities;
(c) Assist Allied Provider with the clinical and professional staff
and clinical and professional operations of each Program, as follows:
(i) Assist the Program in the recruiting of qualified clinical
personnel and assist and advise the Program with respect to other clinical
personnel matters;
(ii) Assist with the design and implementation of Continuous
Quality Improvement Strategies (CQI) and patient satisfaction measures for the
Program which CQI shall be consistent for all Programs and compatible with
Option Care's CQI;
(iii) Assist in the development and implementation of quality
assurance and utilization review policies for the Program compatible with Option
Care policies and consistent for each Program;
(iv) Conduct training programs and seminars for professional and
non-professional, administrative and clinical personnel of the Program, as
necessary (including, without limitation, OSHA training and corporate compliance
training).
(v) Hold staff development and departmental meetings with
Provider and Manager personnel, as necessary;
(vi) Provide to Allied Provider analyses and evaluations of
Program staffing patterns in relation to patient mix, scope of services and
number of disciplines;
(vii) Assist each Program with medical records system
maintenance; and
(viii) Perform medical record/utilization review audits, as
necessary.
(d) Ensure that Allied Provider is managing the financial affairs of
Program, as follows; provided, however, that all financial statements will be
prepared by Allied Provider:
(i) Review the Program's collection systems;
(ii) Review daily cash flow and assist with cash flow management;
(iii) Review the posting of cash receipts;
(iv) Review and monitor Medicare/Medicaid logs;
(v) Supervise the follow-up on outstanding receivables;
(vi) Review and monitor transaction logs;
(vii) Review the processing and payment of the Program's accounts
payable and payroll;
(viii) Monitor whether the Provider's reimbursement staff follows
applicable law and Option Care reimbursement policies for the Program;
(ix) Monitor all applicable cost cap and therapy limitations
published by third party payors in light of applicable requirements;
(x) Notify Option Care of and assist in the conduct of Medicare
and Medicaid audits, and attend all exit conferences;
(xi) Review initial reimbursement settlements and proposed audit
adjustments, as necessary;
(xii) Provide advice and assistance to the Provider in connection
with the pursuit and prosecution of reimbursement appeals; and
(xiii) Assist the Provider in maintaining and updating an
appropriate charge structure for its Program.
(f) Throughout the term of this Agreement, Manager shall submit
monthly and annual progress reports to Option Care. Manager's progress reports
will address Manager's success in meeting defined goals and objectives for
services and each Program's operations, and each Program's business plan and
such other items as agreed upon by Option Care and Manager. Annual progress
reports shall include a report of current staffing and changes thereto over the
period, and a report of services delivered by Manager to the Programs.
4. Obligations of Option Care and the Providers
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(a) Option Care and the Providers agree that each of the Programs
shall be, subject to the obligations of Manager to provide the management
services set forth herein, operated and maintained as a duly certified, licensed
and accredited home health agency or hospice, as the case may be, in accordance
with, as applicable: (i) the Conditions; (ii) the provisions contained in the
Medicare "Home Health Agency manual", HIM-11, the "Hospice Manual", HIM-21;
(iii) other applicable Medicare or Medicaid manuals and general instructions;
(iv) any and all other applicable federal, state or local laws, rules or
regulations; and (v) all supplements, amendments, substitutions or additions to
any of the foregoing.
(b) The Providers shall employ for each of the Programs, directly or
under arrangement, a clinical staff competent to provide clinical services in
conformity with the standards now or hereafter prescribed by any law, rule or
regulation which may be applicable to the operation of the Programs, including
the Conditions. The Providers also will furnish all personnel required for the
operation of each Program including a General Manager and adequate
administrative staff, either on-site or at Option Care corporate headquarters.
Option Care and the Providers shall ensure that such personnel cooperate with
Manager in the discharge of Manager's duties under this Agreement and comply
with the reasonable instructions provided by Manager from time to time. In
performing their functions relative to the Programs', such personnel will be
accountable to Manager; and
(c) A representative of Manager may be requested to attend meetings of
Providers' governing boards relating to the operation of a Program. At meetings
or portions thereof attended by Manager, representatives of Manager shall be
permitted to participate in discussions of Program operations, but shall not be
entitled to vote. Option Care and the Providers shall deliver to Manager a copy
of resolutions, directives and authorizations which affect the services provided
by Manager under this Agreement.
5. TERM AND TERMINATION
--------------------
(a) This Agreement shall have a term of three (3) years beginning on
the date set forth in the preamble and continuing thereafter on a year to year
basis unless with each party giving written notice at least 90 days prior to the
end of the current term of its written notice unless earlier terminated in
accordance with this Section 5 or any of the other provision of this Agreement
addressing termination.
(b) Option Care shall have the power to terminate this Agreement as
follows:
(i) If Manager breaches or defaults in the performance of any
material term, condition or undertaking set forth herein and fails to cure such
breach or default within thirty (30) days of its receipt of written notice from
Option Care describing in detail the occurrence and nature of the breach or
default, or fails to submit a plan reasonably acceptable to Option Care for
curing the breach or default within such thirty (30) day period and to
thereafter diligently cure the breach or default pursuant to the plan if the
breach or default cannot reasonably be cured within the thirty (30) day period;
provided, however, that any such plan must provide for cure of the breach within
a sixty (60) day period from the date of the breach; and further provided that
for any breach involving violation by Manager of any federal or state law,
regulation or rule, the cure period shall be limited to ten (10) days;
(ii) Immediately upon written notice if Manager becomes
insolvent, has a petition in bankruptcy filed with respect to it which is not
dismissed or discharged within thirty (30) days or makes an assignment for the
benefit of creditors;
(iii) Immediately upon written notice if Manager or any of its
employees is barred or suspended from participation in the Medicare or Medicaid
Programs; and
(iv) Immediately upon written notice in the event of the actual
revocation, termination or suspension of any certification (including Medicare
and Medicaid), license or permit of any Option Care Providers or Option Care
Providers' business required by federal or state law which shall or may
materially and adversely affect any of the Program's business, if such
revocation, termination or suspension was due wholly or in part to the
negligence or misconduct of Manager in the performance of its duties under this
Agreement.
(c) Manager shall have the power to terminate this Agreement as
follows:
(i) If Option Care or a Provider breaches or defaults in the
performance of any material term, condition or undertaking set forth herein and
fails to cure such breach or default within thirty (30) days of its receipt of
written notice from Manager describing in detail the occurrence and nature of
the breach or default, or fails to submit a plan for curing the breach or
default within such thirty (30) days period and to thereafter diligently cure
the breach or default pursuant to the plan if the breach or default cannot
reasonably be cured within the thirty (30) day period; provided, however, that
any such plan must provide for cure of the breach within a sixty (60) day period
from the date of the breach; and further provided for any breach or default
involving the payment of money or the actual violation by Option Care or a
Provider of any federal or state law, regulation or rule, the cure period shall
be limited to ten (10) days;
(ii) Immediately upon written notice if Option Care or a Provider
has a petition in bankruptcy filed with respect to it which is not dismissed or
discharged within thirty (30) days or makes an assignment for the benefit of
creditors;
(iii) Immediately upon written notice in the event of the actual
revocation, termination or suspension of any certification (including Medicare
and Medicaid certification), license or permit of Option Care Providers required
by federal or state law which shall or may materially and adversely affect any
of the Program's business; and
(d) If this Agreement is terminated prior to its expiration date,
Manager shall be paid any bonus due hereunder pro-rated to such termination
date. If this Agreement is terminated by Option Care without cause, then Manager
shall be paid for the remainder of the initial 3 year term in accordance with
this Agreement.
6. Insurance and Indemnity
-----------------------
(a) Manager shall carry and maintain in force insurance to cover
liabilities arising out of the services provided by Manager hereunder, including
general liability insurance with limits of at least $1.0 million per occurrence
and $3.0 million in the aggregate, errors and omission insurance with a limit of
at least $1.0 million and workers' compensation insurance as prescribed by law.
Option Care and each of the Providers shall carry and maintain in force
insurance to cover liabilities arising out of the operation of the Programs,
including professional and general liability insurance with limits of at least
$1.0 million per occurrence and $3.0 million in the aggregate and workers'
compensation insurance as prescribed by law.
(b) Option Care and each Provider shall indemnify and hold harmless
Manager (including Manager's directors, officers, employees and agents,
individually and collectively) from and against any and all claims, liabilities,
damages, fines, penalties, taxes, costs and expenses, including reasonable
attorneys' fees and costs of settlement, which any such party may suffer,
sustain or become subject to as a result of (i) the negligence or other wrongful
conduct (including, without limitation, misrepresentation, fraud, willful
misconduct, violations of law or breach of contract) of Option Care or any
Provider or their respective directors, officers or employees in the operation
of the Programs' business or the performance of Option Care's or any Provider's
obligations hereunder; (ii) any existing or future debts, liabilities or
obligations of Option Care or any Provider relative to any Program; or (iii) any
acts or omissions of Manager or any of its officers, employees or agents taken
or not taken (following delivery by Manager to Option Care of Manager's written
objection to the proposed act or omission, which objection is not heeded by
Option Care) pursuant to the policies, procedures or directives of Option Care
or any Provider, their respective governing boards, officers or employees.
(c) Manager shall indemnify and hold harmless Option Care and each
Provider (including their respective directors, officers, employees and agents,
individually and collectively) from and against any and all claims, liabilities,
damages, fines, penalties, taxes, costs and expenses, including reasonable
attorneys' fees and costs of settlement, which any such party may suffer,
sustain or become subject to as a result of the negligence or other wrongful
conduct (including, without limitation, misrepresentation, fraud, willful
misconduct, violations of law or breach of contract) of Manager or any of their
directors, officers, employees or agents in the performance of Manager's
obligations hereunder.
(d) The obligations of the parties under this Section 6 shall survive
termination of this Agreement.
7. ASSIGNMENT
----------
Neither party may assign any of its rights or obligations under this
Agreement to any other person, firm or entity without the express prior written
consent of the other party. This Agreement shall inure to the benefit of and be
binding upon the legal representatives, permitted assigns and successors of the
parties hereto.
8. NOTICES
-------
Notices required hereunder shall be effective if in writing and when
delivered in person or sent by Certified Mail, postage prepaid, to the General
Counsel of Option Care or the President of Manager or the President of any
Provider at the appropriate address set forth in the preamble of this Agreement
or such other addresses as either party may designate in writing to the other
party in accordance with this Section 8.
9. ACCESS TO BOOKS AND RECORDS
---------------------------
(a) For a period of four (4) years following the last date Manager
furnishes services pursuant to this Agreement for a Medicare-certified Program,
Manager shall make available upon written request of the Secretary of the United
States Department of Health and Human Services, the United States Comptroller
General and their duly authorized representatives, all contracts, books,
documents and records of Manager to the extent required by 42 U.S.C.
ss.1395x(v)(1)(l) (as amended or recodified from time to time or any substitute
or successor statute) and lawful regulations promulgated thereunder. Manager
shall notify Option Care within ten (10) days of its receipt of such a request
and of Manager's proposed response to the request.
(b) If Manager carries out any of its duties under this Agreement
through a subcontract with a value of $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 four (4) years after the furnishing of such
services pursuant to such subcontract, such related organization shall make
available, upon written request of the Secretary of the United States Department
of Health and Human Services, the United States Comptroller General or any of
their duly authorized representatives, the subcontract and the books, documents
and records of such organization to the extend required by 42 U.S.C.
ss.1395x(v)(1)(l) (as amended or recodified from time to time or any substitute
or successor statute) and lawful regulations promulgated thereunder.
10. ENTIRE AGREEMENT
----------------
This instrument contains the entire agreement of the parties with respect to
the subject matter hereof. Any and all prior agreements, promises, inducements,
negotiations or representations not expressly set forth in this Agreement are
superseded hereby and are void and of no force and effect.
11. AMENDMENTS
----------
This Agreement cannot be altered or amended except pursuant to an instrument
in writing signed by both of the parties hereto.
12. SEVERABILITY
------------
Every provision of this Agreement is intended to be severable. In the event
that any provision of this Agreement is rendered illegal, invalid or
unenforceable by a federal or state law, rule or regulation, or declared
illegal, invalid or unenforceable by any court of competent jurisdiction, the
remaining provisions hereof shall remain in full force and effect.
Notwithstanding the foregoing, however, and subject to the parties' obligations
under Section 17, in the event that the removal of any provision of this
Agreement by such cause has or may have the effect of materially and adversely
altering the obligations of either party in such a manner as, in the reasonable
judgment of the party affected, will cause serious financial or other hardship
to such party, the party so affected shall have the right to terminate this
Agreement upon thirty (30) days' prior written notice to the other party.
13. HEADINGS
--------
Headings are used herein solely for the convenience of the parties and are
not part of this Agreement.
14. APPLICABLE LAW
--------------
This Agreement shall be governed by, construed and interpreted in accordance
with the internal laws of the State of Illinois, notwithstanding its conflict of
laws rules.
15. WAIVER OF BREACH
----------------
The Waiver by a party of a breach of or default under any term or provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach or default under the same or any other term or
provision of this Agreement by that party.
16. STATUS OF RELATIONSHIP
----------------------
It is understood and agreed that the parties to this Agreement are
independent contractors, and nothing herein shall be construed to establish a
partnership or joint venture relationship between the parties. Each party has
sole responsibility for the payment of each of its employee's wages, payroll
taxes and benefits. By virtue hereof, neither party assumes, directly or by
implication, the debts, obligations, taxes or liabilities of the other party.
17. LIMITED RENEGOTIATION
---------------------
This Agreement shall be construed to be in accordance with any and all
Federal (including Medicare and Medicaid) and state statutes, rules,
regulations, principles and interpretations. In the event there is a change in
Medicare, Medicaid or other federal or state statutes or regulations or in the
interpretation thereof, or in the event a claim is threatened, made or filed by
a government agency, which renders any of the material terms of this Agreement
unlawful, or asserts that any such terms are unlawful, the parties shall
promptly and in good faith renegotiate the affected term or terms to remedy such
condition in such a manner that will preserve, in all material respects, the
underlying economic, financial and business relationship of the parties. If the
parties are unable to renegotiate such term or terms within thirty (30) days,
despite their good faith efforts, either party may terminate this Agreement upon
written notice to the other party.
18. FORCE MAJEURE
-------------
If either Option Care of Manager is delayed or prevented from fulfilling any
of its obligations under this Agreement by force majeure, such party shall not
be liable under this Agreement for the delay or failure. "Force majeure" means
any cause beyond the reasonable control of a party, including but not limited to
an act of God, act or omission of civil or military authorities of a state or
nation, fire, strike, flood, riot, war, delay of transportation, or inability
due to any of these causes to provide or obtain necessary labor, materials or
facilities.
19. EXCLUSIVITY
-----------
Manager agrees and shall cause each of its employees to agree that during the
term of this Agreement, it shall provide management services only for the
Programs and shall not engage, directly or indirectly, in the provision of
healthcare management or consulting services for any other persons or entities;
provided that Option Care may, directly or indirectly through one or more of its
subsidiaries, internally provide management services for such Programs.
The Manager's sole employees shall consist of Xxxx Xxxxxxx, Xxxxx Xxxxx and
Xxxxx Xxxxxxxx. Each of Xxxxxxx, Xxxxx and Halperin shall be full-time employees
of Manager. Xxxxxxx, Xxxxx and Xxxxxxxx shall be deemed to be and construed as
employees of Manager and not of Option Care.
20. DISPUTE RESOLUTION
------------------
Any material dispute between the parties arising under this Agreement which
is not resolved by good faith negotiation may be submitted by either party to
non-binding arbitration in Chicago, Illinois, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The costs of
arbitration shall be borne equally be the parties and each party shall bear its
own attorney's fees and other cots. Either party may appeal an arbitration award
to any court of competent jurisdiction.
21. FEES
----
21.1 (a) Option Care shall pay the Manager a fee (the "Fee") in equal monthly
installments based upon Five Hundred Forty-Five Thousand Dollars ($545,000) per
annum. Manager shall not be entitled to participate in any fringe benefits
offered by Option Care. Manager shall be responsible for payment of all
withholding and other taxes and fringe benefits for its employees.
(b) The Fee shall be reduced by one-third (1/3) for each of Xxxxxxx,
Xxxxx and Halperin's termination of full-time employment with the Manager for
any reason.
(c) The Fee will be increased on each anniversary date by the change
in the Consumer Price Index from the previous anniversary date, but not more
than four percent (4%), on each anniversary date of this Agreement.
(d) The Fee will be paid on the fifteenth (15th) of each month.
21.2 In addition to the Fee, Option Care shall reimburse the Manager pursuant
to Option Care's normal reimbursement policies, for those reasonable direct
expenses approved by Option Care. However, Manager's maximum care allowance
shall be nine cents (.09) per business mile.
21.3 The Fee plus Manager's approved direct expenses plus Manager's
secretarial expenses plus Manager's office space expense shall be charged back
by Option Care in accordance with the formula described below to (a) the Miami
location business revenue, (b) Option Care's company-owned Florida location
revenues (other than Miami), and (c) Option Care's royalty collections from
Florida Franchisees.
Each of a, b and c hereof shall be divided by the total of a, b and c and
then multiplied by the sum of the Fee plus direct expenses plus office space
plus secretarial expense; such final amount shall be charged back monthly to and
included in the P&L of the appropriate entity prior to any calculation of the
bonus hereunder.
22. BONUS
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In addition to the Fee, Manager shall be eligible for a bonus for each of
three twelve month periods, the first period commencing March 1, 1997 and ending
February 28, 1998 (the "1997 period"), the second period commencing March 1,
1998 and ending February 28, 1999 (the "1998 period"), and the third period
commencing March 1, 1999 and ending February 29, 2000 (the "1999 period"), to be
determined as follows and paid within sixty (60) days following the last day of
each such period:
(a) For the Miami location (exclusive of CritiCare), thirty percent (
30%) of its pre-tax earnings over and above the EBITDA dollar target specified
for such period in the Purchase Agreement of even date herewith among Home
Pharmacy, Inc., its shareholders and Option Care (the "Purchase Agreement");
(b) For each existing Option Care Enterprises, Inc. office located in
the State of Florida (exclusive of the Miami location), twenty percent (20%) of
the first fifteen percent (15%) of pre-tax earnings EBITDA margin and forty
percent (40%) of any EBITDA margin over and above a fifteen percent (15%)
margin. For example, assuming $1 million of net sales and a cost of goods and
expense (exclusive of interest and tax) totaling $750,000, a pre-tax margin of
$250,000 or 25% would have been achieved. And, on the first 15% or $150,000, 20%
of $150,000 or $30,000 would be payable. And, on the portion of the $250,000
over and above the 15% pre-tax margin (i.e., $250,000 minus $150,000 equals
$100,000), 40% would be payable or $40,000. In this example, a total bonus
payment of $70,000 would be payable.
(c) For each Option Care franchise located in the State of Florida,
thirty-five percent (35%) of any annual gain documented and collected by Option
Care in same store royalties over and above the royalty amounts paid Option Care
by such franchises in the immediately preceding period.
(d) For each Option Care franchise established in Florida subsequent
to March 24, 1997, ten percent (10%) of the franchise origination fee received
by Option Care plus twenty percent (20%) of the royalties paid to Option Care by
the new franchise within twelve (12) months of execution of its Franchise
Agreement.
(e) For each location purchased by Option Care Enterprises, Inc.
subsequent to March 24, 1997 in the State of Florida, twenty percent (20%) of
any pre-tax earnings over and above the applicable EBITDA targets described in
the definitive agreement to purchase for that particular location.
(f) The bonus for any final fractional period of this
Agreement shall be pro-rated for the months of the final year this Agreement is
in effect.
IN WITNESS WHEREOF, Option Care and Manager have caused this Agreement
to be executed by their duly authorized representative as of the date first set
forth above.
OPTION CARE, INC.
a California corporation
By:
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Its:
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PINECREST HEALTHCARE CONSULTANTS,
INC.
By:
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Its:
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