Exhibit 10.14
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
NOVAMED EYECARE MANAGEMENT, LLC,
a Delaware limited liability company
AND
ILLINOIS EYE SPECIALISTS, LTD.
an Illinois professional corporation
AMENDED AND RESTATED
EFFECTIVE AS OF NOVEMBER 17, 1997
TABLE OF CONTENTS
Page No.
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ARTICLE I DEFINITIONS............................................... 2
1.1 Adjustments................................................... 2
1.2 Affiliate..................................................... 2
1.3 Ancillary Revenue............................................. 2
1.4 Budget........................................................ 2
1.5 Budgeted Adjusted Gross Revenue............................... 3
1.6 Business Manager Consent...................................... 3
1.7 Business Manager Expense...................................... 3
1.8 Capitation/Case Rate Revenues................................. 3
1.9 Confidential Information...................................... 4
1.10 Contribution and Exchange Agreement........................... 4
1.11 Depository Account............................................ 4
1.12 Designated Allied Health Professionals........................ 5
1.13 Dispensary Business........................................... 5
1.14 Dispensary Business Budgeted Office Expense................... 5
1.15 Dispensary Business Budgeted Practice Expense................. 5
1.16 Dispensary Business Budgeted Revenue......................... 5
1.17 Dispensary Business Management Fee............................ 5
1.18 Dispensary Business Monthly Fee............................... 5
1.19 Dispensary Business Monthly Office Expense.................... 5
1.20 Dispensary Business Monthly Practice Expense.................. 5
1.21 Dispensary Business Office Expense............................ 5
1.22 Dispensary Business Revenue................................... 5
1.23 GAAP.......................................................... 5
1.24 Managed Care Contract......................................... 6
1.25 Management Fee................................................ 6
1.26 Management Services........................................... 6
1.27 Management Services Agreement................................. 6
1.28 Intentionally deleted......................................... 6
1.29 Medical Advisory Board........................................ 6
1.30 Medical Services.............................................. 6
1.31 Monthly Office Expense........................................ 6
1.32 Monthly Practice Expense...................................... 6
1.33 Office. 6
1.34 Office Expense................................................ 6
1.35 Optometrist................................................... 8
1.36 Physician..................................................... 8
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1.37 Physician Discretionary Expenses.............................. 9
1.38 Physician-Employee............................................ 9
1.39 Physician-Shareholder......................................... 9
1.40 Policy Board.................................................. 9
1.41 Practice...................................................... 9
1.42 Practice Consent.............................................. 9
1.43 Practice Expense.............................................. 9
1.44 Practice Territory............................................ 9
1.45 Preexisting Obligation Payments............................... 10
1.46 Principal Services............................................ 10
1.47 Principal Services Budgeted Office Expense.................... 10
1.48 Principal Services Budgeted Practice Expense.................. 10
1.49 Principal Services Budgeted Revenue........................... 10
1.50 Principal Services Management Fee............................. 10
1.51 Principal Services Monthly Fee................................ 10
1.52 Principal Services Monthly Office Expense..................... 10
1.53 Principal Services Monthly Practice Expense................... 10
1.54 Principal Services Office Expense............................. 10
1.55 Principal Services Revenue.................................... 10
1.56 Professional Services Revenues................................ 10
1.57 Regional Practices............................................ 11
1.58 Representatives............................................... 11
1.59 Xxxxx Act..................................................... 11
1.60 Subcontractor Costs........................................... 11
1.61 Term. 11
ARTICLE II APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER............ 11
2.1 Appointment................................................... 11
2.2 Authority..................................................... 11
2.3 Patient Referrals............................................. 12
2.4 Internal Practice Matters..................................... 12
2.5 Practice of Medicine.......................................... 12
ARTICLE III RESPONSIBILITIES OF THE POLICY BOARD.................... 12
3.1 Formation and Operation of the Policy Board................... 12
3.2 Duties and Responsibilities of the Policy Board............... 14
3.3 Medical Decisions............................................. 15
ARTICLE IV COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER....... 15
4.1 Office and Equipment.......................................... 15
4.2 Medical Supplies.............................................. 16
4.3 Support Services.............................................. 16
4.4 Quality Assurance, Risk Management, and Utilization Review.... 16
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4.5 Licenses and Permits.......................................... 17
4.6 Personnel..................................................... 17
4.7 Contract Negotiations......................................... 17
4.8 Billing and Collection........................................ 17
4.9 Priority of Payments.......................................... 20
4.10 Fiscal Matters................................................ 20
4.11 Reports and Records........................................... 23
4.12 Recruitment of Physicians and Optometrists.................... 23
4.13 Confidential and Proprietary Information...................... 23
4.14 Insurance..................................................... 24
4.15 No Warranty................................................... 25
ARTICLE V COVENANTS AND RESPONSIBILITY OF PRACTICE.................. 25
5.1 Organization and Operation.................................... 25
5.2 Practice Personnel............................................ 26
5.3 Professional Standards........................................ 27
5.4 Medical Services.............................................. 28
5.5 Peer Review/Quality Assurance................................. 28
5.6 Confidential and Proprietary Information...................... 28
5.7 Noncompetition................................................ 29
5.8 Name, Trademark............................................... 30
5.9 Medical Advisory Board........................................ 31
5.10 Indemnification of Business Manager........................... 31
ARTICLE VI FINANCIAL ARRANGEMENT.................................... 31
6.1 Definitions................................................... 31
6.2 Management Fee................................................ 34
6.3 Reasonable Value.............................................. 34
6.4 Payment of Management Fee..................................... 35
6.5 Accounts Receivable........................................... 35
6.6 Disputes Regarding Fees....................................... 35
ARTICLE VII TERM AND TERMINATION.................................... 36
7.1 Initial and Renewal Term...................................... 36
7.2 Termination................................................... 36
7.3 Effects of Termination........................................ 38
7.4 Repurchase Obligation......................................... 38
7.5 Repurchase Option............................................. 40
7.6 Closing of Repurchase......................................... 41
7.7 Rights and Remedies........................................... 41
7.8 Interpretation................................................ 42
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ARTICLE VIII MISCELLANEOUS.......................................... 42
8.1 Administrative Services Only.................................. 42
8.2 Status of Contractor.......................................... 43
8.3 Notices....................................................... 43
8.4 Governing Law................................................. 44
8.5 Assignment.................................................... 44
8.6 Arbitration................................................... 45
8.7 Waiver of Breach.............................................. 45
8.8 Enforcement................................................... 45
8.9 Gender and Number............................................. 45
8.10 Additional Assurances......................................... 45
8.11 Consents, Approvals, and Exercise of Discretion............... 46
8.12 Force Majeure................................................. 46
8.13 Severability.................................................. 46
8.14 Divisions and Headings........................................ 46
8.15 Amendments and Management Services Agreement Execution........ 46
8.16 Entire Management Services Agreement.......................... 46
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AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT is made and entered
into effective as of November 17, 1997 (the "Effective Date"), by and between
NovaMed Eyecare Management, LLC, a Delaware limited liability company ("Business
Manager"), and Illinois Eye Specialists, Ltd., an Illinois professional
corporation ("Practice"), and amends, restates and replaces in its entirety that
certain Management Services Agreement previously made and entered into effective
as of December 1, 1996 (the "Original Date"), by and between Business Manager
and Practice.
RECITALS
This Management Services Agreement is made with reference to the following
facts:
A. Practice is a validly existing Illinois professional corporation,
formed for and engaged in the conduct of a medical practice and the provision of
medical services to the general public in and around the St. Louis metropolitan
area through individual physicians who are licensed to practice medicine in the
State of Illinois and who are employed or otherwise retained by Practice.
B. Practice is also engaged in the business of selling prescription and
non-prescription eyewear, contact lenses and other related optical products (the
"Dispensary Business").
C. Business Manager is a validly existing Delaware limited liability
company which is in the business of providing physician practice management
services to medical practices.
D. Business Manager and Practice previously have entered into a Management
Services Agreement dated as of December 1, 1996 (the "Original Management
Services Agreement").
E. Practice desires to focus its energies, expertise and time on the
practice of medicine and on the delivery of medical services to patients, and
desires to delegate the business functions of its medical practice to persons
with business expertise.
F. Practice desires to engage Business Manager to provide all management,
administrative and business services as are necessary or appropriate for the
day-to-day administration of the nonmedical aspects of Practice's medical
practice and Dispensary Business, including the provision of all non-medical
assets necessary or appropriate for the operator of Practice's medical practice
and Dispensary Business, and Business Manager desires to provide such services
upon the terms and conditions hereinafter set forth.
G. Practice and Business Manager have determined a fair market value for
the services to be rendered by Business Manager and, based on this fair market
value, have developed a formula for compensating Business Manager that will
allow the parties to establish a relationship
permitting each party to devote its skills and expertise to the appropriate
responsibilities and functions.
H. Business Manager is willing to commit significant resources to Practice
based upon the representation and warranty of Practice that the current
shareholders of Practice will continue to practice medicine for Practice in the
Practice Territory (as hereinafter defined) during the term of this Management
Services Agreement pursuant to employment agreements between Practice and each
Physician-Shareholder (the "Employment Agreements").
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used in this Management Services Agreement, the following terms shall
have the meanings set forth below.
1.1 Adjustments. The term "Adjustments" shall mean any adjustments on
-----------
an accrual basis in accordance with GAAP for uncollectible accounts, Medicare,
Medicaid and other payor contractual adjustments, discounts, worker's
compensation adjustments, professional courtesies and other reductions in
collectible revenue.
1.2 Affiliate. The term "Affiliate" shall mean any person, firm or
---------
entity which directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, any other person
(including members of such person's family), firm or entity.
1.3 Ancillary Revenue. The term "Ancillary Revenue" shall mean all
-----------------
other revenue of Practice, Physicians and Optometrists actually recorded each
month (net of Adjustments) which is not Professional Services Revenue or
Dispensary Business Revenue and shall include, without limitation, any revenues
of Practice or its Physicians and Optometrists which are derived from
professionally related activities such as expert witness fees, and any
royalties, honoraria or the like from authored documents or speeches.
1.4 Budget. The term "Budget" shall mean an operating budget and
------
capital expenditure budget for each fiscal year for each of the Dispensary
Business and the Principal Services, as prepared by Business Manager and adopted
by Practice in accordance with Section 4.10 hereof. The initial Budget shall be
attached hereto and incorporated herein as Exhibit 1.4. Each succeeding Budget
-----------
subsequently adopted pursuant to Section 4.10 hereof shall also be incorporated
herein.
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1.5 Budgeted Adjusted Gross Revenue. The term "Budgeted Adjusted Gross
-------------------------------
Revenue" shall have the meaning set forth in Section 6.1 hereof.
1.6 Business Manager Consent. The term "Business Manager Consent" shall
------------------------
mean the consent granted by any of Business Manager's representatives to the
Policy Board. When any provision of this Management Services Agreement requires
Business Manager Consent, such consent shall not be unreasonably withheld or
delayed and shall be binding on Business Manager.
1.7 Business Manager Expense. The term "Business Manager Expense" shall
------------------------
mean any expense or cost incurred by Business Manager which does not relate
directly to the provision of services to Practice. Such expenses or costs shall
include, without limitation:
(a) all salaries, benefits and other direct costs (including payroll
and other withholding taxes) of executive officers and management personnel of
Business Manager or employees of Business Manager who devote substantially all
of their time and effort to the operations of Business Manager in the aggregate
rather than the operations of any particular practice affiliated with Business
Manager;
(b) the expense of using, leasing, maintaining or repairing the
offices of Business Manager;
(c) the cost of capital to finance the general business obligations
of Business Manager, and any costs associated with raising such capital; and
(d) the costs of any consultants or advisors who provide services for
Business Manager in connection with its business operations, such as accounting,
financial and legal services, other than those services which constitute Office
Expense pursuant to Section 1.34 hereof.
1.8 Capitation/Case Rate Revenues. The term "Capitation/Case Rate
-----------------------------
Revenues" shall mean all revenues from managed care organizations, third party
payors or employers in which payments are based on a per member, case rate or
other similar basis (i.e., all payments which are not based on a fee-for-service
payment methodology or discounted fee-for-service reimbursement methodology) for
the medical needs of a subscribing patient. Capitation/Case Rate revenues shall
include any associated plan payments received such as patient co-payments,
incentive bonuses or incentive fund penalties. All Capitation/Case Rate
Revenues shall be allocated in good faith on an actuarial basis as follows:
(a) Dispensary Business Capitation. The portion, if any, of payments
------------------------------
designated for Dispensary Business goods sold by Practice; Dispensary Business
Capitation shall be Dispensary Business Revenue;
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(b) Professional Services Capitation. The portion of payments
--------------------------------
designated for physician services currently performed by Practice; Professional
Services Capitation shall be Professional Services Revenues; and
(c) Subcontractor Capitation Revenues. The portion of payments
---------------------------------
designated for physicians, optometrists or other medical or optometric services
that will be Subcontractor Costs (e.g., reinsurance, hospitalization, surgical
facility fees, etc.), including incentive bonuses or penalties, and an estimate
for incurred but not reported claims; Subcontractor Capitation Revenues shall
not be Professional Services Revenues.
Subject to the approval of the Policy Board, Business Manager shall develop and
implement an appropriate allocation methodology for each Capitation/Case Rate
Revenues contract.
1.9 Confidential Information. The term "Confidential Information"
------------------------
shall mean any and all financial, technical, commercial or other information of
Business Manager or Practice, as appropriate (whether written or oral),
including, without limitation, all information, notes, studies, patient lists
and records, reports, analyses, financial statements, compilations, studies,
forms, business or management methods, marketing data, fee schedules, peer
review information, credentialing information, quality assurance and utilization
review information, interpretations, projections, forecasts or trade secrets of
Business Manager or of Practice, as applicable, whether or not such Confidential
Information is disclosed or otherwise made available to one party by the other
party pursuant to this Management Services Agreement. Confidential Information
shall also include the terms and provisions of this Management Services
Agreement and any transactions consummated or documents executed by the parties
pursuant to this Management Services Agreement. Confidential Information does
not include any information that (i) is or becomes generally available to and
known by the public (other than as a result of an unpermitted disclosure
directly or indirectly by the receiving party or its affiliates, advisors or
Representatives); (ii) is or becomes available to the receiving party on a
nonconfidential basis from a source other than the furnishing party or its
affiliates, advisors or Representatives, provided that such source is not and
was not bound by a confidentiality agreement with or other obligation of secrecy
to the furnishing party of which the receiving party has knowledge at the time
of such disclosure; or (iii) has already been developed, or is hereafter
independently acquired or developed, by the receiving party without violating
any confidentiality agreement with or other obligation of secrecy to the
furnishing party.
1.10 Contribution and Exchange Agreement. The term "Contribution and
-----------------------------------
Exchange Agreement" shall mean that certain Asset Contribution and Exchange
Agreement dated November 27, 1996 by and among Business Manager, Practice, Eyes
of Illinois Surgery Center, S.C. and Physician-Shareholders.
1.11 Depository Account. The term "Depository Account" shall mean the
------------------
bank account referred to in Section 4.8 hereof.
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1.12 Designated Allied Health Professionals. The term "Designated Allied
--------------------------------------
Health Professionals" shall mean those medical professionals other than
Physicians and Optometrists whose services must be rendered "incident to" a
Physician's services in order to be billable under the Medicare program.
1.13 Dispensary Business. The term "Dispensary Business" shall have the
-------------------
meaning set forth in the Recitals hereto.
1.14 Dispensary Business Budgeted Office Expense. The term "Dispensary
-------------------------------------------
Business Budgeted Office Expense" shall have the meaning set forth in Section
6.1 hereof.
1.15 Dispensary Business Budgeted Practice Expense. The term "Dispensary
---------------------------------------------
Business Budgeted Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.16 Dispensary Business Budgeted Revenue. The term "Dispensary Business
-------------------------------------
Budgeted Revenue" shall have the meaning set forth in Section 6.1 hereof.
1.17 Dispensary Business Management Fee. The term "Dispensary Business
----------------------------------
Management Fee" shall have the meaning set forth in Section 6.1 hereof.
1.18 Dispensary Business Monthly Fee. The term "Dispensary Business
-------------------------------
Monthly Fee" shall have the meaning set forth in Section 6.1 hereof.
1.19 Dispensary Business Monthly Office Expense. The term "Dispensary
------------------------------------------
Business Monthly Office Expense" shall have the meaning set forth in Section 6.1
hereof.
1.20 Dispensary Business Monthly Practice Expense. The term "Dispensary
--------------------------------------------
Business Monthly Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.21 Dispensary Business Office Expense. The term "Dispensary Business
----------------------------------
Monthly Office Expense" shall have the meaning set forth in Section 6.1 hereof.
1.22 Dispensary Business Revenue. The term "Dispensary Business
---------------------------
Revenue" shall mean all revenues of the Dispensary Business of the Practice
recorded on an accrual basis under GAAP (net of Adjustments).
1.23 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,
statements and pronouncements of the Financial Accounting Standards Board, or
other statements, practices and procedures as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of the determination.
5
1.24 Managed Care Contract. The term "Managed Care Contract" shall
---------------------
include any Capitation/Case Rate Revenues contract, or any contracts based on a
fee-for-service payment methodology or discounted fee-for-service reimbursement
methodology and other agreements with third party payors, alternative delivery
systems or other purchasers of group health care services.
1.25 Management Fee. The term "Management Fee" shall mean the amount
--------------
determined pursuant to Section 6.1.
1.26 Management Services. The term "Management Services" shall mean the
-------------------
business, administrative and management services to be provided for Practice
including, without limitation, the provision of equipment, supplies, support
services, nonphysician personnel, office space, management, administration,
financial recordkeeping and reporting, information systems and all other
business office services necessary for the nonmedical operations of Practice.
1.27 Management Services Agreement. The term "Management Services
-----------------------------
Agreement" shall mean this Management Services Agreement by and between Practice
and Business Manager and any amendments hereto.
1.28 Intentionally deleted.
----------------------
1.29 Medical Advisory Board. The term "Medical Advisory Board" shall have
----------------------
the meaning set forth in Section 5.9 hereof.
1.30 Medical Services. The term "Medical Services" shall mean the
----------------
practice of ophthalmology, optometry and other related eye care services as
provided by Practice through Physicians and Optometrists, as the case may be.
1.31 Monthly Office Expense. The term "Monthly Office Expense" shall
----------------------
have the meaning set forth in Section 6.1 hereof.
1.32 Monthly Practice Expense. The term "Monthly Practice Expense"
------------------------
shall have the meaning set forth in Section 6.1 hereof.
1.33 Office. The term "Office" shall mean any office space, clinic,
------
facility or satellite facilities that Business Manager owns, leases or otherwise
procures for the exclusive use of Practice.
1.34 Office Expense. The term "Office Expense" shall mean all expenses
--------------
incurred by Business Manager or Practice in the provision of services to
Practice. Except as specifically enumerated below, Office Expense shall not
include any state or federal income tax liability of Practice or Physician-
Shareholders, or any other expense that is a Practice Expense or a Business
Manager Expense. Without limitation, Office Expense shall include:
6
(a) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all employees of Business Manager who are either
located at, devote substantially all of their time and effort to, or for which
time is allocated specifically for a function to support, Practice;
(b) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all Physician-Employees and Optometrists, but
excluding the salaries, benefits and other direct costs (including payroll and
other withholding taxes) of Physician-Shareholders; provided, however, that in
the event any Physician-Shareholder shall fail, for any reason, to work full-
time in the performance of his or her duties as described in such Physician-
Shareholder's Employment Agreement for a period exceeding two (2) consecutive
months, whether or not such failure (i) gives rise to termination rights
pursuant to such Employment Agreement or (ii) occurs prior to or after the
termination of the Initial Term (as such term is defined in Section 4.1 of such
Employment Agreement), then the expenses described in this Section 1.34(b) shall
thereafter be categorized as Practice Expense;
(c) except as otherwise provided in Section 5.4 hereof, the direct or
reasonably allocated costs of providing such locum tenens coverage as may be
----- ------
necessary pursuant to Section 5.4 hereof, which costs shall include, without
limitation, the salaries, benefits and other direct costs of any Physicians or
Optometrists retained by Practice for such purposes;
(d) the direct or reasonably allocated costs of any employee or
consultant that provides services at the direction of Business Manager with
Practice Consent for improved performance of Practice, such as management,
xxxxxxxx and collections, business office consultation, training, and accounting
and legal services;
(e) reasonable recruitment costs and out-of-pocket expenses of
Business Manager or Practice associated with the recruitment of additional
Physician-Employees and Optometrists of Practice;
(f) all reasonable and customary business insurance expenses of
Practice, Physicians, Optometrists, Designated Allied Health Professionals and
the Office, including, without limitation, general liability insurance and the
Physician-Shareholders' professional liability insurance;
(g) without duplication of expenses included pursuant to any other
subparagraph of this Section 1.34, the expense of using, leasing, maintaining,
repairing, purchasing or otherwise procuring the Office and related equipment
(including any leasehold improvements), including, without limitation, any
depreciation expense and any and all expenses relating to the equipment listed
on Exhibit 1.34(g) attached hereto and incorporated herein, but excluding any
---------------
Preexisting Obligation Payments;
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(h) without duplication of expenses included pursuant to any other
subparagraph of this Section 1.34, the cost of capital, whether as actual
interest on indebtedness incurred on behalf of Practice or as reasonable imputed
interest on capital advanced by Business Manager to finance or refinance
obligations of Practice, purchase medical or nonmedical equipment, renovate the
Office, or finance new ventures of Practice, but excluding any Preexisting
Obligation Payments;
(i) the Base Management Fee;
(j) the direct or reasonably allocated costs relating to sales or
marketing activities or materials, including, without limitation, brochures,
pamphlets, displays, direct mail, promotional materials, patient screening,
network directories, signs, video and audio tapes, equipment, media, development
costs and consulting services;
(k) the direct or reasonably allocated costs of obtaining,
maintaining and supporting Managed Care Contracts;
(l) the direct or reasonably allocated costs relating to any third
party service agreements for the general day-to-day operations of Office and
Practice, which services shall include, without limitation, maintenance, patient
transportation, janitorial, answering services, landscaping, snow removal and
uniform rental;
(m) subject to obtaining Practice Consent, the direct or reasonably
allocated travel expenses of Business Manager associated with attending
meetings, conferences or seminars primarily benefitting Practice;
(n) the cost of medical supplies (including, without limitation,
drugs, pharmaceuticals, products, substances or medical devices), office
supplies, inventory (including, without limitation, inventory for the Dispensary
Business) and utilities; and
(0) direct costs, not to exceed budgeted allowances, for professional
dues, subscriptions, continuing medical education expenses and travel costs for
continuing medical education or other business travel of Practice employees.
1.35 Optometrist. The term "Optometrist" shall mean each individually
-----------
licensed doctor of optometry who is employed or otherwise retained by or
associated with Practice, each of whom shall meet at all times the
qualifications described in Sections 5.2 and 5.3 hereof.
1.36 Physician. The term "Physician" shall mean each individual
---------
licensed to practice medicine in the State of Illinois who is employed or
otherwise retained by or associated with Practice, each of whom shall meet at
all times the qualifications described in Sections 5.2 and 5.3 hereof.
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1.37 Physician Discretionary Expenses. The term "Physician
--------------------------------
Discretionary Expenses" shall mean any expenses or debt obligations of Practice
or Physicians which are not included in the Budget or approved by Business
Manager and shall include, without limitation, the following: accounting,
consulting or legal expenses incurred by Practice without coordinating such
engagement through Business Manager; professional dues, subscriptions,
continuing medical education expenses and travel costs for continuing medical
education in excess of budgeted allowances for such items and any equipment
obtained by Practice without the approval of the Policy Board as set forth in
Section 4.1(d) hereof; and other discretionary business expenses incurred
directly by Physicians or Practice.
1.38 Physician-Employee. The term "Physician-Employee" shall mean any
------------------
Physician employed by Practice, but shall not include Physician-Shareholders.
1.39 Physician-Shareholder. The term "Physician-Shareholder" shall mean
---------------------
any Physician who is employed by, and a shareholder of, Practice.
1.40 Policy Board. The term "Policy Board" shall refer to the body
------------
responsible for developing an implementing management and administrative
policies for the overall operation of the Regional Practices.
1.41 Practice. The term "Practice" is defined in the introductory
--------
paragraph of this Management Services Agreement.
1.42 Practice Consent. The term "Practice Consent" shall mean the
----------------
consent granted by any of Practice's authorized Representatives who is not an
officer or employee of Business Manager. When any provision of this Management
Services Agreement requires Practice Consent, such consent shall not be
unreasonably withheld or delayed and shall be binding on Practice.
1.43 Practice Expense. The term "Practice Expense" shall mean an
----------------
expense incurred by Business Manager or Practice and for which Practice, and not
Business Manager, is financially liable. Practice Expense shall include,
without limitation, such items as Preexisting Obligation Payments, Physician
Discretionary Expenses, salaries, benefits and other direct costs of Physician-
Shareholders, any costs of providing locum tenens coverage designated as a
----- ------
Practice Expense pursuant to Section 5.4 hereof, and any other expenses incurred
by Practice and Physician-Shareholders which are not in the Budget or are in
excess of budgeted allowances.
1.44 Practice Territory. The term "Practice Territory" shall mean the
------------------
geographic area within a seven and one-half (7-1/2) mile radius of any present
or future locations of Practice; provided, however, that the Western boundary of
the Practice Territory shall be the Mississippi River.
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1.45 Preexisting Obligation Payments. The term "Preexisting Obligation
-------------------------------
Payments" shall mean (i) the expense for principal and interest amortization of
debt obligations of Practice or any Physician-Shareholder relating to the
operation of Practice which existed prior to the execution of this Management
Services Agreement and (ii) lease payments and other costs relating to any
outstanding debt, obligations or liabilities of Practice or any Physician-
Shareholder relating to the operation of Practice which existed prior to the
execution of this Management Services Agreement, and which include, without
limitation, the items set forth on Exhibit 1.45 attached hereto and incorporated
------------
herein.
1.46 Principal Services. The term "Principal Services" shall mean all
------------------
services performed by or on behalf of Practice which generate Professional
Services Revenues or Ancillary Revenues.
1.47 Principal Services Budgeted Office Expense. The term "Principal
------------------------------------------
Services Budgeted Office Expense" shall have the meaning set forth in Section
6.1 hereof.
1.48 Principal Services Budgeted Practice Expense. The term "Principal
--------------------------------------------
Services Budgeted Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.49 Principal Services Budgeted Revenue. The term "Principal Services
-----------------------------------
Budgeted Revenue" shall have the meaning set forth in Section 6.1 hereof.
1.50 Principal Services Management Fee. The term "Principal Services
---------------------------------
Management Fee" shall have the meaning set forth in Section 6.1 hereof.
1.51 Principal Services Monthly Fee. The term "Principal Services Monthly
------------------------------
Fee" shall have the meaning set forth in Section 6.1 hereof.
1.52 Principal Services Monthly Office Expense. The term "Principal
-----------------------------------------
Services Monthly Office Expense" shall have the meaning set forth in Section
6.1 hereof.
1.53 Principal Services Monthly Practice Expense. The term "Principal
-------------------------------------------
Services Monthly Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.54 Principal Services Office Expense. The term "Principal Services
---------------------------------
Office Expense" shall have the meaning set forth in Section 6.1 hereof.
1.55 Principal Services Revenue. The term "Principal Services Revenue"
--------------------------
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
1.56 Professional Services Revenues. The term "Professional Services
------------------------------
Revenues" shall mean the sum of (i) all professional fees actually recorded each
month on an accrual basis under GAAP (net of Adjustments) as a result of Medical
Services and related health care services
10
rendered by Physicians, Optometrists and Designated Allied Health Professionals,
whether rendered in an outpatient or inpatient setting, as well as customary
professional fees for the fitting of contact lenses, and (ii) Professional
Services Capitation allocated to Professional Service Revenues.
1.57 Regional Practices. The term "Regional Practices" is defined in
------------------
Section 3.1(a) hereof.
1.58 Representatives. The term "Representatives" shall mean a party's
---------------
officers, directors, employees, or other agents or representatives.
1.59 Xxxxx Act. The term "Xxxxx Act" shall refer to Section 1877 of
---------
the Social Security Act.
1.60 Subcontractor Costs. The term "Subcontractor Costs" shall mean the
-------------------
amounts payable to third parties for providing goods or medical services for
Capitation/Case Rate Revenues contracts.
1.61 Term. The term "Term" shall mean the initial term and any renewal
----
terms of this Management Services Agreement as described in Section 7.1 hereof.
ARTICLE II
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
2.1 Appointment. Practice hereby appoints Business Manager as its sole
-----------
and exclusive agent for the management and administration of the business
functions and business affairs of the medical practice, including the optical
dispensaries of Practice, and Business Manager hereby accepts such appointment,
subject at all times to the terms and conditions of this Management Services
Agreement.
2.2 Authority. Consistent with the provisions of this Management
---------
Services Agreement, Business Manager shall have the responsibility and
commensurate authority to provide Management Services to Practice. Subject to
the terms and conditions of this Management Services Agreement, Practice
expressly authorizes Business Manager to provide the Management Services in any
manner Business Manager deems appropriate to meet the day-to-day requirements of
the business functions of Practice. In connection with Business Manager's
provision of Management Services, Practice also expressly authorizes Business
Manager to negotiate and execute on behalf of Practice any and all contracts
related to the provision of such Management Services; provided, however that,
subject to Section 4.7 hereof, Business Manager shall have no authority to
negotiate and execute on behalf of Practice contracts that relate specifically
to the provision of Medical Services. The parties acknowledge and agree that
Practice, through its Physicians, shall be responsible for and shall have
complete authority, responsibility, supervision
11
and control over the provision of all Medical Services and other professional
health care services performed for patients, and that all diagnoses, treatments,
procedures and other professional health care services shall be provided and
performed exclusively by or under the supervision of Physicians in such manner
as such Physicians, in their sole discretion, deem appropriate. Business Manager
shall have and exercise absolutely no control or supervision over the provision
of Medical Services. Except as provided in Section 4.7 hereof, with respect to
any agreement relating specifically to Medical Services, and subject to the
approval of the Policy Board pursuant to Section 3.2(e), Practice shall, to the
extent practicable, give Business Manager and the Policy Board thirty (30) days'
prior notice of Practice's intent to execute any such agreement obligating
Practice to perform Medical Services or otherwise creating a binding legal
obligation on Practice to perform Medical Services.
2.3 Patient Referrals. Business Manager and Practice agree that the
-----------------
benefits afforded either party hereunder are not payment for, and are not in any
way contingent upon the referral, admission or any other arrangement for, the
provision of any item or service offered by Business Manager or Practice.
2.4 Internal Practice Matters. Except as otherwise provided herein,
-------------------------
matters involving the internal governance, control or finances of Practice,
including specifically the allocation of professional income among Physician-
Shareholders, Physician-Employees and Optometrists of Practice, and tax and
investment planning, shall remain the sole responsibility of Practice,
Physician-Shareholders, Physician-Employees and Optometrists.
2.5 Practice of Medicine. The parties acknowledge that Business
--------------------
Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of medicine. To the extent that
any act or service required to be performed by Business Manager hereunder should
be construed by a court of competent jurisdiction or by the Board of Medical
Examiners of the State of Illinois to constitute the practice of medicine,
Business Manager's requirement to perform that act or service shall be deemed
waived and unenforceable.
ARTICLE III
RESPONSIBILITIES OF THE POLICY BOARD
3.1 Formation and Operation of the Policy Board.
-------------------------------------------
(a) Structure of Policy Board. Practice hereby acknowledges that it
-------------------------
is one of a group of ophthalmology practices located in the St. Louis
Metropolitan Statistical Area (MSA No. 243) which is affiliated with Business
Manager (Practice and such other practices shall be collectively referred to
herein as "Regional Practices"). The Regional Practices and Business Manager
have established a Policy Board which is responsible for overseeing the overall
operations of the nonmedical aspects of each Regional Practice's facilities and,
subject to Section 3.3 hereof, certain medical issues. The Policy Board shall
consist of four (4) members, with each
12
of the Business Manager and Regional Practices designating two (2) members. Each
member of the Policy Board shall serve a one-year term. The Policy Board members
designated by the Regional Practices shall be Physician-Shareholders of a
Regional Practice. Except as otherwise expressly provided herein, the act of a
majority of the members of the Policy Board shall be the act of the Policy
Board.
(b) Appointment of Members. The Policy Board shall consist of the
----------------------
members set forth on Exhibit 3.1 attached hereto and incorporated herein.
-----------
Thereafter, annually and at least thirty (30) days prior to the commencement of
each calendar year, each of Business Manager and the Regional Practices shall
deliver to the Operating Board of Business Manager a list of two (2) designees
to the Policy Board to serve as members of the Policy Board for the upcoming
calendar year. In the event that either Business Manager or the Regional
Practices fail to deliver the list of designees by the required date, then such
party's representatives on the Policy Board shall remain the same for the
upcoming calendar year. Any vacancies created, whether by death, incapacity or
resignation of a designee, shall be filled by the party which appointed such
designee by no later than fifteen (15) business days after the date of receipt
by all of the Regional Practices of notice from Business Manager that such
vacancy exists and must be filled. If the applicable party shall fail to
designate a replacement member to the Policy Board within the required time
period, then the other party shall have the right to designate the replacement
member and such replacement member shall serve on the Policy Board until his or
her successor is duly appointed pursuant to this Section 3.1(b). In any case in
which the Regional Practices shall be required to designate a member or members
to the Policy Board, a previously appointed designee of the Regional Practices
shall convene a meeting or collect the written votes of the Representatives of
the Regional Practices to select such designee or designees. Each Regional
Practice shall be entitled to one vote per designee to be appointed and those
designees receiving a plurality of the votes shall serve as the representatives
of the Regional Practices on the Policy Board.
(c) Actions of the Policy Board. The Policy Board meetings shall be
---------------------------
held as mutually agreed, but at least semiannually, in St. Louis, Missouri.
Meetings may be called by any two (2) members of the Policy Board upon notice to
Business Manager. Notice of each such meeting, stating the place, date and hour
of the meeting, shall then be delivered by Business Manager to each member of
the Policy Board not less than seventy-two (72) hours prior to such meeting.
Meetings shall be open to any Physician-Shareholder and any officer, director or
employee (as designated by Business Manager) of Business Manager. Members of
the Policy Board may participate in a meeting by means of conference telephone.
Attendance at any meeting in person or by proxy, or participation in a meeting
by means of conference telephone, shall constitute a waiver of notice thereof.
Any action required to be taken at a meeting of the Policy Board may be taken
without a meeting and without a vote if a consent in writing, setting forth the
action to be taken, is signed by all of the members of the Policy Board, unless
such action is medical in nature, in which case such consent need be signed only
by all of the Physician members of the Policy Board.
13
3.2 Duties and Responsibilities of the Policy Board. The Policy Board
-----------------------------------------------
shall have the following duties, obligations and authority:
(a) Capital Improvements and Expansion. Subject to the items
----------------------------------
specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, any renovation and expansion plans and capital expenditures with
respect to the Office, or the priority of such capital expenditures, shall be
reviewed and approved by the Policy Board and shall be based upon economic
feasibility, physician support, productivity and then-current market conditions.
(b) Marketing and Advertising. The Policy Board shall explore
-------------------------
potential joint marketing and other advertising of the services performed at the
Regional Practices' facilities.
(c) Collection Policies. As a part of the annual operating budget, in
-------------------
consultation with Practice and Business Manager, the Policy Board shall review
and approve the collection policies for the Dispensary Business of, and for all
Medical Services and ancillary services provided by Practice.
(d) Provider and Payor Relationships. Subject to Sections 4.7 and 4.8
--------------------------------
hereof, decisions regarding the establishment or maintenance of relationships
with institutional health care providers and third party payors shall be
approved by the Policy Board in consultation with Practice and Business Manager.
The Policy Board shall review and approve such discounted fee schedules,
including capitated fee arrangements, and shall approve allocations of
Capitation/Case Rate Revenues.
(e) Strategic Planning. The Policy Board shall recommend long-term
------------------
strategic planning objectives for Practice; provided, however, that the Policy
Board shall not engage in recommending any horizontal marketing allocations
between practices.
(f) Physician and Optometrist Hiring. Subject to the items
--------------------------------
specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, the Policy Board shall recommend to Practice the number and type
of Physicians and Optometrists required for the efficient operation of
Practice's facilities. Practice shall have the right to accept or reject any
recommendation of the Policy Board on this matter and Practice shall retain the
number and type of Physicians and Optometrists as it shall deem necessary in its
sole discretion. The Policy Board shall review and approve any variations to
the restrictive covenants in any Employment Agreement.
(g) Fee Dispute Resolution. Upon written submission by Practice of a
----------------------
dispute concerning Management Fees, the Policy Board shall consider, develop and
attempt to implement a resolution of such dispute.
14
(h) Employee Relations. Upon submission by Practice or any Physician
------------------
or Optometrist of a written complaint or concern regarding any employee of
Business Manager performing services for Practice hereunder, the Policy Board
shall consider, develop and attempt to implement a resolution of such complaint
or concern.
(i) Grievance Referrals. The Policy Board shall consider and make
-------------------
recommendations to Practice regarding any disputes pertaining to matters not
specifically addressed in this Management Services Agreement as referred to it
by Practice.
3.3 Medical Decisions. Notwithstanding anything to the contrary
-----------------
contained in Section 3.2 above, all medical decisions addressed by the Policy
Board will be made solely by Physician members of the Policy Board.
ARTICLE IV
COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide all Management Services
which are necessary or appropriate for the day-to-day administration of the
nonmedical aspects of Practice's operations (including the Dispensary Business),
including, without limitation, those services set forth in this Article IV in
accordance with all laws, rules, regulations and guidelines applicable to the
provision of Management Services.
4.1 Office and Equipment.
--------------------
(a) Subject to Section 4.1(b) hereof, as necessary or appropriate, and
after taking into consideration the professional concerns of Practice, Business
Manager shall lease, acquire or otherwise procure an Office in a location or
locations reasonably acceptable to Practice and shall permit Practice to use the
Office. Any Office procured by Business Manager for use by Practice shall be
procured at commercially reasonable rates.
(b) In the event Practice is the lessee of the Office under a lease
with an unrelated and nonaffiliated lessor, Business Manager may require
Practice to assign such lease to Business Manager upon receipt of consent from
the lessor, and, in such event, Business Manager shall assume Practice's
obligations thereunder from and after the date of such assignment. Practice
shall use its best efforts to assist in obtaining the lessor's consent to the
assignment. Upon request, Practice shall execute any instruments and shall take
any acts that Business Manager deems necessary to accomplish the assignment of
the lease. Any expenses incurred in effectuating the assignment shall be an
Office Expense.
(c) Business Manager shall provide all nonmedical equipment, fixtures,
office supplies, furniture and furnishings reasonably deemed necessary by
Business Manager for the
15
operation of the Office and for the provision of Medical Services and the
operation of the Dispensary Business.
(d) Business Manager shall provide or cause to be provided (including
financing arrangements with respect thereto) all medical equipment reasonably
required by Practice.
(e) Business Manager shall be responsible for all necessary repair and
maintenance of the Office as an Office Expense, consistent with Business
Manager's responsibilities under the terms of any lease or other use
arrangement. Business Manager shall also be responsible for all necessary
repair, maintenance and replacement of all equipment relating to the Office,
except for any such repairs, maintenance and replacement necessitated by the
negligence or willful misconduct of Practice, its Physicians or other personnel
employed by Practice, in which event any such repair or replacement shall be a
Practice Expense and not an Office Expense.
4.2 Medical Supplies. Business Manager shall order, procure, purchase
----------------
and provide on behalf of, and as agent for, Practice all necessary and
reasonably desirable medical supplies and optical dispensary supplies and
inventory unless otherwise prohibited by federal and/or state law, and shall
appropriately respond to any reasonable inquiries or requests by Physicians for
the need to order or repair such supplies. Business Manager shall ensure that
the Office is adequately stocked at all times with medical supplies that are
reasonably necessary or appropriate for the operation of Practice and required
for the provision of Medical Services and optical dispensary supplies and
inventory that are reasonably necessary or appropriate for the operation of the
Dispensary Business. The ultimate oversight, supervision and ownership of all
medical supplies is and shall remain the sole responsibility of Practice. As
used in this Section 4.2, the term "medical supplies" shall mean all drugs,
pharmaceuticals, products, substances, items or devices whose purchase,
possession, maintenance, administration, prescription or security requires the
authorization or order of a licensed health care provider or requires a permit,
registration, certification or other governmental authorization held by a
licensed health care provider as specified under any federal and/or state law.
4.3 Support Services. Business Manager shall provide or arrange for
----------------
all printing, stationery, telephone, facsimile, office supplies, forms, postage,
duplication or photocopying services, and other support services as are
reasonably necessary or appropriate for the operation of the Office and the
provision of Medical Services and the operation of the Dispensary Business
therein.
4.4 Quality Assurance, Risk Management, and Utilization Review.
----------------------------------------------------------
Business Manager shall assist Practice in Practice's establishment and
implementation of procedures to ensure the consistency, quality, appropriateness
and medical necessity of Medical Services provided by Practice, and shall
provide administrative support for Practice's overall quality assurance, risk
management and utilization review programs. Business Manager shall use its
commercially reasonable efforts to perform these tasks in a manner to ensure the
confidentiality of, and the
16
privileged status afforded to, these programs and procedures to the fullest
extent allowable under state and federal law.
4.5 Licenses and Permits. Business Manager shall, on behalf of and in
--------------------
the name of Practice, coordinate all development and planning processes, and
assist in the application for, and use reasonable efforts to assist Practice in
obtaining and maintaining, all federal, state and local licenses, certifications
and regulatory permits required for, or in connection with, the operation of
Practice, the equipment located at the Office, and any optical dispensary of
Practice, other than those relating to the provision of Medical Services or the
administration of drugs by Physicians.
4.6 Personnel. Except as specifically provided in Section 5.2(b)
---------
hereof, Business Manager shall, consistent with the Budget, employ or otherwise
retain and shall be responsible for selecting, hiring, training, supervising and
terminating, all nonphysician personnel as Business Manager reasonably deems
necessary and appropriate for Business Manager's performance of its duties and
obligations under this Management Services Agreement. Business Manager shall
have sole responsibility for determining the salaries, providing employee
benefits, and for withholding any sums for income tax, unemployment insurance,
worker's compensation coverage, social security or any other withholding
required by applicable law or governmental requirement.
4.7 Contract Negotiations. Business Manager shall advise Practice with
---------------------
respect to and negotiate, either directly or on Practice's behalf, as
appropriate, all contractual arrangements with third parties as are reasonably
necessary and appropriate for Practice's provision of Medical Services and for
Practice's operation of the Dispensary Business, including, without limitation,
Managed Care Contracts. Practice hereby constitutes and appoints Business
Manager as Practice's agent for the purpose of negotiating and executing on
behalf of Practice and its Physicians any Managed Care Contract approved by the
Policy Board, as well as any modifications, extensions and renewals of such
Managed Care Contracts. Practice also designates Business Manager as Practice's
agent for the further purpose of giving and receiving notices required or
permitted to be given and received under such Managed Care Contracts. Any
notice received by Business Manager on behalf of Practice shall be transmitted
to Practice as soon as practicable. Business Manager may engage such
consultants as Business Manager deems necessary and appropriate to pursue and
negotiate Managed Care Contracts for Practice, and Practice authorizes Business
Manager to negotiate, for approval by the Policy Board, agreements for
Subcontractor Costs. Notwithstanding the foregoing, upon approval of the Policy
Board of any Managed Care Contract, Business Manager shall deliver a copy of
such contract to Practice (or a description of the principal terms and
conditions thereof) for its review and approval. Practice may accept or reject
any Managed Care Contract by delivering written notice to Business Manager
within five (5) days of its receipt of such contract (or description).
Practice's failure to respond within such five-day period shall be deemed an
acceptance of the Managed Care Contract for all purposes.
4.8 Billing and Collection. On behalf of and for the account of
----------------------
Practice, Business Manager shall (i) establish and maintain credit, billing and
collection policies and procedures, (ii) timely xxxx and collect all
professional and other fees for all billable Medical Services provided by
17
Practice, Physicians or Optometrists and for all goods sold by Practice in
connection with the Dispensary Business, all for application solely in
accordance with the Budget, and (iii) perform all cash management services on
behalf of Practice which Business Manager shall deem commercially reasonable.
Business Manager shall advise and consult with Practice regarding the fees for
Medical Services and ancillary services provided by Practice; it being
understood, however, that Practice shall establish the fees to be charged for
Medical Services and that Business Manager shall have no authority whatsoever
with respect to the establishment of such fees. In connection with the billing,
collection and cash management services to be provided hereunder, and throughout
the Term (and thereafter as provided in Section 7.3 hereof), Practice hereby
grants to Business Manager an exclusive special power of attorney and appoints
Business Manager as Practice's exclusive true and lawful agent and attorney-in-
fact, and Business Manager hereby accepts such special power of attorney and
appointment, for the following purposes:
(a) To xxxx Practice's patients, in Practice's name and on Practice's
behalf, for all billable Medical Services provided or arranged by Practice to
patients and for all goods sold by practice in connection with the Dispensary
Business, unless such billing would cause Practice to be in violation of the
Xxxxx Act, any state referral ban or any other applicable federal, state or
local law or regulation;
(b) To xxxx, in Practice's name and on Practice's behalf, all claims
for payment, reimbursement or indemnification from Blue Cross/Blue Shield,
insurance companies, Medicare, Medicaid and all other third-party payors or
fiscal intermediaries for all covered billable Medical Services provided or
arranged by Practice to patients and for all goods sold by Practice in
connection with the Dispensary Business, unless such billing would cause
Practice to be in violation of the Xxxxx Act, any state referral ban or any
other applicable federal, state or local law or regulation;
(c) Subject to applicable law, and excluding receivables for Medicare
and Medicaid Services, to collect and receive, as the Agent of Practice, in
Business Manager's name and for Business Manager's account all accounts
receivable of Practice purchased by Business Manager, including, without
limitation, Purchased Receivables (as defined in Section 6.5 hereof) and to
deposit such collections in an account selected by Business Manager and
maintained in Business Manager's name;
(d) Subject to subparagraph (e) below, to collect and receive, in
Practice's name and on Practice's behalf, all accounts receivable generated by
such xxxxxxxx and claims for reimbursement that have not been purchased by
Business Manager, and to administer such accounts at its reasonable discretion
on Practice's behalf, which administration shall include, without limitation,
(i) extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) with Practice Consent, discharging or releasing the obligors of
any such accounts; (iii) with Practice Consent, suing, assigning or selling at a
discount such accounts to collection agencies; or (iv) with Practice Consent,
taking other measures to require the payment of any such accounts.
18
(e) To collect all government program receivables after such amounts
have been received and deposited into an account maintained in Practice's name
and over which Practice has sole control. Once deposited into such account,
Practice hereby authorizes the government receivables to be automatically swept
into the Depository Account.
(f) To deposit all amounts collected into the Depository Account which
shall be in the name of Business Manager, but in which Business Manager shall
account for such funds on a separate and distinct basis from any other funds
deposited into such account by other Regional Practices; moreover, Practice
shall retain all rights in and to such deposited funds irrespective of their
deposit into the Depository Account. The parties hereto acknowledge and agree
that Business Manager is performing cash management services on behalf of
Practice by collecting all such amounts in the Depository Account and making any
distributions, withdrawals and payments therefrom as required in this Management
Services Agreement. The parties further acknowledge and agree that in
performing such services for Practice, Business Manager is acting as Practice's
agent pursuant to the power of attorney set forth in this Section 4.8, and,
except as expressly provided herein, all rights to such funds shall remain with
Practice. Practice covenants to transfer and deliver to Business Manager for
deposit into Depository Account, or covenants that Practice itself will make
such deposit of, all funds received by Practice from patients or third party
payors for Medical Services provided on or after the Effective Date and for all
goods sold in connection with the Dispensary Business on or after the Effective
Date. Upon receipt by Business Manager of any funds from patients or third
party payors or from Practice pursuant hereto for Medical Services provided on
or after the Effective Date or for goods sold in connection with the Dispensary
Business on or after the Effective Date, Business Manager shall deposit same
into the Depository Account as soon as commercially practicable. In the manner
set forth in Section 4.9 hereof, Business Manager shall disburse such deposited
funds to creditors and other persons on behalf of Practice, maintaining records
of such receipt and disbursement of funds.
(g) To take possession of, and endorse in the name of Practice, solely
for deposit into the Depository Account, any notes, checks, money orders,
insurance payments and any other instruments received as payment for Medical
Services and ancillary services and for goods sold in connection with the
Dispensary Business.
(h) To sign checks, drafts, bank notes or other instruments on behalf
of Practice, and to make withdrawals from the Depository Account for payments
specified in this Management Services Agreement or as requested from time to
time by Practice.
Throughout the Term (and as provided in Section 7.3 hereof), Practice hereby
grants to Business Manager an exclusive special power of attorney for the
purposes stated herein and appoints Business Manager as Practice's exclusive
true and lawful agent and attorney-in-fact, and Business Manager hereby accepts
such special power of attorney and appointment, to deposit into the Depository
Account as and when received all funds, fees and revenues generated from
Practice's provision of Medical Services and ancillary services on or after the
Effective Date and collected by Business Manager and for all goods sold by
Practice in connection with the Dispensary
19
Business on or after the Effective Date and collected by the Business Manager,
and to make withdrawals from Depository Account solely for payments specified in
this Management Services Agreement, including any Preexisting Obligation
Payments directly affecting property used in or relating to the Office, and/or
as requested from time to time by Practice. Upon request of Business Manager,
Practice shall execute and deliver to the financial institution where the
Depository Account is maintained, such additional documents or instruments as
may be necessary to evidence or effect the special and limited power of attorney
granted to Business Manager by Practice pursuant to this Section 4.8. The
special and limited power of attorney granted herein shall be coupled with an
interest and shall be irrevocable during the term hereof, except with Business
Manager Consent. The irrevocable power of attorney shall expire on the later of
the termination of this Management Services Agreement, the collection, sale or
release of all accounts receivable purchased by Business Manager, and the
payment of all Management Fees due to Business Manager as of such date pursuant
to Section 6.2 hereof. If Business Manager assigns this Management Services
Agreement in accordance with its terms, then Practice shall execute a power of
attorney in favor of the assignee and in the form of Exhibit 4.8 attached
-----------
hereto.
4.9 Priority of Payments. As of the Effective Date, all revenue of
--------------------
Practice derived from Medical Services and ancillary services provided on and
after the Effective Date and from sales of goods in connection with the
Dispensary Business on and after the Effective Date (collectively, "Post-
Effective Date Revenues") shall be deposited into the Depository Account (or, in
the alternative, identified or segregated in such a manner as to permit the
Post-Effective Date Revenues to be deposited into the Depository Account when
and as directed by Business Manager) for distribution in accordance with this
Section 4.9. From and after the Effective Date, each month Business Manager
shall apply, or retain on behalf of Practice, funds that are in the Depository
Account in the following order of priority:
(a) to Business Manager, in satisfaction of Office Expense,
except the Base Management Fee;
(b) as directed by Practice, in satisfaction of Monthly Practice
Expense; and
(c) to Business Manager, in satisfaction of the Base Management
Fee.
4.10 Fiscal Matters.
--------------
(a) Annual Budget.
-------------
(i) Initial Budget. The initial Budget shall be agreed upon by
--------------
the parties before the execution of this Management Services Agreement and
shall be attached hereto and made a part hereof.
20
(ii) Process for Succeeding Budgets. Annually and at least
------------------------------
forty-five (45) days prior to the commencement of each fiscal year of
Business Manager, Business Manager, in consultation with the Policy Board,
shall prepare and deliver to Practice for Practice's approval a proposed
Budget, setting forth an estimate of Practice's revenues and expenses for
the upcoming fiscal year (including, without limitation, the Dispensary
Business Budgeted Practice Expense, the Principal Services Budgeted
Practice Expense, the Dispensary Business Monthly Fee and the Principal
Services Monthly Fee). Practice shall review the proposed Budget and either
approve the proposed Budget or request any changes within fifteen (15) days
after receiving the proposed Budget. The Budget shall be adopted upon
mutual agreement of Business Manager and Practice after reasonable review
and comment and may be revised or modified only in consultation with
Business Manager. Once approved by both Business Manager and Practice, each
succeeding Budget shall be attached hereto and made a part hereof.
(iii) Deadlock. In the event the parties are unable to agree on
--------
a Budget by the beginning of the fiscal year (a "Deadlock"), then until an
agreement is reached, the Budget for the prior year shall be deemed to be
adopted as the Budget for the current year. Notwithstanding the foregoing,
the Policy Board, in its judgment, may impose reductions on a consistent
basis to each of Budgeted Practice Expense and the Monthly Fee in the event
that the Policy Board makes a determination that general economic
conditions and/or regulatory developments adversely affecting the Medical
Services provided by Practice or the Dispensary Business render the present
levels of the Budgeted Practice Expense and the Monthly Fee impractical.
For purposes of illustration only, and without limitation, such general
economic conditions and/or regulatory developments could include proposed
or actual cuts in Medicare/Medicaid reimbursement for procedures that are a
material component of the Medical Services performed by Practice. Following
resolution of any Deadlock, Budgeted Practice Expense and the Monthly Fee
(and the corresponding Monthly Practice Expense and Management Fee as
calculated in Article VI hereof) shall be recomputed retroactive to the
beginning of the fiscal year based upon the parameters agreed to in the new
Budget, and appropriate adjustments in payments owing to Practice and/or
Business Manager, as the case may be, resulting from such recomputation
shall be made promptly. Notwithstanding the foregoing, if after six months
the parties are still unable to agree on a Budget, then the dispute shall
be submitted to arbitration in accordance with Section 8.6 hereof. Until
the arbitrator renders a judgment or the dispute is otherwise resolved, the
adjustments described in this Section 4.10(a)(iii) shall continue to apply.
Notwithstanding anything to the contrary contained herein, nothing in this
Section 4.10(a)(iii) shall affect the payment of Office Expense, which
shall be paid in full in accordance with the provisions of this Agreement.
For purposes of this Section 4.10(iii) and (iv), "Budgeted Practice
Expense" and "Monthly Fee" shall refer to either Principal Services or
Dispensary Business, as applicable.
(iv) Modifications to Budget. The Budget may be modified at any
-----------------------
time by mutual agreement of Practice and Business Manager, which
modifications may include,
21
without limitation, modifications to the Monthly Fee and Budgeted Practice
Expense in the event that additional Physicians or Optometrists become
affiliated with Practice during the calendar year.
(b) Accounting and Financial Records. Business Manager shall
--------------------------------
establish and administer adequate accounting procedures, controls and systems
for the development, preparation and safekeeping of administrative and financial
records in connection with the performance of its duties and responsibilities
hereunder, all of which shall be prepared and maintained in accordance with GAAP
and applicable laws and regulations. Business Manager shall provide Practice
with the following:
(i) Monthly Reports. As soon as practicable, and in any event
---------------
no later than fifteen (15) days after the end of each calendar month,
Business Manager shall furnish to Practice a monthly statement reflecting
the computation for the Dispensary Business Monthly Practice Expense,
Principal Services Monthly Practice Expense, the Dispensary Business
Management Fee and the Principal Services Management Fee. Within forty-five
(45) days after the end of each month, Business Manager shall provide
Practice with a monthly statement reflecting the accounting activity for
Practice prepared in accordance with GAAP.
(ii) Annual Financial Statements. As soon as practicable, and
---------------------------
in any event no later than one hundred twenty (120) days after the end of
each calendar year, Business Manager shall furnish to Practice audited
financial statements, consisting of a balance sheet and related statements
of income, changes in members' equity and cash flow, all of which (taken as
a whole) shall reflect the financial status of Business Manager as of the
end of such calendar year, and shall be prepared in accordance with GAAP
consistently applied.
(c) Review of Expenditures. A Representative of Practice shall have
----------------------
the right to review all expenditures related to the operation of Practice, but
Practice shall not have the power to prohibit or invalidate any expenditure that
is consistent with the Budget.
(d) Tax Matters. Business Manager and Practice acknowledge and agree
-----------
that, to the extent that any of the services to be provided by Business Manager
hereunder may be subject to any state sales and use taxes, Business Manager may
have a legal obligation to collect such taxes from Practice and to remit same to
the appropriate tax collection authorities. Practice agrees to pay, in addition
to the payment of the Management Fee, the applicable state sales and use taxes
in respect of the portion of the Management Fees attributable to such services.
22
4.11 Reports and Records.
-------------------
(a) Medical Records. Business Manager shall advise and assist
---------------
Practice as to the establishment, monitoring and maintenance of procedures and
policies for the timely creation, preparation, filing and retrieval of all
medical records generated by Practice in connection with Practice's provision of
Medical Services; and, subject to applicable law, shall ensure that medical
records are promptly available to Physicians and any other appropriate persons.
All such medical records shall be retained and maintained in accordance with all
applicable state and federal laws. All medical records are, and will remain, the
property and Confidential Information of Practice and its patients.
(b) Other Reports and Records. Business Manager shall create, prepare
-------------------------
and file such additional reports and records as are reasonably necessary or
appropriate for Practice's provision of Medical Services, and shall be prepared
to analyze and interpret such reports and records upon the request of Practice.
4.12 Recruitment of Physicians and Optometrists. Upon Practice's
------------------------------------------
request, Business Manager shall perform all administrative services reasonably
necessary or appropriate to recruit potential Physicians and Optometrists to
become employees of Practice. Business Manager shall provide Practice with
model agreements to document Practice's employment, retention or other service
arrangements with such individuals. It is and will remain the sole and complete
responsibility of Practice to interview, select, contract with, supervise,
control and terminate all Physicians and Optometrists performing Medical
Services or other professional services, and Business Manager shall have no
authority whatsoever with respect to such activities.
4.13 Confidential and Proprietary Information.
----------------------------------------
(a) Business Manager will not disclose any Confidential Information of
Practice to other persons without Practice Consent. Business Manager will not,
directly or indirectly, use such Confidential Information in a manner
detrimental to Practice, and Business Manager will keep such Confidential
Information confidential and will ensure that its affiliates and advisors who
have access to such Confidential Information comply with these nondisclosure
obligations. Notwithstanding the foregoing, Business Manager may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Management Services Agreement,
it being understood and agreed to by Business Manager that such Representatives
will be informed of the confidential nature of the Confidential Information,
will agree to be bound by this Section 4.13, and will be directed by Business
Manager not to disclose to any other person any Confidential Information.
Business Manager shall be responsible for any breach of this Section 4.13 by its
affiliates, advisors or Representatives. If Business Manager is required (by
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or similar legal processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Practice
or its affiliates, advisors or Representatives, Business Manager will (i)
provide Practice with prompt prior notice thereof and
23
copies, if possible, and, if not, a description, of the request and the
Confidential Information requested or required to be produced so that Practice
may seek an appropriate protective order or other protections to enforce the
provisions of this Section 4.13, or, alternatively, waive compliance with the
provisions of this Section 4.13, and (ii) consult with Practice as to whether
Practice should attempt to resist or narrow such request. If Business Manager is
compelled to disclose or produce Confidential Information concerning Practice
or, in the alternative, be liable for contempt or suffer other censure or
penalty, Business Manager may disclose or produce such Confidential Information
without liability hereunder; provided, however, that Business Manager shall give
Practice written notice of the Confidential Information to be so disclosed or
produced, and a copy of the request therefor, as far in advance of its
disclosure or production as is reasonably practicable and shall use its
commercially reasonable efforts to obtain, to the greatest extent practicable,
an order or other reliable assurance that confidential treatment will be
accorded to such Confidential Information so required to be disclosed or
produced.
(b) Notwithstanding clause (a) above, Business Manager may share,
subject to the restrictions of this Section 4.13(b), with other professional
corporations, associations, medical practices or health care delivery entities,
the statistics of Practice, including utilization review data, quality assurance
data, cost data, outcomes data or other Practice data. Business Manager may
disclose such statistics to other medical groups with whom Business Manager has
a management relationship, to managed care providers or other third party payors
for the purpose of obtaining or maintaining third party payor contracts, or to
financial analysts and underwriters. In addition, Business Manager may disclose
all Practice-related information necessary or desirable in connection with any
public or private offering of any security of Business Manager, but no such data
will disclose or divulge patient identifying information.
4.14 Insurance.
---------
(a) Business Manager's Insurance. Throughout the Term, Business
----------------------------
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof and in a manner
consistent with good business practice, appropriate workers' compensation
coverage for Business Manager's employed personnel provided to Practice pursuant
to this Management Services Agreement, and professional, casualty and
comprehensive general and vicarious liability insurance covering Business
Manager, the Office, Business Manager's personnel and all of Business Manager's
equipment in such amounts, on such basis and upon such terms and conditions as
Business Manager deems appropriate. Upon the request of Practice, Business
Manager shall provide Practice with a certificate evidencing such insurance
coverage and Business Manager shall use commercially reasonable efforts to list
Practice as an additional insured. Business Manager may also carry key person
life and disability insurance on any Physician in amounts determined reasonable
and sufficient by Business Manager, the expense of which shall be an Office
Expense only upon the express written permission of Practice. Business Manager
shall be the owner and beneficiary of any such insurance.
24
(b) Professional and General Liability Insurance of Practice.
--------------------------------------------------------
Business Manager shall obtain and maintain, on behalf of Practice and as an
Office Expense, professional and comprehensive general liability insurance
covering Practice and each of Physicians and Optometrists. The comprehensive
general liability coverage shall be in the minimum amount of one million dollars
($1,000,000) for each occurrence and two million dollars ($2,000,000) annual
aggregate; and professional liability coverage shall be in the minimum amount of
one million dollars ($1,000,000) for each occurrence and three million dollars
($3,000,000) annual aggregate, or any other higher minimum coverage requirements
established by law. The insurance policy or policies shall provide for at least
(30) days' advance written notice to Business Manager and Practice from the
insurer as to any alteration of coverage, cancellation or proposed cancellation
for any cause. Business Manager shall cause to be issued to Practice a
certificate of such insurer or insurers reflecting such coverage and either
party hereunder shall provide written notice to the other party promptly upon
receipt of any notice canceling or proposing to cancel the insurance coverage of
Practice, or any Physician or Optometrist for any reason. Upon the termination
of this Management Services Agreement for any reason, Practice shall obtain and
maintain as a Practice Expense "tail" professional liability coverage, in the
amounts specified in this Section 4.14(b) for an extended reporting period of
ten years, and Practice shall be responsible for paying all premiums for "tail"
insurance coverage.
(c) Health Insurance. Business Manager shall, to the extent such
----------------
coverage is available from Business Manager's current insurance carrier, make
available to, and accessible by, Physicians and Optometrists health benefits
under any health benefit program maintained by Business Manager. If any
Physician or Optometrist elects such coverage, subject to Section 1.30(b), the
cost of such coverage shall be deemed an Office Expense for any Physician-
Employee or Optometrist, and a Practice Expense for any Physician-Shareholder.
4.15 No Warranty. Practice acknowledges that Business Manager has not
-----------
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of revenue or income to Practice.
ARTICLE V
COVENANTS AND RESPONSIBILITY OF PRACTICE
5.1 Organization and Operation. Practice, as a continuing condition of
--------------------------
Business Manager's obligations under this Management Services Agreement, shall
at all times during the Term be and remain legally organized and operated to
provide Medical Services in a manner consistent with all state and federal laws.
(a) Employment of Physicians.
------------------------
(i) Practice shall operate and maintain within the Practice
Territory a full-time practice of medicine specializing in the provision of
Medical Services, and shall
25
maintain and enforce employment agreements in the form of Exhibit 5.1 (the
-----------
"Employment Agreements") with Physician-Shareholders, including, without
limitation, the initial Physician-Shareholders identified in Exhibit 5.1A.
------------
Practice shall not amend the Employment Agreements in any material manner
or waive any material rights of Practice thereunder without the prior
written approval of Business Manager. Recognizing that Business Manager
would not have entered into this Management Services Agreement but for
Practice's covenant to maintain Employment Agreements with Physician-
Shareholders, and subject to subparagraph (ii) below, Practice shall pay to
Business Manager, in addition to the Management Fee, any damages,
compensation, payment or settlement received by Practice from a Physician
who terminates his or her Employment Agreement without Physician Cause (as
defined in the Employment Agreement) or whose Employment Agreement is
terminated by Practice for Practice Cause (as defined in the Employment
Agreement) or for any other material breaches of the Employment Agreements
(such damages being collectively referred to herein as the "Business
Manager Damages").
(ii) Notwithstanding the provisions of Section 5.1(a)(i) above,
or any other provision to the contrary contained herein, Practice shall
have a period of not less than forty-five (45) days following the
occurrence of any event described in Section 5.1(a)(i) above that entitles
Business Manager to receive Business Manager Damages to take such actions
to cure the breach of any Employment Agreement by a Physician-Shareholder
(which actions to cure may, without limitation, include retention of
additional Physicians to replace the levels of revenue and income
previously generated by the Physician causing such breach); provided,
however, that the determination of whether or not such breach has been
cured shall be made by Business Manager in its good faith discretion, and
provided further, that Practice shall in no event be permitted to cure any
breach that results from a breach by a Physician-Shareholder of any non-
competition provision contained in any Employment Agreement.
(b) Corporate Governance. Throughout the Term of this Management
--------------------
Services Agreement, Practice shall maintain and enforce written Buy-Sell
Agreements with Physician-Shareholders specified in Exhibit 5.1A, and shall
------------
cause all new shareholders of Practice to execute such agreements prior to
becoming a shareholder in Practice. As a condition precedent to the execution
of this Management Services Agreement, the Physician-Shareholders have amended
their existing Buy-Sell Agreement, or executed a new Buy-Sell Agreement, which
addresses the concepts set forth on Exhibit 5.1B to the satisfaction of Business
------------
Manager and its counsel. Practice will also maintain its articles of
incorporation and by-laws in accordance with applicable law, including, without
limitation, any laws governing the transferability of shares from disqualified
shareholders to qualified shareholders. Throughout the Term of this Management
Services Agreement, Practice shall not, without the prior written consent of
Business Manager, amend such documents or waive any rights thereunder in any
manner.
26
5.2 Practice Personnel.
------------------
(a) Physician Personnel and Optometrists. Practice shall retain the
------------------------------------
number of Physicians and Optometrists as is reasonably necessary and appropriate
in the sole discretion of Practice for the provision of Medical Services. Each
Physician shall hold and maintain a valid and unrestricted license to practice
medicine in the state of Illinois, and shall be competent, in the reasonable
opinion of Practice, in the practice of ophthalmology. Each Optometrist shall
hold and maintain a valid and unrestricted license to practice optometry in the
state of Illinois, and shall be competent, in the reasonable opinion of
Practice, in such practice. Practice shall enter into and maintain with each
such retained Physician and Optometrist a written employment agreement
substantially in the form of either Exhibit 5.1 for Physician-Shareholders or
-----------
Exhibit 5.2A for Physician-Employees. Practice will neither commit nor permit
------------
to remain outstanding any breach of such employment agreement that would allow
any Physician or Optometrist to terminate for cause. Regardless of whether the
compensation is a Practice Expense or Office Expense, Practice shall be
responsible for paying the compensation and benefits, as applicable, for all
Physicians, Optometrists, and any other physician personnel or other contracted
or affiliated physicians, and for withholding any sums for income tax,
unemployment insurance, social security or any other withholding required by
applicable law. If requested, Business Manager shall, on behalf and at the
direction of Practice, administer the compensation with respect to such
individuals in accordance with the written agreement between Practice and each
Physician or Optometrist. Business Manager shall neither control nor direct any
Physician or Optometrist in the performance of Medical Services for patients.
(b) Nonphysician Personnel. Business Manager shall retain all
----------------------
nonphysician personnel necessary for the operation of Practice and such
nonphysician personnel shall be under Business Manager's control, supervision
and direction in the performance of their duties, except for (i) Designated
Allied Health Professionals, who shall perform their duties under the
supervision and control of Physicians, consistent with the requirements
necessary to meet the "incident to" provisions of the Medicare program, and (ii)
opticians and others providing services in Practice's optical dispensary, who
shall perform their duties under the supervision and control of Physicians and
Optometrists.
5.3 Professional Standards. As a continuing condition of Business
----------------------
Manager's obligations hereunder, each Physician, Optometrist and any other
physician personnel retained by Practice to provide Medical Services must comply
with, be controlled and governed by, and otherwise provide Medical Services in
accordance with, all applicable federal, State and municipal laws, rules,
regulations, ordinances and orders, and the ethical standards and standards of
care of the medical community wherein the principal office of each Physician or
Optometrist is located. In addition, each Physician and any other physician
personnel retained by Practice to provide Medical Services must obtain and
retain appropriate admitting privileges at local area hospitals or health care
facilities which are reasonably adequate for Physician to perform Medical
Services. Procurement of temporary staff privileges pending the completion of
the medical staff approval
27
process shall satisfy this provision, provided Physician actively pursues full
admitting privileges and actually receives full admitting privileges within a
reasonable time.
5.4 Medical Services. Practice shall use reasonable efforts to ensure
----------------
that Physicians and Optometrists are available to provide Medical Services to
patients. In the event that Physicians or Optometrists are not available to
provide the relevant Medical Services coverage, Practice shall engage and retain
locum tenens coverage. Physicians and Optometrists retained on a locum tenens
----- ------ ----- ------
basis shall meet all of the requirements of Section 5.3 hereof, and the cost of
providing locum tenens coverage shall be an Office Expense, unless such locum
----- ------ -----
tenens coverage is attributable to a Physician-Shareholder exceeding the maximum
------
amount of vacation, personal and educational leave days allowable under such
Physician-Shareholder's Employment Agreement, in which case the cost of such
coverage shall be a Practice Expense. With the assistance of Business Manager,
Practice, Physicians and Optometrists shall be responsible for scheduling the
relevant coverage of all medical and eye-related procedures. Practice shall use
its best efforts to develop and promote Practice.
5.5 Peer Review/Quality Assurance. Practice shall adopt a peer
-----------------------------
review/quality assurance program to monitor and evaluate the quality and cost-
effectiveness of Medical Services provided by Physicians and Optometrists of
Practice. Upon request of Practice, Business Manager shall provide
administrative assistance to Practice in performing its peer review/quality
assurance activities, but only if such assistance can be provided in a manner
consistent with maintaining the confidentiality and privileged status of the
processes and actions of the peer review/quality assurance process of Practice.
5.6 Confidential and Proprietary Information. Practice will not
----------------------------------------
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization. Such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
Practice will keep such Confidential Information confidential and will ensure
that its affiliates and advisors who have access to such Confidential
Information comply with these nondisclosure obligations. Notwithstanding the
foregoing, Practice may disclose Confidential Information to those of its
Representatives who need to know Confidential Information for the purposes of
this Management Services Agreement, it being understood and agreed to by
Practice that such Representatives will be informed of the confidential nature
of the Confidential Information, will agree to be bound by this Section 5.6, and
will be directed by Practice not to disclose to any other person any
Confidential Information. Practice shall be responsible for any breach of this
Section 5.6 by its affiliates, advisors or Representatives. If Practice is
required (by interrogatories, requests for information or documents, subpoenas,
civil investigative demands or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its affiliates, advisors or Representatives, Practice will (i)
provide Business Manager with prompt prior notice thereof and copies, if
possible, and, if not, a description, of the request and the Confidential
Information requested or required to be produced so that Business Manager may
seek an appropriate protective order or other protections to enforce the
provisions of this Section 5.6,
28
or, alternatively, waive compliance with the provisions of this Section 5.6 and
(ii) consult with Business Manager as to the advisability of Business Manager's
taking of legally available steps to resist or narrow such request. Practice
further agrees that if, in the absence of a protective order or the receipt of a
waiver hereunder, Practice is nonetheless, in the written opinion of its legal
counsel, compelled to disclose or produce Confidential Information concerning
Business Manager to any tribunal or to stand liable for contempt or suffer other
censure or penalty, Practice may disclose or produce such Confidential
Information to such tribunal legally authorized to request and receive such
Confidential Information without liability hereunder; provided, however, that
Practice shall give Business Manager written notice of the Confidential
Information to be so disclosed or produced, and a copy of the request therefor,
as far in advance of its disclosure or production as is practicable and shall
use its best efforts to obtain, to the greatest extent practicable, an order or
other reliable assurance that confidential treatment will be accorded to such
Confidential Information so required to be disclosed or produced.
5.7 Noncompetition. Practice hereby recognizes and acknowledges that
--------------
Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Management Services Agreement and
that in the process of providing services under this Management Services
Agreement, Practice will be privy to financial and Confidential Information of
Business Manager and other Regional Practices, to which Practice would not
otherwise be exposed. The parties also recognize that the services to be
provided by Business Manager will be feasible only if Practice operates an
active practice to which Physicians associated with Practice devote their full
professional time and attention. Practice agrees and acknowledges that the
noncompetition covenants described hereunder are necessary for the protection of
Business Manager, and that Business Manager would not have entered into this
Management Services Agreement without the following covenants:
(a) During the Term of this Management Services Agreement and except
for the performance of Medical Services and ancillary services at the Office as
contemplated by this Management Services Agreement or as expressly agreed to by
Business Manager in writing, Practice shall not establish, operate or provide
Medical Services at a medical office, clinic or other health care facility
anywhere within the Practice Territory. During the Term of this Management
Services Agreement and except for the operation of the Dispensary Business at
Offices contemplated by, or subject to, this Management Services Agreement or as
expressly agreed to by Business Manager in writing, Practice shall not
establish, operate or engage in a Dispensary Business at any other office or
facility.
(b) Except as specifically agreed to by Business Manager in writing,
Practice commits and agrees that during the Term of this Management Services
Agreement and for a period of five (5) years from the termination date of this
Management Services Agreement, except in the event Practice terminates this
Management Services Agreement for cause pursuant to Section 7.2(b) hereof,
Practice shall not directly or indirectly own (excluding ownership of less five
percent (5%) of the equity of any publicly traded entity), manage, operate,
control, or otherwise
29
be associated with, lend funds to, lend its name to, or maintain any interest
whatsoever in any enterprise (i) having to do with the provision, distribution,
promotion or advertising of any type of management or administrative services or
products to third parties in competition with Business Manager; and/or (ii)
offering any type of service or product in the Practice Territory to third
parties similar to those offered by Business Manager to Practice.
Notwithstanding the above restriction, nothing herein shall prohibit Practice or
any of its holders from providing management and administrative services to its
or their own medical practices after the termination of this Management Services
Agreement.
(c) The written Employment Agreements described in Section 5.1 hereof
shall contain covenants of Physician-Shareholder whereby they agree not to
compete with Practice within the Practice Territory for one (1) year after
termination of the employment agreement, except in the event Physician
terminates such agreement for Physician Cause or certain buyout rights are
exercised.
(d) Practice shall obtain and enforce formal written agreements with
Physician-Employees and Optometrists in the form of Exhibit 5.2A, pursuant to
------------
which the employees agree not to compete with Practice within the Practice
Territory for one (1) year after termination of the employment agreement, except
in the event Physician terminates such agreement for Physician Cause.
(e) Practice understands and acknowledges that the provisions in
Section 5.6 hereof and this Section 5.7 are designed to preserve the goodwill of
Business Manager and the goodwill of the individual Physicians and Optometrists
of Practice. Accordingly, if Practice breaches any obligation of Section 5.6
hereof or this Section 5.7, in addition to any other remedies available under
this Management Services Agreement at law or in equity, Business Manager shall
be entitled to enforce this Management Services Agreement by injunctive relief
and by specific performance of the Management Services Agreement, such relief to
be without the necessity of posting a bond, cash or otherwise. Additionally,
nothing in this paragraph shall limit Business Manager's right to recover any
other damages to which it is entitled as a result of Practice's breach. If any
provision of the covenants herein is held by a court of competent jurisdiction
to be unenforceable due to an excessive time period, geographic area or
restricted activity, the covenant shall be reformed to comply with such time
period, geographic area or restricted activity that would be held enforceable.
5.8 Name, Trademark. Practice represents and warrants that Practice
---------------
conducts its professional practice under the name of, and only under the name of
"Illinois Eye Specialists," that such name is the name of Practice under state
law, and that Practice is the licensee of such name under the Contribution and
Exchange Agreement. Practice covenants and promises that, without the prior
written consent of Business Manager, Practice will not:
(a) take any action or omit to take any action that would result in
the change or loss of the name;
30
(b) license, sell, give or otherwise transfer the name, or the right
to use the name, to any medical practice, physician, professional corporation or
any other entity; or
(c) cease conducting the professional practice of Practice under the
name.
5.9 Medical Advisory Board. The Operating Board of Business Manager has
----------------------
appointed a medical advisory board (the "Medical Advisory Board") to provide a
general forum for review and analysis of medical and clinical issues affecting
the Regional Practices and all other medical practices with which Business
Manager has entered into a Management Services Agreement or similar agreement.
The Medical Advisory Board consists of at least three Doctors of Ophthalmology,
one of whom is designated as the "Medical Director," and may include, at the
discretion of the Operating Board of Business Manager, one or more Doctors of
Optometry, Registered Nurses or other health care professionals. The Vice
President Clinical Operations of Business Manager, and/or such other designee as
Business Manager shall select, attends meetings of the Medical Advisory Board on
a consulting basis. Members of the Medical Advisory Board serve for one-year
terms and are appointed or re-appointed for such term during the first meeting
of the Operating Board of Business Manager held for each calendar year. The
Operating Board of Business Manager may name additional members, remove any
member, or fill any vacancy created by the resignation, death or disability of
any member, of the Medical Advisory Board during any duly called meeting of such
Operating Board. Notwithstanding anything to the contrary contained herein, the
Medical Advisory Board will serve in a solely advisory capacity and the ultimate
authority over medical decisions affecting Practice shall reside with Practice's
Physician-Shareholders.
5.10 Indemnification of Business Manager. Practice shall hold Business
-----------------------------------
Manager, its Affiliates, Representatives, successors and assigns and each of
them harmless from and against any and all losses, damages, fines, costs,
claims, judgments, proceedings, expenses or liabilities (including, without
limitation, reasonable attorneys' fees, paralegal fees, and costs and expenses
thereof) arising out of, or attributable to, or which result from any claim of a
third party with respect to the operation of the Dispensary Business or the
performance of Medical Services performed by Practice (including, without
limitation, malpractice claims), except to the extent that any damages or losses
are attributable to the negligence, gross negligence or willful misconduct of
Business Manager or its employees and agents.
ARTICLE VI
FINANCIAL ARRANGEMENT
6.1 Definitions.
-----------
31
(a) Dispensary Business Budgeted Office Expense. The term "Dispensary
-------------------------------------------
Business Budgeted Office Expense" shall mean, for any month, the Dispensary
Business Office Expense (other than the Dispensary Business Management Fee)
established in the Budget for such month.
(b) Dispensary Business Budgeted Practice Expense. The term
---------------------------------------------
"Dispensary Business Budgeted Practice Expense" shall mean, for any month, the
Dispensary Business Practice Expense (as defined in the Budget) established in
the Budget for such month.
(c) Dispensary Business Budgeted Revenue. The term "Dispensary
------------------------------------
Business Budgeted Revenue" shall mean, for any month, the Dispensary Business
Revenue established in the Budget for such month.
(d) Dispensary Business Management Fee. The term "Dispensary Business
----------------------------------
Management Fee" shall be, for any month, the * , except in the event that
either (i) * or (ii) * , in which case the "Dispensary Business
Management Fee" for such month shall be * .
(e) Dispensary Business Monthly Fee. The term "Dispensary Business
-------------------------------
Monthly Fee" shall be for any month, the * for such month.
(f) Dispensary Business Monthly Office Expense. The term "Dispensary
------------------------------------------
Business Monthly Office Expense" for any month shall mean the amount of
Dispensary Business Budgeted Office Expense for such month, plus or minus any
difference between (i) the actual Dispensary Business Office Expense incurred by
or on behalf of Practice for the previous month (other than the Dispensary
Business Management Fee) and (ii) Dispensary Business Budgeted Office Expense
for the previous month.
(g) Dispensary Business Monthly Practice Expense. The term
--------------------------------------------
"Dispensary Business Monthly Practice Expense" shall mean, for any month, the
* for such month, except in the event that either (i) * or (ii) *
, in which case the term "Dispensary Business Monthly Practice Expense" for such
month shall mean * .
(h) Dispensary Business Office Expense. The term "Dispensary Business
----------------------------------
Office Expense" shall mean all Office Expenses, operating and non-operating,
which constitute direct expenses to produce Dispensary Business Revenue, as
determined consistent with the Budget; provided that any disagreement over
whether an expense constitutes a direct expense to produce Dispensary Business
Revenue shall be resolved by the Policy Board.
-----------------
* Confidential portions omitted and filed separately with the commission.
* Confidential portions omitted and filed separately with the commission.
32
(i) Management Fee The term "Management Fee" shall mean, for any
--------------
month, the sum of the Dispensary Business Management Fee for such month and the
Principal Services Management Fee for such month.
(j) Monthly Office Expense The term "Monthly Office Expense" shall
----------------------
mean, for any month, the sum of the Dispensary Business Monthly Office Expense
for such month and the Principal Services Monthly Office Expense for such month.
(k) Monthly Practice Expense The term "Monthly Practice Expense"
------------------------
shall mean, for any month, the sum of the Dispensary Business Monthly Practice
Expense for such month and the Principal Services Monthly Practice Expense for
such month.
(l) Principal Services Budgeted Office Expense. The term "Principal
------------------------------------------
Services Budgeted Office Expense" shall mean, for any month, the Principal
Services Office Expense (other than the Principal Services Management Fee)
established in the Budget for such month.
(m) Principal Services Budgeted Practice Expense. The term
--------------------------------------------
"Principal Services Budgeted Practice Expense" shall mean, for any month, the
Principal Services Practice Expense (as defined in the Budget) established in
the Budget for such month.
(n) Principal Services Budgeted Revenue. The term "Principal
-----------------------------------
Services Budgeted Revenue" shall mean, for any month, the amount of Principal
Services Revenue established in the Budget for such month.
(o) Principal Services Management Fee. The term "Principal Services
---------------------------------
Management Fee" shall be, for any month, the * , except in the event that
either (i) * or (ii) * , in which case the "Principal Services
Management Fee" for such month shall be * .
(p) Principal Services Monthly Fee. The term "Principal Services
------------------------------
Monthly Fee" shall mean, for any month, the * for such month.
(q) Principal Services Monthly Office Expense. The term "Principal
-----------------------------------------
Services Monthly Office Expense" shall mean, for any month, the amount of
Principal Services Budgeted Office Expense for such month, plus or minus any
difference between (i) the actual Principal Services Office Expense incurred by
or on behalf of Practice for [such] month (other than the Principal Services
Management Fee) and (ii) Principal Services Budgeted Office Expense for [such]
month.
-------------------
* Confidential portions omitted and filed separately with the commission.
33
(r) Principal Services Monthly Practice Expense. The term "Principal
-------------------------------------------
Services Monthly Practice Expense" shall mean, for any month, the * for
such month, except in the event that either (i) * or (ii) * , in
which case the term "Principal Services Monthly Practice Expense" for such month
shall mean * .
(s) Principal Services Office Expense. The term "Principal Services
---------------------------------
Office Expense" for any month shall mean all Office Expenses for such month
other than Dispensary Business Office Expenses for such month.
6.2 Management Fee Practice and Business Manager agree to the
--------------
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable, in the priority established by Section 4.9 hereof,
Business Manager will be paid the following:
(a) the amount of all Office Expense (other than the Dispensary
Business Management Fee and the Principal Services Management Fee) for the
previous month, paid on behalf of Practice; and
(b) the Management Fee for the previous month.
6.3 Reasonable Value Payment of the Management Fee is not intended to
----------------
be and shall not be interpreted or applied as permitting Business Manager to
share in Practice's fees for Medical Services or any other services, but is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the equipment, contract analysis and support, other support
services, purchasing, personnel, office space, management, administration,
strategic management and other items and services furnished by Business Manager
pursuant to this Management Services Agreement, after giving effect to the
nature and volume of the services required and the risks assumed by Business
Manager. The parties agree that it is appropriate to calculate and apply
separate fees for the management of the Dispensary Business and Principal
Services, due to (i) the amount of Business Manager Expense incurred by
Business Manager in connection with the management of the operations of the
Dispensary Business, (ii) the fair market value of the management services
provided by Business Manager with respect to each of the Dispensary Business and
financial services and (iii) the nature and volume of the services required and
the risks assumed by Business Manager with respect to each of the Dispensary
Business and Principal Services.
6.4 Payment of Management Fee. To facilitate the payment of the
-------------------------
Management Fee as provided in Section 6.2 hereof, and subject to the priority of
payment methodology set forth in Section 4.9 hereof, Practice hereby expressly
authorizes Business Manager to make withdrawals of the Management Fee from the
Depository Account as such fee becomes due and payable during the Term and
thereafter as provided in Section 7.3 hereof.
34
6.5 Accounts Receivable. Unless otherwise prohibited by law, to assure
-------------------
that Practice receives the entire amount of professional fees for its services
and to assist Practice in maintaining reasonable cash flow for the payment of
Office Expense, Business Manager may purchase, with recourse to Practice for the
amount of the purchase (up to the amount of Adjusted Gross Revenue for such
month), the accounts receivable of Practice arising during the previous month
(the "Purchased Receivables") (i) in an amount equal to the difference, if any,
between (A) the sum of the Monthly Office Expense and the Monthly Practice
Expense paid or accrued by Business Manager for such month and (B) the amount of
cash collections deposited into the Depository Account during such month and
used to pay all or any portion of the Office Expenses and the Monthly Practice
Expense, by transferring such amount into the Depository Account, and (ii) in an
amount equal to the difference, if any, between the Management Fee and the
amount of cash collections deposited into the Depository Account during such
month and used to pay all or any portion of the Management Fee, in satisfaction
of Practice's obligation to pay Business Manager the Management Fee. The
consideration paid to Business Manager for the purchase shall be an amount equal
to the Principal Services Revenue and Dispensary Business an amount equal to the
Adjusted Gross Revenue with respect to the Purchased Receivables (according to
GAAP on an accrual basis net of Adjustments). Although it is the intention of
the parties that Business Manager purchase and thereby become the owner of the
Purchased Receivables of Practice, in the event such purchase shall be
ineffective for any reason, Practice is concurrently granting to Business
Manager a security interest in the Purchased Receivables, and Practice shall
cooperate with Business Manager and shall execute all documents in connection
with the pledge of the Purchased Receivables to Business Manager. All
collections in respect to the Purchased Receivables by Business Manager shall be
received by Business Manager as the agent of Practice and shall be endorsed to
Business Manager and deposited in a bank account at a bank designated by
Business Manager. To the extent Practice comes into possession of any payments
in respect of the Purchased Receivables, Practice shall direct such payments to
Business Manager for deposit in bank accounts designated by Business Manager.
6.6 Disputes Regarding Fees.
-----------------------
(a) It is the parties' intent that any disputes regarding Business
Manager's performance hereunder shall be resolved to the extent possible by good
faith negotiations. To that end, the parties agree that if Practice in good
faith believes that Business Manager has failed to perform its obligations, and
that as a result of such failure, Practice is entitled to a set-off or reduction
in its Management Fees, Practice shall give Business Manager notice of the
perceived failure and request in the notice a set-off or reduction in Management
Fees. Business Manager and Practice shall then negotiate the dispute in good
faith, and if an agreement is reached, the parties shall implement the
resolution without further action.
(b) If the parties cannot reach a resolution within thirty (30) days,
and the amount at issue is $25,000 or less, then the dispute shall be submitted
to the Policy Board. The Policy Board shall then consider, develop and
implement a resolution of such dispute which shall be final and binding upon
Practice and Business Manager.
35
(c) If the amount in dispute is greater than $25,000, and Business
Manager and Practice fail to resolve the dispute, then such dispute shall be
submitted by either party to binding arbitration as described by Article X of
the Contribution and Exchange Agreement.
ARTICLE VII
TERM AND TERMINATION
7.1 Initial and Renewal Term. The Term of this Management Services
------------------------
Agreement will be for an initial period of forty (40) years after the Effective
Date, and shall be automatically renewed for successive five (5) year periods
thereafter, provided that neither Business Manager nor Practice shall have given
notice of termination of this Management Services Agreement at least one hundred
twenty (120) days before the end of the initial term or any renewal term, or
unless otherwise terminated as provided in Section 7.2 hereof.
7.2 Termination.
-----------
(a) Termination By Business Manager. Business Manager may terminate
-------------------------------
this Management Services Agreement upon the occurrence of any one of the
following events which shall be deemed to be "for cause:"
(i) The suspension, restriction, revocation or cancellation of
any Physician's license to practice medicine in the state of Illinois;
(ii) Practice's loss or suspension of its Medicare or Medicaid
provider number, and/or Practice's restriction from treating patients of
the Medicare or Medicaid programs;
(iii) The dissolution of Practice or the filing by Practice of a
petition in voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily under any state or federal
statute for the protection of debtors;
(iv) The filing against Practice of an involuntary petition
under any bankruptcy statute, or the appointment of a custodian, receiver,
trustee or assignee for the benefit of creditors, and such condition shall
continue undischarged or undismissed for sixty (60) days; and
(v) Practice materially defaults in the performance of any of
its material duties or obligations hereunder, and shall fail to cure such
default within sixty (60) days after Practice receives notice from Business
Manager specifying the nature of such default.
(b) Termination By Practice. Practice may terminate this Management
-----------------------
Services Agreement upon any of the following occurrences which shall be deemed
to be "for cause":
36
(i) In the event that an arbitrator pursuant to Section 8.6
hereof makes a final determination that Business Manager has materially
breached a fiduciary duty owed to Practice, Practice may terminate this
Management Services Agreement upon ten (10) days' notice to Business
Manager;
(ii) With ten (10) days' written notice to Business Manager, in
the event Business Manager (A) intentionally and in bad faith
misappropriates Practice's funds, or (B) fails to properly account
Practice's funds and fails to correct such accounting error within thirty
(30) days of receipt of notice from Practice describing with particularity
the error;
(iii) Business Manager materially defaults in the performance of
any of its duties or obligations pursuant to Sections 4.6 or 4.7 hereunder,
and shall fail to cure such default within one hundred fifty (150) days
after Business Manager receives notice from Practice; provided, however,
that any failure of NovaMed to comply with the last two sentences of
Section 4.7 hereof shall not be deemed a material breach for purposes of
this Section 7.2;
(c) Termination by Agreement. In the event Practice and Business
------------------------
Manager shall mutually agree in writing, this Management Services Agreement may
be terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event
------------------------------------------------
there shall be a change in the Medicare or Medicaid statutes, state or federal
statutes, case law, regulations or general instructions, the interpretation of
any of the foregoing, the adoption of new federal or state legislation, or a
change in any third-party reimbursement system, any of which are reasonably
likely to materially and adversely affect the manner in which either party may
perform or be compensated for its services under this Management Services
Agreement or which shall make this Management Services Agreement unlawful, the
parties shall immediately enter into good faith negotiations regarding a new
service arrangement or basis for compensation for the services furnished
pursuant to this Management Services Agreement that complies with the law,
regulation or policy and that approximates as closely as possible the economic
position of the parties prior to the change. If good faith negotiations cannot
resolve the matter, it shall be submitted to arbitration as referenced in
Section 8.6 hereof. If a court of competent jurisdiction compels or requires a
party hereto to refrain from performing its duties and obligations hereunder, or
a party's performance hereunder shall be directly violative of a court order
directed at such party, then, to the extent necessary to comply with such court
order, this Management Services Agreement shall be deemed suspended. In no
event shall such suspension be construed to relieve either party's obligation
under this Section 7.2(d) and the parties will immediately commence good faith
negotiations regarding a new service arrangement or compensation structure that
is in compliance with any such court order, which arrangement or structure will
allocate the economic aspects of the relationship between the parties in a
manner as nearly as possible as that intended by this Management Services
Agreement.
37
7.3 Effects of Termination. Upon termination of this Management
----------------------
Services Agreement, as heretofore provided, neither party shall have any further
obligations hereunder except for (i) obligations accruing prior to the date of
termination, including, without limitation, payment of the Management Fees,
Office Expense and Practice Expense relating to services provided prior to the
termination of this Management Services Agreement, (ii) obligations, promises or
covenants set forth herein that are expressly set forth herein to extend beyond
the Term under the circumstances giving rise to such termination, including,
without limitation, indemnity, confidentiality and noncompetition provisions,
which provisions shall survive the expiration or termination of this Management
Services Agreement by Business Manager for cause, and (iii) the applicable
obligations of Practice and Business Manager described in Section 7.4 or 7.5
hereof. In effectuating the provisions of this Section 7.3, Practice
specifically acknowledges and agrees that Business Manager shall continue to
collect and receive on behalf of Practice all cash collections from accounts
receivable in existence at the time this Management Services Agreement is
terminated, it being understood that such cash collections will be applied in
accordance with Section 4.9 hereof, and will represent, in part, compensation to
Business Manager for management services already rendered and compensation on
accounts receivable purchased by Business Manager. Upon the expiration or
termination of this Management Services Agreement for any reason or cause
whatsoever, Business Manager shall surrender to Practice all books and records
pertaining to Practice's medical practice.
7.4 Repurchase Obligation. Upon termination of this Management
---------------------
Services Agreement by Business Manager for cause or by Practice without cause,
Business Manager shall have the right, but not the obligation, to require
Practice to comply with the terms and conditions of this Section 7.4. In the
event Business Manager exercises such right by delivering written notice to
Practice within sixty (60) days of such termination, then Practice shall be
required to:
(a) Purchase from Business Manager at fair market value the intangible
assets, deferred charges and all other amounts on the books of Business Manager
relating to the Management Services Agreement as adjusted, through the last day
of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of the intangible
assets, deferred charges or covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the fair market value thereof. In the event of
any repurchase of real property, the appraised value shall be determined by
Business Manager and Practice, each selecting a duly qualified appraiser, who in
turn will agree on a third appraiser. This agreed-upon appraiser shall perform
the appraisal which shall be binding on both parties. In the event either party
fails to select an appraiser within fifteen (15) days of the selection of an
appraiser by the other party, the appraiser selected by the other party shall
make the selection of the third-party appraiser;
38
(c) Purchase at the fair market value all improvements, additions, or
leasehold improvements that have been made by Business Manager at any Office and
that relate solely to the performance of Business Manager's obligations under
this Management Services Agreement;
(d) Assume all debt and all contracts, payables and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased hereunder as an Office by Business Manager;
and
(e) Purchase from Business Manager at the fair market value all of the
equipment listed in the Contribution and Exchange Agreement or an exhibit
thereto, including all replacements and additions thereto made by Business
Manager pursuant to the performance of its obligations under this Management
Services Agreement, and all other assets, including inventory and supplies, and
tangibles and intangibles, set forth on the books of Business Manager as
adjusted through the last day of the month most recently ended prior to the date
of such termination in accordance with GAAP to reflect operations of the Office,
depreciation, amortization and other adjustments of assets shown on the books of
Business Manager.
In the event Business Manager exercises its rights pursuant to this Section 7.4,
Practice shall have the obligation to purchase all, and not less than all, of
the items listed in subparagraphs (a) through (e) above. In no event, however,
shall this Section 7.4 be construed as enabling Practice to repurchase any
assets acquired by Business Manager pursuant to the Contribution and Exchange
Agreement, which relate directly or indirectly to the ambulatory surgical center
owned and operated by Eyes of Illinois Surgery Center, S.C. immediately prior to
the Effective Date of the Contribution and Exchange Agreement (the "ASC
Assets"). The ASC Assets are expressly excluded from the assets enumerated in
subparagraphs (a) through (e) above and Practice shall have no right to
repurchase the ASC Assets under this Section 7.4 unless Business Manager shall
so elect in writing, in which case Practice shall be required to repurchase the
ASC Assets at the greater of the then book or fair market value. For purposes
of this Article VII, "fair market value" of a particular item shall be an amount
mutually agreed upon by Practice and Business Manager. If Practice and Business
Manager are unable to reach agreement on such value after ten (10) days of
deliberations, then such fair market value shall be determined by an
independent, duly qualified appraiser mutually agreed upon by Practice and
Business Manager. If Practice and Business Manager cannot agree upon an
appraiser within ten (10) days, then each party shall select a duly qualified
appraiser, who in turn will select a third appraiser. This agreed-upon
appraiser shall perform the appraisal which shall be binding upon both parties.
All expenses of such appraisal shall be borne fifty percent (50%) by Business
Manager and fifty percent (50%) by Practice.
7.5 Repurchase Option. Upon termination of this Management Services
-----------------
Agreement by Practice for cause pursuant to Section 7.2(b) hereof, Practice
shall have the right, but not the obligation, to:
39
(a) Purchase from Business Manager at fair market value the intangible
assets, deferred charges and all other amounts on the books of Business Manager
relating to the Management Services Agreement as adjusted, through the last day
of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of the intangible
assets, deferred charges or covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the appraised fair market value thereof. In
the event of any repurchase of real property, the appraised value shall be
determined in accordance with the appraisal mechanism described in Section 7.4
hereof;
(c) Purchase at fair market value all improvements, additions or
leasehold improvements that have been made by Business Manager at any Office and
that relate solely to the performance of Business Manager's obligations under
this Management Services Agreement;
(d) Assume all debt and all contracts, payables and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased by Business Manager; and
(e) Purchase from Business Manager at fair market value all of the
equipment listed in the Contribution and Exchange Agreement or an exhibit
thereto, including all replacements and additions thereto made by Business
Manager pursuant to the performance of its obligations under this Management
Services Agreement, and all other tangible assets, including inventory and
supplies, set forth on the books of Business Manager as adjusted through the
last day of the month most recently ended prior to the date of such termination
in accordance with GAAP to reflect operations of the Office, depreciation,
amortization and other adjustments of assets shown on the books of Business
Manager.
In the event Practice exercises its rights pursuant to this Section 7.5,
Practice shall have the obligation to purchase all, and not less than all, of
the items listed in subparagraphs (a) through (e). In no event, however, shall
this Section 7.5 be construed as enabling Practice to repurchase any assets
acquired by Business Manager pursuant to the Contribution and Exchange
Agreement, which relate directly or indirectly to the ASC Assets. The ASC
Assets are expressly excluded from the assets enumerated in subparagraphs (a)
through (e) above and Practice shall have no right to repurchase the ASC Assets
under this Section 7.5 unless Business Manager shall so elect in writing, in
which case Practice shall be required to repurchase the ASC Assets at the
greater of the then book or fair market value. In lieu of paying cash for the
items described in this Section 7.5, Practice shall have the option of: (i)
offsetting the cash amount required pursuant to this Section 7.5 against the
outstanding balance due and owing under the Note (as such term is defined in the
Contribution and Exchange Agreement); or (ii) contributing to Business Manager
that number of Exchange Shares (as such term is defined in the Contribution and
Exchange Agreement) which, based on the then fair market value of such units
(determined in accordance
40
with a consistent application of the valuation procedure established under
Section 7.01(d) of the Contribution and Exchange Agreement), equals the cash
amount required pursuant to this Section 7.5.
7.6 Closing of Repurchase. Except as expressly provided in Section
---------------------
7.5 hereof, Practice shall pay cash for the repurchased assets. The amount of
the purchase price shall be reduced by the amount of debt and liabilities of
Business Manager, if any, assumed by Practice. Practice and, if required by
law, any Physician associated with Practice, shall execute such documents as may
be required, (i) for Practice to assume the liabilities set forth in Section
7.4(d) or 7.5(d) hereof, as applicable, and (ii) for Practice to indemnify or
remove Business Manager from any liability with respect to such repurchased
asset and with respect to any property leased or subleased by Business Manager.
Business Manager shall execute such documents as may be required to convey the
assets, free and clear of all liens (except for those liens assumed by
Practice). The closing date for the repurchase shall be determined by mutual
agreement of Practice and Business Manager but shall in no event occur later
than one hundred eighty (180) days from the date of the notice of termination.
The termination of this Management Services Agreement shall become effective
upon the closing of the sale of the assets under Section 7.4 or 7.5 hereof, as
the case may be, and all parties shall be released from any restrictive
covenants provided for in Section 5.7 hereof on such closing date. From and
after any termination, each party shall provide the other party with reasonable
access to the books and records then owned by it to permit such requesting party
to satisfy reporting and contractual obligations that may be required of it.
7.7 Rights and Remedies. In the event of a material breach of this
-------------------
Management Services Agreement by either party hereunder, the nonbreaching party
shall have, in addition to any other rights and remedies contained in this
Management Services Agreement, all rights and remedies available to such party
at law or equity. Without limiting the generality of the foregoing, the parties
acknowledge and agree that Business Manager entered into this Management
Services Agreement with the understanding that the Term of this Management
Services Agreement would be forty years. In the event of a material breach
hereunder by Practice, the parties acknowledge and agree that the actual damages
to be suffered by Business Manager will be difficult to ascertain. Practice
recognizes that, in the event Practice shall fail to perform, observe or
discharge any of its duties, obligations or liabilities under this Management
Services Agreement, any remedy at law may prove to be inadequate relief to
Business Manager. Therefore, Practice agrees that, if Business Manager so elects
and in addition to any other remedies available at law or equity, Business
Manager shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages, or to specific
performance of any provision hereof. In addition to all other remedies of
Business Manager for any material breach hereunder by Practice, and without
limiting any and all rights set forth herein, Business Manager may set-off any
and all amounts which are due or which Business Manager reasonably believes will
become due and owing to Business Manager under this Agreement, against any and
all amounts which are due and owing under the Note. Such rights of set-off
shall be governed by the terms and conditions set forth in the Note.
41
7.8 Interpretation. The purpose and intent of this Article VII is to
--------------
establish the limited instances in which a party may terminate this Management
Services Agreement. Unless the parties mutually agree to terminate this
Management Services Agreement, neither party shall be entitled to terminate this
Management Services Agreement prior to the expiration of the Term unless a
party's breach gives rise to a termination "for cause" pursuant to Section
7.2(a) or (b) hereof, as the case may be. Nothing in this Agreement (including
Section 7.4 hereof) shall be construed as permitting Practice to terminate this
Agreement without cause.
ARTICLE VIII
MISCELLANEOUS
8.1 Administrative Services Only. Nothing in this Management
----------------------------
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which Practice and
its Physicians and Optometrists perform Medical Services or other professional
health care services. The rendition of all Medical Services, including, but not
limited to, the prescription or administration of medicine and drugs shall be
the sole responsibility of Practice and its Physicians and Optometrists, and
Business Manager shall not interfere in any manner or to any extent therewith.
Nothing contained herein shall be construed to permit Business Manager to engage
in the practice of medicine, it being the sole intention of the parties hereto
that the services to be rendered to Practice by Business Manager are solely for
the purpose of providing nonmedical management and administrative services to
Practice to enable Practice to devote its full time and energies to the
professional conduct of its medical practice and provision of Medical Services
to its patients and not to administration or practice management. Practice,
through the Physicians and Optometrists, shall be responsible for and shall have
complete authority, responsibility, supervision and control over the opticians
and other employees of Business Manager providing services in connection with
the Dispensary Business, consistent with the requirements necessary to satisfy
the "in-office ancillary service exception" to the Xxxxx Act.
8.2 Status of Contractor. It is expressly acknowledged that the
--------------------
parties hereto are "independent contractors," and nothing in this Management
Services Agreement is intended and nothing shall be construed to allow either
party to exercise control or direction over the manner or method by which the
other party performs the services that are the subject matter of this Management
Services Agreement; provided that the services to be provided hereunder shall be
furnished in a manner consistent with the standards governing such services and
the provisions of this Management Services Agreement. Each party understands
and agrees that (i) neither party will withhold on behalf of the other party any
sums for income tax, unemployment insurance, social security or any other
withholding pursuant to any law or requirement of any governmental body or make
available any of the benefits afforded to its employees, (ii) all of such
payments, withholdings and benefits, if any, are the sole responsibility of the
party incurring the liability, and (iii) each party will indemnify and hold the
other harmless from any and all loss or liability arising with respect to such
payments, withholdings and benefits, if any.
42
8.3 Notices. Any notice, demand or communication required, permitted
-------
or desired to be given hereunder shall be in writing and shall be served on the
parties at the following respective addresses:
Practice:
Illinois Eye Specialists, Ltd.
00 Xxxxxxx Xxxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, III, M.D.
Xxxxxx X. Xxxxxxxxxxx, M.D.
with a copy to:
Xxxxx & Xxxxx
1512 Ohio Edison Building
00 Xxxxx Xxxx Xxxxxx
Xxxxx, Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Business Manager:
NovaMed Eyecare Management, LLC
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
Xxxx X. Xxxxxxxx, Xx.
with a copy to:
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted or desired to be given hereunder shall be sent
either (a) by hand delivery, in which case notice shall be deemed received when
actually delivered, (b) by prepaid certified or registered first class mail,
43
return receipt requested, in which case notice shall be deemed received five
calendar days after deposit, postage prepaid in the United States Mail, (c) by
facsimile if also delivered by hand, or deposited in the United States Mail,
postage prepaid, registered or certified mail, on or before two (2) business
days after its delivery by facsimile, in which case notice shall be deemed
received one (1) business day after the facsimile transmission, or (d) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after prepaid deposit with such courier.
8.4 Governing Law. This Management Services Agreement shall be
-------------
governed by the laws of the State of Illinois applicable to agreements to be
performed wholly within the State of Illinois.
8.5 Assignment. Except as may be herein specifically provided to the
----------
contrary, this Management Services Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective legal representatives,
successors and permitted assigns; provided, however, Practice may not assign
this Management Services Agreement without the prior written consent of Business
Manager, which consent may be withheld in Business Manager's discretion. The
sale, transfer, pledge or assignment of any of the voting shares of Practice
held by any shareholder of Practice or the issuance by Practice of common or
other voting shares to any other person, or any combination of such transactions
within a period of one (1) year, such that the existing shareholders in Practice
immediately prior to such transactions or the beginning of the one-year period,
as applicable, fail to maintain a majority of the voting interests in Practice
shall be deemed an attempted assignment by Practice, and shall be null and void
unless consented to in writing by Business Manager prior to any such transfer or
issuance. Any breach of this provision, whether or not void or voidable, shall
constitute a material breach of this Management Services Agreement, and in the
event of such breach, Business Manager may terminate this Management Services
Agreement upon twenty-four (24) hours' notice to Practice. The rights and
obligations of Business Manager under this Management Services Agreement shall
not be assignable without Practice Consent; provided, however, that Business
Manager shall have the right to assign its rights, duties and obligations
hereunder, without Practice Consent: (i) to any Affiliate of Business Manager
or (ii) in connection with and in contemplation of a reorganization, merger,
consolidation or sale of all or substantially all of the capital stock or assets
of Business Manager (or any other transaction substantially similar in effect).
Moreover, Business Manager shall have the right to collaterally assign its
interest in this Management Services Agreement and its other rights hereunder to
any financial institution or other third party without Practice Consent.
8.6 Arbitration. Except as expressly provided in Section 6.6 hereof,
-----------
the parties shall negotiate in good faith to resolve any controversy, dispute or
disagreement arising out of or relating to this Management Services Agreement or
the breach of this Management Services Agreement. Any matter not resolved by
negotiation shall be submitted to binding arbitration and such arbitration shall
be governed by the terms of Article X of the Contribution and Exchange
Agreement, which, as it applies to the parties hereto, is incorporated herein by
reference in its
44
entirety; provided, however, that nothing contained in this Section 8.6 shall
prevent either party hereto from pursuing any right or remedy afforded it under
Section 7.7 hereof.
8.7 Waiver of Breach. The waiver by either party of a breach or
----------------
violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
8.8 Enforcement. In the event either party resorts to legal action
-----------
to enforce or interpret any provision of this Management Services Agreement, the
prevailing party shall be entitled to recover the costs and expenses of such
action so incurred, including, without limitation, reasonable attorneys' fees.
8.9 Gender and Number. Whenever the context of this Management
-----------------
Services Agreement requires, the gender of all words herein shall include the
masculine, feminine and neuter, and the number of all words herein shall include
the singular and plural.
8.10 Additional Assurances. Except as may be specifically provided
---------------------
herein to the contrary, the provisions of this Management Services Agreement
shall be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall execute
such additional instruments and take such additional acts as are reasonable, and
as the requesting party may reasonably deem necessary, to effectuate this
Management Services Agreement.
8.11 Consents, Approvals, and Exercise of Discretion. Whenever this
-----------------------------------------------
Management Services Agreement requires any consent or approval to be given by
either party, or either party must or may exercise discretion, and except where
specifically set forth to the contrary, the parties agree that such consent or
approval shall not be unreasonably withheld or delayed, and that such discretion
shall be reasonably exercised.
8.12 Force Majeure. Neither party shall be liable or deemed to be in
-------------
default for any delay or failure in performance under this Management Services
Agreement or other interruption of service deemed to result, directly or
indirectly, from acts of God, civil or military authority, acts of public enemy,
war, accidents, explosions, earthquakes, floods, failure of transportation,
strikes or other work interruptions by either party's employees, or any other
similar cause beyond the reasonable control of either party unless such delay or
failure in performance is expressly addressed elsewhere in this Management
Services Agreement.
8.13 Severability. The parties hereto have negotiated and prepared
------------
the terms of this Management Services Agreement in good faith with the intent
that each and every one of the terms, covenants and conditions herein be binding
upon and inure to the benefit of the respective parties. Accordingly, if any
one or more of the terms, provisions, promises, covenants or conditions of this
Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any
45
reason whatsoever by a court of competent jurisdiction or an arbitration
tribunal, such provision shall be as narrowly construed as possible, and each
and all of the remaining terms, provisions, promises, covenants and conditions
of this Management Services Agreement or their application to other persons or
circumstances shall not be affected thereby and shall be valid and enforceable
to the fullest extent permitted by law. To the extent this Management Services
Agreement is in violation of applicable law, then the parties agree to negotiate
in good faith to amend the Management Services Agreement, to the extent possible
consistent with its purposes, to conform to law.
8.14 Divisions and Headings. The divisions of this Management
----------------------
Services Agreement into articles, sections and subsections, and the use of
captions and headings in connection therewith is solely for convenience and
shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
8.15 Amendments and Management Services Agreement Execution. This
------------------------------------------------------
Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of Practice and Business Manager by their
respective duly authorized officers. Each multiple copy shall be deemed an
original, but all multiple copies together shall constitute one and the same
instrument.
8.16 Entire Management Services Agreement. With respect to the
------------------------------------
subject matter of this Management Services Agreement, this Management Services
Agreement supersedes all previous contracts and constitutes the entire agreement
between the parties. Neither party shall be entitled to benefits other than
those specified herein. No prior oral statements or contemporaneous
negotiations or understandings or prior written material not specifically
incorporated herein shall be of any force and effect, and no changes in or
additions to this Management Services Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment to become
effective on the date stipulated in such amendment. The parties specifically
acknowledge that, in entering into and executing this Management Services
Agreement, the parties rely solely upon the representations and agreements
contained in this Management Services Agreement and no others.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
46
IN WITNESS WHEREOF, Practice and Business Manager have caused this
Management Services Agreement to be executed by their duly authorized
representatives, all as of the day and year first above written.
PRACTICE:
ILLINOIS EYE SPECIALISTS, LTD.
an Illinois professional corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx, M.D., Xxxxxx X. Xxxxx, III, M.D.
_______________________________________________________
Name: Xxxxxx X. Xxxxxxxxxxx, M.D., Xxxxxx X. Xxxxx, III, M.D.
_______________________________________________________
Title: President, Medical Director
___________________________________
BUSINESS MANAGER:
NOVAMED EYECARE MANAGEMENT, LLC,
a Delaware limited liability Company
By: /s/ Xxxxxxx X. Xxxxxx
______________________________________
Xxxxxxx X. Xxxxxx,
President and Chief Executive Officer
EXHIBIT 1.6
BUDGET
*
----------------
* Confidential portions omitted and filed separately with the commission.
Illinois Eye Specialists
--------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
---------------------------------- --------------------------------------------------------------------------------
Practice * * * * * * * * * * * *
* * * * * * * * * * * *
Revenue * * * * * * * * * * * *
Practice revenue * * * * * * * * * * * *
ASC facility revenue * * * * * * * * * * * *
Optical revenue - glasses * * * * * * * * * * * *
Optical revenue - contacts * * * * * * * * * * * *
Optometric revenue * * * * * * * * * * * *
Other revenue * * * * * * * * * * * *
Contractual adjustments * * * * * * * * * * * *
* * * * * * * * * * * *
Other Revenue * * * * * * * * * * * *
* * * * * * * * * * * *
Budgeted Principal Services Revenue * * * * * * * * * * * *
* * * * * * * * * * * *
Expenses * * * * * * * * * * * *
* * * * * * * * * * * *
Salaries and Wages: * * * * * * * * * * * *
Center Staff Salaries: * * * * * * * * * * * *
Administration * * * * * * * * * * * *
Technician * * * * * * * * * * * *
Nurses * * * * * * * * * * * *
Other salaries * * * * * * * * * * * *
Overtime pay * * * * * * * * * * * *
* * * * * * * * * * * *
Payroll Taxes & Benefits * * * * * * * * * * * *
Vacation & leave pay * * * * * * * * * * * *
Bonuses * * * * * * * * * * * *
Incentive commpensation * * * * * * * * * * * *
FICA Tax * * * * * * * * * * * *
SUI * * * * * * * * * * * *
FUI * * * * * * * * * * * *
Other payroll taxes * * * * * * * * * * * *
Labor allocation * * * * * * * * * * * *
401k Match * * * * * * * * * * * *
Life & Disability ins. * * * * * * * * * * * *
Employee Health ins. * * * * * * * * * * * *
* * * * * * * * * * * *
Benefit % * * * * * * * * * * * *
Total Salaries & Wages * * * * * * * * * * * *
* * * * * * * * * * * *
MD/OD Compensation * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Pharmaceuticals and supplies: * * * * * * * * * * * *
Practice supplies * * * * * * * * * * * *
ASC - general * * * * * * * * * * * *
ASC - refractive * * * * * * * * * * * *
Pillar point fees * * * * * * * * * * * *
Optical COS - glasses * * * * * * * * * * * *
Optical COS - contacts * * * * * * * * * * * *
Optometric supplies * * * * * * * * * * * *
Total Pharmac. & Supplies * * * * * * * * * * * *
Practice * * * * * * * * * * * *
G&A expenses: * * * * * * * * * * * *
* * * * * * * * * * * *
Description Total 1998 %
---------------------------------- ---------------
Practice * * * * *
* * * * *
Revenue * * * * *
* * * * *
Practice revenue * * * * *
ASC facility revenue * * * * *
Optical revenue - glasses * * * * *
Optical revenue - contacts * * * * *
Optometric revenue * * * * *
Other revenue * * * * *
Contractual adjustments * * * * *
* * * * *
* * * * *
Other Revenue * * * * *
* * * * *
Budgeted Principal Services Revenue * * * * *
* * * * *
Expenses * * * * *
Salaries and Wages: * * * * *
Center Staff Salaries: * * * * *
Administration * * * * *
Technician * * * * *
Nurses * * * * *
Other salaries * * * * *
Overtime pay * * * * *
* * * * *
Payroll Taxes & Benefits * * * * *
Vacation & leave pay * * * * *
Bonuses * * * * *
Incentive compensation * * * * *
FICA Tax * * * * *
SUI * * * * *
FUI * * * * *
Other payroll taxes * * * * *
Labor allocation * * * * *
401k Match * * * * *
Life & Disability ins. * * * * *
Employee Health ins. * * * * *
* * * * *
Benefit % * * * * *
Total Salaries & Wages * * * * *
* * * * *
MD/OD Compensation * * * * *
* * * * *
* * * * *
Pharmaceuticals and supplies: * * * * *
Practice supplies * * * * *
ASC - general * * * * *
ASC - refractive * * * * *
Pillar point fees * * * * *
Optical COS - glasses * * * * *
Optical COS - contacts * * * * *
Optometric supplies * * * * *
Total Pharmac. & Supplies * * * * *
Practice * * * * *
G&A expenses: * * * * *
* * * * *
* Confidential portions omitted and filed separately with the commission.
15
Illinois MSA Specialists
--------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
---------------------------------- --------------------------------------------------------------------------------
Office & Administrative: * * * * * * * * * * * *
Office Supplies * * * * * * * * * * * *
---------------
Office supplies * * * * * * * * * * * *
Software/computer expense * * * * * * * * * * * *
Food service * * * * * * * * * * * *
Bank charges * * * * * * * * * * * *
Credit card fees * * * * * * * * * * * *
* * * * * * * * * * * *
Postage & freight * * * * * * * * * * * *
Employee & patient programs * * * * * * * * * * * *
Continuing education * * * * * * * * * * * *
Dues and subscriptions * * * * * * * * * * * *
Telephone * * * * * * * * * * * *
Utilities * * * * * * * * * * * *
Printing * * * * * * * * * * * *
Misc. office expense * * * * * * * * * * * *
Total office & Admin. Expenses * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Marketing: * * * * * * * * * * * *
Advertising * * * * * * * * * * * *
Marketing - Other * * * * * * * * * * * *
Total Marketing * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Professional and Service Fees: * * * * * * * * * * * *
Legal * * * * * * * * * * * *
Accounting * * * * * * * * * * * *
Other prof. consulting * * * * * * * * * * * *
Collection fees * * * * * * * * * * * *
Answering service * * * * * * * * * * * *
Linens & uniforms * * * * * * * * * * * *
Other services * * * * * * * * * * * *
Temporary services * * * * * * * * * * * *
Total Professional Fees * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Rental Expense: * * * * * * * * * * * *
Building rent * * * * * * * * * * * *
Other office rent & parking * * * * * * * * * * * *
Equipment leases * * * * * * * * * * * *
Optical equipment rent * * * * * * * * * * * *
Total Rent Expense * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Repairs and Maintenance: * * * * * * * * * * * *
Building maintenance * * * * * * * * * * * *
Repairs - equipment * * * * * * * * * * * *
Non-capitalized tools * * * * * * * * * * * *
Total Repairs & Maint. * * * * * * * * * * * *
Practice * * * * * * * * * * * *
* * * * * * * * * * * *
Taxes and Insurance: * * * * * * * * * * * *
Malpractice * * * * * * * * * * * *
Liability & casualty * * * * * * * * * * * *
Workers' compensation ins. * * * * * * * * * * * *
Description Total 1998 %
---------------------------------- ---------------
Office & Administrative: * * * * *
Office Supplies * * * * *
---------------
Office supplies * * * * *
Software/computer expense * * * * *
Food service * * * * *
Bank charges * * * * *
Credit card fees * * * * *
* * * * *
Postage & freight * * * * *
Employee & patient programs * * * * *
Continuing education * * * * *
Dues and subscriptions * * * * *
Telephone * * * * *
Utilities * * * * *
Printing * * * * *
Misc. office expense * * * * *
Total office & Admin. Expenses * * * * *
* * * * *
* * * * *
Marketing: * * * * *
Advertising * * * * *
Marketing - Other * * * * *
Total Marketing * * * * *
* * * * *
Professional and Service Fees: * * * * *
Legal * * * * *
Accounting * * * * *
Other prof. consulting * * * * *
Collection fees * * * * *
Answering service * * * * *
Linens & uniforms * * * * *
Other services * * * * *
Temporary services * * * * *
Total Professional Fees * * * * *
* * * * *
Rental Expense: * * * * *
Building rent * * * * *
Other office rent & parking * * * * *
Equipment leases * * * * *
Optical equipment rent * * * * *
Total Rent Expense * * * * *
* * * * *
* * * * *
Repairs and Maintenance: * * * * *
Building maintenance * * * * *
Repairs - equipment * * * * *
Non-capitalized tools * * * * *
Total Repairs & Maint. * * * * *
* * * * *
Practice * * * * *
* * * * *
Taxes and Insurance: * * * * *
Malpractice * * * * *
Liability & casualty * * * * *
Workers' compensation ins. * * * * *
*Confidential portions omitted and filed separately with the commission.
16
Illinois Eye Specialists
---------------------------------------------------------------------------------------------------------------------------------
1998 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
---------------------------------- --------------------------------------------------------------------------------
D&O * * * * * * * * * * * *
Key Man Life * * * * * * * * * * * *
Other insurance * * * * * * * * * * * *
Property tax * * * * * * * * * * * *
Sales & Use tax * * * * * * * * * * * *
Property tax * * * * * * * * * * * *
Other taxes * * * * * * * * * * * *
Total Taxes & Ins. * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Other Expenses: * * * * * * * * * * * *
Travel & entertainment * * * * * * * * * * * *
Recruitment & relocation * * * * * * * * * * * *
Auto & Van * * * * * * * * * * * *
Contracted patient transport. * * * * * * * * * * * *
Donations and gifts * * * * * * * * * * * *
Allocated IT/Computing costs * * * * * * * * * * * *
Other * * * * * * * * * * * *
Total Other Expense * * * * * * * * * * * *
* * * * * * * * * * * *
Total G&A expenses * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Depreciation & Amortization: * * * * * * * * * * * *
Building depreciation * * * * * * * * * * * *
Equipment depreciation * * * * * * * * * * * *
Goodwill amortization * * * * * * * * * * * *
Other intangible amortization * * * * * * * * * * * *
Amortization of deferred charges * * * * * * * * * * * *
* * * * * * * * * * * *
Total Depr. and Amortization * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Interest (income) and expense: * * * * * * * * * * * *
Depository Interest * * * * * * * * * * * *
Investment Income * * * * * * * * * * * *
Bank Line Interest Expense * * * * * * * * * * * *
Cap. Lease Interest Expense * * * * * * * * * * * *
Other Interest Expense * * * * * * * * * * * *
* * * * * * * * * * * *
Total Interest (income)/expense * * * * * * * * * * * *
* * * * * * * * * * * *
Principal Services Budgeted Office Expense * * * * * * * * * * * *
Practice * * * * * * * * * * * *
* * * * * * * * * * * *
Principal Services Budgeted * * * * * * * * * * * *
Practice Expense * * * * * * * * * * * *
* * * * * * * * * * * *
Principal Services Monthly Fee * * * * * * * * * * * *
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- ---------------
D&O * * * * * * * *
Key Man Life * * * * * * * *
Other insurance * * * * * * * *
Property tax * * * * * * * *
Sales & Use tax * * * * * * * *
Property tax * * * * * * * *
Other taxes * * * * * * * *
Total Taxes & Ins. * * * * * * * *
* * * * * * * *
* * * * * * * *
Other Expenses: * * * * * * * *
Travel & entertainment * * * * * * * *
Recruitment & relocation * * * * * * * *
Auto & Van * * * * * * * *
Contracted patient transport. * * * * * * * *
Donations and gifts * * * * * * * *
Allocated IT/Computing costs * * * * * * * *
Other * * * * * * * *
Total Other Expense * * * * * * * *
* * * * * * * *
Total G&A expenses * * * * * * * *
* * * * * * * *
* * * * * * * *
Depreciation & Amortization: * * * * * * * *
Building depreciation * * * * * * * *
Equipment depreciation * * * * * * * *
Goodwill amortization * * * * * * * *
Other intangible amortization * * * * * * * *
Amortization of deferred charges * * * * * * * *
* * * * * * * *
Total Depr. and Amortization * * * * * * * *
* * * * * * * *
* * * * * * * *
Interest (income) and expense: * * * * * * * *
Depository Interest * * * * * * * *
Investment Income * * * * * * * *
Bank Line Interest Expense * * * * * * * *
Cap. Lease Interest Expense * * * * * * * *
Other Interest Expense * * * * * * * *
* * * * * * * *
Total Interest (income)/expense * * * * * * * *
* * * * * * * *
Principal Services Budgeted Office Expense * * * * * * * *
* * * * *
Practice * * * * * * * *
* * * * * * * *
Principal Services Budgeted * * * * * * * *
Practice Expense * * * * * * * *
* * * * * * * *
Principal Services Monthly Fee * * * * * * * *
* * * * * * * *
*Confidential portions omitted and filed separately with the commission.
17
Illinois Eye Specialists
--------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun
------------------------------------ -----------------------------------------------------
Optical * * * * * *
Revenue * * * * * *
-------
Practice revenue * * * * * *
ASC facility revenue * * * * * *
Optical revenue * * * * * *
Optometric revenue * * * * * *
Alliance revenue * * * * * *
Research & Consulting * * * * * *
Other revenue * * * * * *
* * * * * *
Laboratory revenue * * * * * *
* * * * * *
Dispensary Business Budgeted Revenue * * * * * *
* * * * * *
Expenses * * * * * *
-------- * * * * * *
Salaries and Wages: * * * * * *
Center Staff Salaries: * * * * * *
---------------------
Administration * * * * * *
Technician/Nurses * * * * * *
PSR/Front Desk * * * * * *
Other salaries * * * * * *
Overtime pay * * * * * *
* * * * * *
Payroll Taxes & Benefits * * * * * *
------------------------
Vacation & leave pay * * * * * *
Bonuses * * * * * *
Incentive compensation * * * * * *
FICA Tax * * * * * *
SUI * * * * * *
FUI * * * * * *
Other payroll taxes * * * * * *
Labor allocation * * * * * *
401k Match * * * * * *
Life & Disability ins. * * * * * *
Employee Health ins. * * * * * *
* * * * * *
Benefits % * * * * * *
Total Salaries & Wages * * * * * *
* * * * * *
MD/OD Compensation * * * * * *
* * * * * *
* * * * * *
Pharmaceuticals and supplies: * * * * * *
Medical Supplies * * * * * *
COS - Glasses * * * * * *
COS - Contacts * * * * * *
COS - adjustments * * * * * *
Laboratory fees * * * * * *
Discount & allowances * * * * * *
Optical - Other * * * * * *
Total Pharmac. & Supplies * * * * * *
Optical * * * * * *
G & A expenses: * * * * * *
Description Jul Aug Sep Oct Nov Dec Total 1998 %
------------------------------------- ----------------------------------------------------- --------------
Optical * * * * * * * * * * *
Revenue * * * * * * * * * * *
-------
Practice revenue * * * * * * * * * * *
ASC facility revenue * * * * * * * * * * *
Optical revenue * * * * * * * * * * *
Optometric revenue * * * * * * * * * * *
Alliance revenue * * * * * * * * * * *
Research & Consulting * * * * * * * * * * *
Other revenue * * * * * * * * * * *
* * * * * * * * * * *
Laboratory revenue * * * * * * * * * * *
* * * * * * * * * * *
Dispensary Business Budgeted Revenue * * * * * * * * * * *
* * * * * * * * * * *
Expenses * * * * * * * * * * *
-------- * * * * * * * * * * *
Salaries and Wages: * * * * * * * * * * *
Center Staff Salaries: * * * * * * * * * * *
---------------------
Administration * * * * * * * * * * *
Technician/Nurses * * * * * * * * * * *
PSR/Front Desk * * * * * * * * * * *
Other salaries * * * * * * * * * * *
Overtime pay * * * * * * * * * * *
* * * * * * * * * * *
Payroll Taxes & Benefits * * * * * * * * * * *
------------------------
Vacation & leave pay * * * * * * * * * * *
Bonuses * * * * * * * * * * *
Incentive compensation * * * * * * * * * * *
FICA Tax * * * * * * * * * * *
SUI * * * * * * * * * * *
FUI * * * * * * * * * * *
Other payroll taxes * * * * * * * * * * *
Labor allocation * * * * * * * * * * *
401k Match * * * * * * * * * * *
Life & Disability ins. * * * * * * * * * * *
Employee Health ins. * * * * * * * * * * *
* * * * * * * * * * *
Benefits % * * * * * * * * * * *
Total Salaries & Wages * * * * * * * * * * *
* * * * * * * * * * *
MD/OD Compensation * * * * * * * * * * *
* * * * * * * * * * *
* * * * * * * * * * *
Pharmaceuticals and supplies: * * * * * * * * * * *
Medical supplies * * * * * * * * * * *
COS - Glasses * * * * * * * * * * *
COS - Contacts * * * * * * * * * * *
COS - adjustments * * * * * * * * * * *
Laboratory fees * * * * * * * * * * *
Discounts & allowances * * * * * * * * * * *
Optical - Other * * * * * * * * * * *
Total Pharmac. & Supplies * * * * * * * * * * *
Optical * * * * * * * * * * *
G & A expenses: * * * * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
18
Illinois MSA Specialists
-------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
---------------------------------- --------------------------------------------------------------------------------
* * * * * * * * * * * *
Office & Administrative: * * * * * * * * * * * *
Office Supplies * * * * * * * * * * * *
---------------
Office supplies * * * * * * * * * * * *
Software/computer expense * * * * * * * * * * * *
Food service * * * * * * * * * * * *
Bank charges * * * * * * * * * * * *
Credit card fees * * * * * * * * * * * *
* * * * * * * * * * * *
Postage & freight * * * * * * * * * * * *
Employee & patient programs * * * * * * * * * * * *
Continuing education * * * * * * * * * * * *
Dues and subscriptions * * * * * * * * * * * *
Telephone * * * * * * * * * * * *
Utilities * * * * * * * * * * * *
Printing * * * * * * * * * * * *
Misc. office expense * * * * * * * * * * * *
Total Office & Admin. Expenses * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Marketing: * * * * * * * * * * * *
Advertising * * * * * * * * * * * *
Marketing - Other * * * * * * * * * * * *
Total Marketing * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Professional and Service Fees: * * * * * * * * * * * *
Legal * * * * * * * * * * * *
Accounting * * * * * * * * * * * *
Other prof. consulting * * * * * * * * * * * *
Collection fees * * * * * * * * * * * *
Answering service * * * * * * * * * * * *
Linens & uniforms * * * * * * * * * * * *
Other services * * * * * * * * * * * *
Temporary services * * * * * * * * * * * *
Total Professional Fees * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Rental Expense: * * * * * * * * * * * *
Building rent * * * * * * * * * * * *
Other office rent & parking * * * * * * * * * * * *
Equipment leases * * * * * * * * * * * *
Optical equipment rent * * * * * * * * * * * *
Total Rent Expense * * * * * * * * * * * *
* * * * * * * * * * * *
* * * * * * * * * * * *
Repairs & Maintenance: * * * * * * * * * * * *
Building maintenance * * * * * * * * * * * *
Repairs - equipment * * * * * * * * * * * *
Non-capitalized tools * * * * * * * * * * * *
Total Repairs & Maint. * * * * * * * * * * * *
Optical * * * * * * * * * * * *
* * * * * * * * * * * *
Taxes and Insurance: * * * * * * * * * * * *
Malpractice * * * * * * * * * * * *
Liability & casualty * * * * * * * * * * * *
Workers' compensation ins. * * * * * * * * * * * *
Description Total 1998 %
---------------------------------- ---------------
* * * * *
Office & Administrative: * * * * *
Office Supplies * * * * *
---------------
Office supplies * * * * *
Software/computer expense * * * * *
Food service * * * * *
Bank charges * * * * *
Credit card fees * * * * *
* * * * *
Postage & freight * * * * *
Employee & patient programs * * * * *
Continuing education * * * * *
Dues and subscriptions * * * * *
Telephone * * * * *
Utilities * * * * *
Printing * * * * *
Misc. office expense * * * * *
Total Office & Admin. Expenses * * * * *
* * * * *
* * * * *
Marketing: * * * * *
Advertising * * * * *
Marketing - Other * * * * *
Total Marketing * * * * *
* * * * *
* * * * *
Professional and Service Fees: * * * * *
Legal * * * * *
Accounting * * * * *
Other prof. consulting * * * * *
Collection fees * * * * *
Answering service * * * * *
Linens & uniforms * * * * *
Other services * * * * *
Temporary services * * * * *
Total Professional Fees * * * * *
* * * * *
* * * * *
Rental Expense: * * * * *
Building rent * * * * *
Other office rent & parking * * * * *
Equipment leases * * * * *
Optical equipment rent * * * * *
Total Rent Expense * * * * *
* * * * *
* * * * *
Repairs & Maintenance: * * * * *
Building maintenance * * * * *
Repairs - equipment * * * * *
Non-capitalized tools * * * * *
Total Repairs & Maint. * * * * *
Optical * * * * *
* * * * *
Taxes and Insurance: * * * * *
Malpractice * * * * *
Liability & casualty * * * * *
Workers' compensation ins. * * * * *
*Confidential portions omitted and filed separately with the commission.
19
Illinois Eye Specialists
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
D&O * * * * * * * * *
Key Man Life * * * * * * * * *
Other insurance * * * * * * * * *
Property tax * * * * * * * * *
Sales & Use tax * * * * * * * * *
Property tax * * * * * * * * *
Other taxes * * * * * * * * *
Total Taxes & Ins. * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Other Expenses: * * * * * * * * *
Travel & entertainment * * * * * * * * *
Recruitment & relocation * * * * * * * * *
Auto & Van * * * * * * * * *
Contracted patient transport. * * * * * * * * *
Donations and gifts * * * * * * * * *
Allocated IT/Computing costs * * * * * * * * *
Other * * * * * * * * *
Total Other Expense * * * * * * * * *
* * * * * * * * *
Total G&A expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Depreciation & Amortization: * * * * * * * * *
Building depreciation * * * * * * * * *
Equipment depreciation * * * * * * * * *
Goodwill amortization * * * * * * * * *
Other intangible amortization * * * * * * * * *
Amortization of deferred charges * * * * * * * * *
* * * * * * * * *
Total Depr. and Amortization * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Interest (income) and expense: * * * * * * * * *
Depository Interest * * * * * * * * *
Investment Income * * * * * * * * *
Bank Line Interest Expense * * * * * * * * *
Cap. Lease Interest Expense * * * * * * * * *
Other Interest Expense * * * * * * * * *
* * * * * * * * *
Total Interest (income)/expense * * * * * * * * *
* * * * * * * * *
Dispensary Business Budgeted * * * * * * * * *
Office Expense * * * * * * * * *
Optical * * * * * * * * *
* * * * * * * * *
Dispensary Business Budgeted * * * * * * * * *
Practice Expense * * * * * * * * *
* * * * * * * * *
Dispensary Business Monthly Fee * * * * * * * * *
Description Oct Nov Dec
---------------------------------- ---------------------
D&O * * *
Key Man Life * * *
Other insurance * * *
Property tax * * *
Sales & Use tax * * *
Property tax * * *
Other taxes * * *
Total Taxes & Ins. * * *
* * *
* * *
Other Expenses: * * *
Travel & entertainment * * *
Recruitment & relocation * * *
Auto & Van * * *
Contracted patient transport. * * *
Donations and gifts * * *
Allocated IT/Computing costs * * *
Other * * *
Total Other Expense * * *
* * *
Total G&A expenses * * *
* * *
* * *
Depreciation & Amortization: * * *
Building depreciation * * *
Equipment depreciation * * *
Goodwill amortization * * *
Other intangible amortization * * *
Amortization of deferred charges * * *
* * *
Total Depr. and Amortization * * *
* * *
* * *
Interest (income) and expense: * * *
Depository Interest * * *
Investment Income * * *
Bank Line Interest Expense * * *
Cap. Lease Interest Expense * * *
Other Interest Expense * * *
* * *
Total Interest (income)/expense * * *
* * *
Dispensary Business Budgeted * * *
Office Expense * * *
Optical * * *
* * *
Dispensary Business Budgeted * * *
Practice Expense * * *
* * *
Dispensary Business Monthly Fee * * *
Description Total 1998 %
---------------------------------- ---------------
D&O * * * * *
Key Man Life * * * * *
Other insurance * * * * *
Property tax * * * * *
Sales & Use tax * * * * *
Property tax * * * * *
Other taxes * * * * *
Total Taxes & Ins. * * * * *
* * * * *
* * * * *
Other Expenses: * * * * *
Travel & entertainment * * * * *
Recruitment & relocation * * * * *
Auto & Van * * * * *
Contracted patient transport. * * * * *
Donations and gifts * * * * *
Allocated IT/Computing costs * * * * *
Other * * * * *
Total Other Expense * * * * *
* * * * *
Total G&A expenses * * * * *
* * * * *
* * * * *
Depreciation & Amortization: * * * * *
Building depreciation * * * * *
Equipment depreciation * * * * *
Goodwill amortization * * * * *
Other intangible amortization * * * * *
Amortization of deferred charges * * * * *
* * * * *
Total Depr. and Amortization * * * * *
* * * * *
* * * * *
Interest (income) and expense: * * * * *
Depository Interest * * * * *
Investment Income * * * * *
Bank Line Interest Expense * * * * *
Cap. Lease Interest Expense * * * * *
Other Interest Expense * * * * *
* * * * *
Total Interest (income)/expense * * * * *
* * * * *
Dispensary Business Budgeted * * * *
Office Expense * * * *
Optical * * * * *
* * * * *
Dispensary Business Budgeted * * * * *
Practice Expense * * * * *
* * * * *
Dispensary Business Monthly Fee * * * * *
*Confidential portions omitted and filed separately with the commission.
63
EXHIBIT 1.30(g)
EQUIPMENT
The financing or leasing costs of the following equipment shall be Office
Expenses in the amounts described below:
Argon Laser ($680.79 per month; outstanding principal balance as of
11/4/96: $5,446.32) 1993 Euro Van ($367.79 per month; outstanding principal
balance as of 11/4/96: $8,577.18)
Pachtometer ($541.81 per month; outstanding principal balance as of
11/8/96: $15,902.13)
Radial Keratotomy Equipment ($803.10 per month; outstanding principal
balance as of 11/4/96: $9,637.20)
Medical Records Computer ($623.09 per month; outstanding principal balance
as of 11/4/96: $22,475.24)
EXHIBIT 1.42
PREEXISTING OBLIGATION PAYMENTS
10. Bank Agreements*
a. First Bank and Illinois Eye Specialists
(i) Fixed Rate Commercial Promissory Note in the
amount of $11,500.00
(ii) Commercial Continuing Guaranty (unlimited) of
Xxxxxx X. Xxxxxxxxxxx, M.D.
(iii) Commercial Continuing Guaranty (unlimited) of
Xxxxxx X. Xxxxx, III, M.D.
(iv) Commercial Security Agreement securing $11,500.00
Note
(v) Agreement to Furnish Insurance in connection with
$11,500.00 Note.
b. First Bank and Illinois Eye Specialists
(i) Fixed Rate Commercial Promissory Note in the
amount of $17,195.00
(ii) Commercial Continuing Guaranty (unlimited) of
Xxxxxx X. Xxxxxxxxxxx, M.D.
(iii) Commercial Continuing Guaranty (unlimited) of
Xxxxxx X. Xxxxx, III, M.D.
(iv) Commercial Security Agreement securing $17,195.00
Note
(v) Agreement to Furnish Insurance in connection with
$11,500.00 Note.
c. First Bank and S&D Joint Venture
(i) Fixed Rate Commercial Promissory Note in the
amount of $28,000.00
(ii) Commercial Security Agreement securing $28,000.00
Note
(iii) Agreement to Furnish Insurance in connection
with $28,000.00 Note
d. First Bank, U.S. Small Business Administration,
S&D Joint Venture, Xxxxxx X. Xxxxxxxxxxx, M.D., Xxxxxx X. Xxxxx,
III, M.D., Eyes of Illinois Surgery Center, S.C. and Illinois Eye
Specialists, Ltd.
(i) Note in the amount of $550,000.00
(ii) Compensation Agreement for Services in Connection
with Application and Loan from (or in Participation with)
Small Business Administration
(iii) Assignment of Life Insurance Policy as
Collateral between Xxxxxx X. Xxxxx, III, M.D. and Xxxxxx X.
Xxxxxxxxxxx, M.D.
(iv) Agreement of Compliance
(v) Assignment of Lease and Consent to Assignment of
Lease
(vi) Mortgage
(vii) Lessor's Agreement
(viii) Guaranty of Xxxxxx X. Xxxxxxxxxxx, M.D. and
Xxxxxx X. Xxxxx, III, M.D.
(ix) Security Agreements with Eyes of Illinois Surgery
Center, S.C., S&D Joint Venture and Illinois Eye
Specialists, Ltd.
(x) Assurance of Compliance for Nondiscrimination
(xi) Agreement Entered into by the Maker and the
Holder of the Within-Described Note.
e. Troy Security Bank and Tri-City Eye Center, Ltd.,
in connection with Xx. Xxxxxxxxxxx'x and Xx. Xxxxx'x Industrial
Revenue Bond in the amount of $650,000.00.
(i) Security Agreement
(ii) Indenture of Trust
52
EXHIBIT 3.1
MEMBERS OF POLICY BOARD
BUSINESS MANAGER DESIGNEES
Xxxxxx X. Xxxxxxx
T. Xxxxx Xxxxx
REGIONAL PRACTICE DESIGNEES
Xxxxxx X. Xxxxxx, M.D.
Xxxx X. Xxxxxxxxxx, M.D.
Xxxxxx X. Xxxxx, III, M.D.
EXHIBIT 4.8
POWER OF ATTORNEY
See attached.
EXHIBIT 5.1
FORM OF EMPLOYMENT AGREEMENT (SHAREHOLDERS)
See attached.
EXHIBIT 5.1A
LIST OF INITIAL PHYSICIAN-SHAREHOLDERS
Xxxxxx X. Xxxxx, III, M.D.
Xxxxxx X. Xxxxxxxxxxx, M.D.
EXHIBIT 5.1B
FORM OF BUY-SELL AGREEMENT
The Buy-Sell Agreement referenced in Section 5.1(b) will address the following
concepts to the satisfaction of Business Manager and its counsel:
Applicable state statutes generally require that the shares of a
professional corporation held by a physician-shareholder be
transferred to a person qualified to render professional medical
services if (i) such shareholder dies, (ii) such shareholder becomes a
disqualified person, or (iii) the shares of a professional corporation
are transferred by operation of law or court decree to a disqualified
person. Illinois law requires that the articles of incorporation, by-
laws or a separate agreement provide for the purchase or redemption of
the shares of any shareholder upon death or disqualification.
Accordingly, the Buy-Sell Agreement must contain a provision providing
for (i) redemption, (ii) cross-purchase, or (iii) a combination
thereof, in the case of a shareholder's death or disqualification. In
addition, the transfer of shares to disqualified persons must be
specifically prohibited.
A provision must also be included which governs succession in the case
of death or disqualification of the last remaining shareholder of the
professional corporation. Business Manager and Practice will work
together to structure an arrangement mutually acceptable to both
parties.
Specifically, the Buy-Sell Agreement will incorporate the provisions set
forth on Schedule 1 attached to this Exhibit 5.1B.
---------- ------------
SCHEDULE 1
TO
EXHIBIT 5.1B
Definitions.
-----------
"Act" means the [applicable state Medical Corporation Act or Professional
Corporation Act].
"NovaMed" means NovaMed Eyecare Management, LLC, a Delaware limited
liability company.
"NovaMed Agreement" means that certain ___________ Agreement dated as of
_________ __, 199_, by and among the Corporation, the Shareholders and NovaMed.
["Partnership" means the limited partnership formed pursuant to that
certain Limited Partnership Agreement by and between __________ and __________,
dated ______________.] [If applicable]
"Selling Shareholder" means a Shareholder affected by a Triggering Event
other than a Final Triggering Event.
"Shares" means the shares of common stock of the Corporation, and any
shares of any other class of stock, presently authorized and issued or which the
Corporation may hereafter authorize and issue, including subscription and other
purchase rights relative to any such shares of stock and all securities and
obligations convertible into such shares of stock, in each case whether now or
hereafter issued.
"Transfer" means any sale, gift, bequest, distribution, disposition,
assignment, pledge or any other voluntary or involuntary transfer, disposition
or encumbrance, including any disposition by operation of law.
"Triggering Event" means any of the following events:
(a) the death of a Shareholder;
(b) the disability of a Shareholder (which is defined as a Shareholder's
inability to engage in the practice of medicine for ninety (90) days
within any period of one hundred eighty (180) consecutive days);
(c) the disqualification of a Shareholder from the practice of medicine;
(d) the termination of a Shareholder's employment or active involvement
with the Corporation for any reason; or
(e) the voluntary or involuntary transfer, transfer by operation of law
(including without limitation a transfer in connection with a divorce
or bankruptcy), or any other transfer or attempted transfer of Shares
or any right or interest therein in violation of this Agreement.
Restriction On Transfer.
-----------------------
Each Shareholder agrees not to make any Transfer of Shares that he or she
now owns or may hereafter own, outright or beneficially, except in accordance
with and as expressly permitted in this Agreement. Except as expressly
permitted in this Agreement, no Transfer of Shares may be made by any
Shareholder without the prior written consent of the remaining Shareholders, and
no such Transfer shall be effective unless and until the Transferee agrees in
writing to be subject to and bound by all of the terms, conditions and
restrictions of this Agreement and the NovaMed Agreement by signing a
counterpart hereof and thereof. Any Transfer of Shares not in strict compliance
with this Agreement shall be null and void ab initio.
-- ------
Additional Shareholders.
-----------------------
The parties hereto acknowledge and agree that from time to time other
physicians may acquire Shares in the Corporation. Notwithstanding the
foregoing, the Corporation shall not issue any Shares to another person unless
such person agrees in writing to be subject to and bound by all of the terms,
conditions and restrictions of this Agreement and the NovaMed Agreement by
signing a counterpart hereof and thereof.
Licensing Requirement.
---------------------
Under no circumstances shall any Transfer or issuance of Shares of the
Corporation to an additional shareholder be valid unless the proposed new or
additional shareholder is a licensed physician in good standing under the laws
of the State of Missouri, except as otherwise permitted under the Act.
Final Triggering Event.
----------------------
(a) Application. Upon the occurrence of a Triggering Event affecting all
-----------
Shareholders simultaneously or affecting the last remaining Shareholder(s)
(each, a "Final Triggering Event"), the following provisions shall apply and
shall supersede any other provision contained in this Agreement relating to
cross-purchases or redemptions of a Selling Shareholder's Shares.
(b) Repurchase of Shares. Promptly upon the occurrence of a Final
--------------------
Triggering Event, but in any event not later than within three (3) days, the
Shareholder(s) to whom such Final Triggering Event relates and any Selling
Shareholder with respect to whom this Section __
supersedes the application of any other provision of this Agreement pursuant to
subsection (a) above, and/or such Shareholders' estates, transferees or other
representatives (all such Shareholders or such Shareholders' estates,
transferees or other representatives, as the case may be, hereinafter referred
to as "Terminating Shareholders") shall notify NovaMed's Medical Director of the
occurrence of such Final Triggering Event, and NovaMed's Medical Director shall
have the right to purchase Shares in accordance with subsection (c) below or to
designate a New Shareholder in accordance with the provisions of the NovaMed
Agreement. Upon such designation, the Terminating Shareholders shall (i) sell to
the Corporation, and the Corporation shall purchase from each such Terminating
Shareholder, ninety-nine percent (99%) of all Shares then held by each such
Terminating Shareholder, and (ii) sell to NovaMed's Medical Director or the New
Shareholder (as defined in the NovaMed Agreement), as the case may be, and
NovaMed's Medical Director or such New Shareholder, as the case may be, shall
purchase from each such Terminating Shareholder, the remainder of the Shares
then held by each such Terminating Shareholder, in accordance with the
provisions of this Section __.
(c) Purchase Price. The purchase price to be paid for each Terminating
--------------
Shareholder's Shares (the "Purchase Price") shall be as follows:
(i) The Purchase Price for the Shares to be purchased by the Corporation
shall consist of each Terminating Shareholder's pro rata share of the
[Partnership] interests held by the Corporation.
(ii) The Purchase Price for the Shares to be purchased by NovaMed's Medical
Director or the New Shareholder, as the case may be, shall be an
amount equal to ______________________________________.
(d) Closing. The closing of any purchase and sale pursuant to this
-------
Section __ (the "Closing") shall take place within [thirty (30)] days after the
Final Triggering Event at the principal office of the Corporation or at such
other place as the parties to such purchase and sale may mutually agree. At the
Closing, each Terminating Shareholder shall deliver certificates for the Shares
to be purchased, duly endorsed in blank, and such Shares shall be conveyed (i)
to the Corporation effective as of the close of business of the day of the Final
Triggering Event, and (ii) to NovaMed's Medical Director or the New Shareholder,
as the case may be, effective as of the opening of business on the day after the
Final Triggering Event, in each case free and clear of all claims, liens,
encumbrances and other rights of third parties, and the Corporation and
NovaMed's Medical Director or the New Shareholder, as the case may be, shall
deliver the Purchase Price in the form of instruments of transfer, in form and
substance satisfactory to the Terminating Shareholders, assigning and
transferring to the Terminating Shareholders, effective as of the date of the
Final Triggering Event, each Terminating Shareholder's share of the
[Partnership] interests and all of the Corporation's right, title and interest
therein, free and clear of all claims, liens, encumbrances and other rights of
third parties, or in immediately available funds, as applicable.
(e) Taxable Year. The Corporation's taxable year shall be closed as of
------------
the close of business of the day of the Final Triggering Event.
(f) Violation of Law. In the event that the consummation of the
----------------
purchase and sale of Shares as contemplated under this Section __ violates
applicable law, the Terminating Shareholders and NovaMed's Medical Director
shall in good faith negotiate and consummate an alternative transaction
structure, including without limitation, the purchase of the Corporation's
assets and assumption of the Corporation's liabilities by NovaMed's Medical
Director or his designee, which will allow (i) the continuation of the
Corporation's business by the Corporation or a successor entity, (ii) the
continued performance by the Corporation or a successor entity and NovaMed of
their respective obligations under that certain Management Services Agreement by
and between NovaMed and the Corporation, dated as of _______ __, 199_, and (iii)
the transfer of the [Partnership] interests held by the Corporation to the
Terminating Shareholders.
(g) NovaMed's Failure to Designate New Shareholder. In the event that
----------------------------------------------
NovaMed's Medical Director fails to elect to purchase Shares or to designate a
New Shareholder as required pursuant to the NovaMed Agreement, the provisions of
this Section __ shall not be binding on the Corporation or the Terminating
Shareholders.
Legend on Certificates.
----------------------
The certificates representing all Shares now or hereafter owned by the
Shareholders shall be subject to the terms of this Agreement, and shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS'
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION. THE SHARES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT IN STRICT ACCORDANCE WITH THE
TERMS OF THE SHAREHOLDERS' AGREEMENT. BY ACCEPTING THE SHARES OF STOCK
EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES TO BE BOUND BY THE
SHAREHOLDERS' AGREEMENT.
Termination.
-----------
This Agreement and all restrictions on the transfer of Shares created
hereby shall terminate upon the bankruptcy or receivership of the Corporation or
the execution by all parties hereto of a written instrument terminating this
Agreement. Termination of this Agreement for any reason shall not affect any
right or remedy existing hereunder prior to the effective date of termination.
Binding Effect. This Agreement is binding upon, and shall inure to the
--------------
benefit of, the Corporation, its successors, and assigns and to the Shareholders
and their respective heirs, personal representatives, successors, and assigns.
EXHIBIT 5.2A
FORM OF EMPLOYMENT AGREEMENT (NONSHAREHOLDERS)
See attached.
