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EXHIBIT 10.6
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by an * and [ ], have been
separately filed with the Commission.
MANAGEMENT SERVICES AGREEMENT
by and among
New Atlanta Ear, Nose & Throat Associates, P.C.,
PSC Management Corp.
and
Physicians' Specialty Corp.
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TABLE OF CONTENTS
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Section 1. Key Definitions 1
1.1 GAAP 2
1.2 Net Practice Revenues 2
1.3 Physician Expenses 2
1.4 Physician Shareholders 2
1.5 Practice Employees 2
1.6 Practice Expenses 2
1.7 State 3
Section 2. Advisory Board4
2.1 Formation and Operation of the Advisory Board 4
2.2 Functions of the Advisory Board 4
Section 3. Obligations of Manager 5
3.1 Provision of Services 5
3.2 Medical Offices 5
3.3 Furniture, Fixtures and Equipment 6
3.4 Financial Planning and Goals 6
3.5 Business Office Services 6
3.6 Deposit of Net Practice Revenues 7
3.7 Revenue Reports 8
3.8 Support Services
3.9 Administrator 8
3.10 Personnel 8
3.11 Professional Services 9
3.12 Patient and Financial Records 9
3.13 Marketing Services 10
3.14 Physician Recruitment 10
3.15 Expansion of Practice 10
3.16 Performance of Business Office Services 10
3.17 Force Majeure 10
3.18 Payment of Practice Expenses 11
3.19 Budgets 11
Section 4. Obligations of Practice12
4.1 Physician Expenses 12
4.2 Professional Standards 12
4.3 Provider and Payor Relationships 14
4.4 Physician Contracts and Powers of Attorney 14
4.5 Restrictive Covenants 14
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4.6 Professional Dues and Education Expenses 17
4.7 Provision of Services by Practice 17
4.8 Physician Shareholder Agreement 17
Section 5. Incentive Compensation 17
5.1 Incentive Amounts 17
5.2 Mechanics of Draws 18
5.3 Reconciliation 18
5.4 Assignment of Security Interest 18
Section 6. Term and Termination 20
6.1 Term 20
6.2 Termination 20
6.3 Remedies Upon Termination 22
6.4 Repurchase of Equipment and Supplies 22
Section 7. Representations and Warranties 22
7.1 Representations and Warranties of Practice 22
7.2 Representations and Warranties of Manager 23
Section 8. Insurance and Indemnity24
8.1 Insurance to be Maintained by Practice 24
8.2 Indemnification by Manager 24
8.3 Indemnification by Practice 24
8.4 Indemnification Procedure 24
8.5 Key Man Insurance 25
Section 9. Assignment25
Section 10. Compliance with Regulations 25
10.1 Practice of Medicine 25
10.2 Subcontracts 26
Section 11. Independent Relationship26
11.1 Independent Contractor Status 26
11.2 Referral Arrangements 27
Section 12. Guarantees 27
Section 13. Name; License 28
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Section 14. Miscellaneous 28
14.1 Notices 28
14.2 Additional Acts 29
14.3 Governing Law 30
14.4 Captions, etc 30
14.5 Severability 30
14.6 Changes in Reimbursement 30
14.7 Modifications 30
14.8 No Rule of Construction 30
14.9 Counterparts 31
14.10 Binding Effect 31
14.11 Enforcement Rights 31
14.12 Costs of Enforcement 31
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MANAGEMENT SERVICES AGREEMENT
MANAGEMENT SERVICES AGREEMENT, effective as of ________, 1997 (the
"Effective Date"), by and among NEW ATLANTA EAR, NOSE & THROAT ASSOCIATES, P.C.,
a Georgia professional corporation (the "Practice"); PSC MANAGEMENT CORP., a
Delaware corporation ("Manager"); and PHYSICIANS' SPECIALTY CORP., a Delaware
corporation ("Parent").
W I T N E S S E T H :
WHEREAS, Manager is a wholly-owned subsidiary of Parent and is in the
business of managing medical practices and providing management services to
individual physicians and physician practice groups;
WHEREAS, pursuant to an Asset Purchase Agreement dated as of November
26, 1996, between Atlanta Ear, Nose & Throat Associates, P.C. and its
shareholders and Manager (the "Asset Purchase Agreement"), Manager has purchased
substantially all the assets utilized by Practice in connection with the medical
practice conducted by Atlanta Ear, Nose & Throat Associates, P.C.
WHEREAS, subject to the terms and conditions of this Agreement,
Practice desires to engage Manager to provide to Practice management services,
facilities, personnel, equipment and supplies necessary for the medical practice
conducted by Practice, and Manager desires to accept such engagement;
WHEREAS, the basis for the financial considerations provided in this
Agreement are derived from the revenues to be generated by the medical practice
of Practice, the basis for which has been documented by Atlanta Ear, Nose &
Throat Associates, P.C. and delivered to Manager prior to the formation and
agreement of such financial considerations; and
WHEREAS, Parent joins in this Agreement to guarantee the performance by
Manager of its obligations hereunder.
NOW THEREFORE, in consideration of the premises and the covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged by the
parties to this Agreement, Practice, Manager and Parent (collectively, the
"Parties") hereby agree as follows:
SECTION 1. KEY DEFINITIONS.
For purposes of this Agreement, the following are certain important
defined terms used in this Agreement (a complete list of defined terms is set
forth on Appendix A.
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1.1 GAAP. The term "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, in
statements and pronouncements of the Financial Accounting Standards Board, in
such other statements by such other entity, or other practices and procedures as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination. For purposes of
this Agreement, GAAP shall be applied in a manner consistent with the practices
used by Parent and Manager.
1.2 NET PRACTICE REVENUES. The term "Net Practice Revenues" shall mean
all revenues, computed on an accrual basis as defined by GAAP, (after taking
into account adjustments for uncollectible accounts, discounts, Medicare,
Medicaid, workers' compensation, professional courtesy discounts and other
write-offs) generated by or on behalf of Practice or its employees as a result
of professional medical services furnished to patients, and other fees or income
generated by such persons in their capacity as Physician Shareholders, Practice
Employees and employees of Practice, whether rendered in an inpatient or
outpatient setting and whether generated from health maintenance organizations,
preferred provider organizations, Medicare, Medicaid or rendered to other
patients, including, but not limited to, payments received under any capitation
arrangement. The term "Net Practice Revenues" shall also include any ancillary
services revenues for services provided at the Medical Offices.
1.3 PHYSICIAN EXPENSES. The term "Physician Expenses" is defined in
Section 4.1 of this Agreement.
1.4 PHYSICIAN SHAREHOLDERS. The term "Physician Shareholders" shall
mean those individuals who are duly licensed to practice medicine in the State
and who are shareholders of Practice.
1.5 PRACTICE EMPLOYEES. The term "Practice Employees" shall mean: (a)
those individuals who are duly licensed to practice medicine in the State and
who are employees of Practice (other than Physician Shareholders), or those
individuals who are otherwise under contract with Practice to provide physician
and/or medical services to patients, specifically including nurse practitioners,
certified registered nurse anesthetists, physician assistants, Fellows, surgical
assistants, certified nurse midwives, individuals with a Masters in Social Work
degree, physical therapists, and psychologists with a Masters or a Doctorate
degree; and (b) those individuals (other than those described in Section 1.5(a))
required by law, regulatory authority or policy as of the Effective Date, who
must be billed through and by a licensed physician and who are therefore
required to be employees of the Practice.
1.6 PRACTICE EXPENSES. The term "Practice Expenses" shall mean all
expenses incurred in the operation of the medical practice of Practice at the
Medical Offices (as defined in Section 3.1) or otherwise, whether by Manager or
by Practice, including, but not limited to: (a) depreciation, amortization,
salaries, benefits and other direct costs of all employees and
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independent contractors of Practice (but not including salaries, benefits or
other direct costs of Practice Employees (as defined in Section 1.5) or
Physician Shareholders (as defined in Section 1.4)); (b) rent and other
obligations under leases or subleases for the Medical Offices and equipment used
by Practice; (c) personal property taxes and intangible taxes assessed against
assets used by Practice (d) charitable contributions budgeted and approved by
Manager and Practice; (e) interest expense on indebtedness of or specifically
related to the medical practice of Practice, including, without limitation,
capital expenditures; (f) utility expenses relating to the Medical Offices; (g)
subject to the limitation of Section 3.18, twelve and one-half percent (12-
1/2%) of Net Practice Revenues (as defined in Section 1.2), such amount to be
retained by Manager as payment for its services and non-allocable costs incurred
by Manager attributable to the provision of management services; (h) other
expenses incurred by Practice or Manager in carrying out their respective
obligations under this Agreement, except as otherwise provided herein; (i)
amounts paid by Manager in reimbursement of Practice, pursuant to Section 4.1,
for salaries and benefits paid by Practice for those individuals described in
Section 1.5(b); and (j) any reserves reasonably deemed prudent by Manager for
anticipated costs or expenses of the medical practice of Practice.
The term "Practice Expenses" shall not include, among other things: (1)
any federal, state or local income taxes of Practice or Manager, or the costs of
preparing federal, state or local tax returns; (2) any salaries or benefits
payable to Practice Employees or Physician Shareholders, except as covered under
subsection (i) above; (3) physician licensure fees, board certification fees and
costs of membership in professional associations for Practice Employees and
Physician Shareholders; (4) costs of continuing professional education for
Practice Employees and Physician Shareholders; (5) costs associated with legal,
accounting and professional services incurred by or on behalf of Practice other
than as described in the first sentence of Section 3.11; (6) liability judgments
assessed against Practice, Practice Employees or Physician Shareholders in
excess of policy limits; (7) direct personal expenses of Physician Shareholders
or Practice Employees of a kind which are customarily charged to physician
shareholders and practice employees (including, but not limited to, cellular
phone expenses, car allowances, costs of employees providing personal services
to particular Physician Shareholders or Practice Employees, and like expenses
personal in nature); (8) capital expenditures except to the extent of
depreciation and amortization; or (9) any costs or expenses not designated in
this Agreement as being Practice Expenses or costs and expenses designated as
the responsibility of Manager.
Practice Expenses incurred in any budget period in excess of 120% of
budgeted amounts (measured on an aggregate, not line item, basis) resulting in
more than a 20% decrease in the budgeted pre-tax income of Practice shall be the
sole obligation of Manager, unless incurrence of such expenses is approved by
the Advisory Board described in Section 2.1 below, such approval not to be
unreasonably withheld if the expenses are commercially reasonable in nature and
amount under the circumstances.
1.7 STATE. The term "State" shall mean the State of Georgia, which is
where the medical practice of Practice is located.
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SECTION 2. ADVISORY BOARD.
2.1 FORMATION AND OPERATION OF THE ADVISORY BOARD. Manager and Practice
shall establish an Advisory Board responsible for advising Manager in connection
with the development of management and administrative policies for the overall
operation of the medical practice of Practice. The Advisory Board shall consist
of four (4) members. Manager shall designate, in its sole discretion and from
time to time, two (2) members of the Advisory Board. Practice shall designate,
in its sole discretion and from time to time, two (2) members of the Advisory
Board. Except as may otherwise be provided, the act of a majority of the members
of the Advisory Board shall be the act of the Advisory Board.
2.2 FUNCTIONS OF THE ADVISORY BOARD. The Advisory Board shall review,
evaluate and make recommendations to Practice and Manager with respect to the
following matters:
(a) Annual Budgets. All annual capital and operating budgets
prepared by Manager, as set forth in Sections 3.4 and 3.19, shall be subject to
review and approval by the Advisory Board, which shall make recommendations to
Manager with respect to proposed changes therein.
(b) Physician Employment and Recruitment. The Advisory Board
shall advise Manager and Practice with respect to the types of physicians
required for the efficient operation of the medical practice of Practice and the
content of all physician employment and recruitment contracts to be utilized by
Practice.
(c) Strategic Planning. The Advisory Board shall make
recommendations to Manager regarding the development of long-term strategic
planning objectives for Practice.
(d) Capital Expenditures. The Advisory Board shall make
recommendations to Manager regarding the priority of major capital expenditures
for the medical practice of Practice.
(e) Capital Improvements and Expansion. Any renovation and
expansion plans and capital equipment expenditures with respect to the
operations of the medical practice of Practice shall be reviewed by the Advisory
Board and shall be based, in the judgment of Manager, upon economic feasibility,
physician support, productivity and then-current market conditions.
(f) Provider and Payor Relationships. The Advisory Board shall
review and advise Manager and Practice with respect to the establishment or
maintenance of relationships with institutional healthcare providers and payors.
(g) Ancillary Services. The Advisory Board shall review and
make recommendations to Manager and Practice regarding the provision of
ancillary services based upon the pricing, access to and quality of such
services.
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(h) Patient Fees, Collection Policies. At least annually, the
Advisory Board shall review and advise Manager and Practice with respect to the
fee schedule for all physicians and ancillary services rendered by Practice.
(i) Advertising. The Advisory Board shall advise Manager with
respect to all advertising and other marketing of services performed at the
Medical Offices of Practice, including design and erection of exterior signs.
(j) Exceptions to Inclusion in Net Practice Revenues. The
Advisory Board will review and make recommendations to Manager and Practice with
respect to the proposed exclusion of any revenue from Net Practice Revenues.
(k) Grievance Referrals. The Advisory Board shall consider,
review and make recommendations to Manager and Practice with respect to any
matters arising in connection with the operations of Practice that are not
specifically addressed in this Agreement and as to which Manager or Practice
requests consideration by the Advisory Board.
Notwithstanding any contrary provision of this Agreement, it is acknowledged and
agreed that other than as provided in Section 2.2(a), recommendations of the
Advisory Board are intended for the advice and guidance of Manager and Practice
and that the Advisory Board does not have the power to bind Manager or Practice.
Where discretion with respect to any matter is vested in Manager under the terms
of this Agreement, Manager shall have ultimate responsibility for the exercise
of such discretion, notwithstanding any recommendation of the Advisory Board.
Manager and Practice shall, however, take such recommendations of the Advisory
Board into account in good faith in the exercise of such discretion.
SECTION 3. OBLIGATIONS OF MANAGER.
3.1 PROVISION OF SERVICES. Practice hereby engages Manager for the term
of this Agreement, and Manager hereby accepts such engagement, to provide to
Practice the business management and services, personnel, equipment and supplies
provided for in this Section 3 (collectively "Management Services"). Manager
shall provide the Management Services at the medical offices located at those
locations set forth on Exhibit 3.1, or at such other place or places as may be
agreed upon by the parties. The medical offices or such other places at which
the Management Services are to be provided are referred to as the "Medical
Offices."
3.2 MEDICAL OFFICES. Manager shall pay out of Net Practice Revenues all
rent due from the Effective Date forward with respect to the Medical Offices,
and all costs of repairs, maintenance and improvements, telephone, electric, gas
and water utility expenses, insurance, normal janitorial services, refuse
disposal and all other costs and expenses reasonably incurred in connection with
the operations of Practice including, but not limited to, related real or
personal property lease payments and expenses, taxes and insurance. Manager
shall consult with Practice with respect to the condition, use and needs of the
Medical Offices, as expanded, improved or relocated from time to time.
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3.3 FURNITURE, FIXTURES AND EQUIPMENT. Manager agrees to provide or
have provided to medical offices those supplies and items of furniture, fixtures
and equipment as are determined by Manager, after consultation with Practice, to
be necessary and/or appropriate for Practice's operations at the Medical Offices
during the term of this Agreement (all such items of furniture, fixtures and
equipment are collectively referred to hereinafter as the "FFE") subject,
however, to the following conditions:
(a) Practice shall have the use of the FFE only during the
term of this Agreement and title to the FFE shall be and remain in Parent,
Manager and/or PSC at all times during such term.
(b) Manager shall be responsible for, and pay for out of Net
Practice Revenues, all repairs, maintenance and replacement of the FFE, except
for repairs, maintenance and replacement necessitated by the negligence of
Practice, its employees and agents.
3.4 FINANCIAL PLANNING AND GOALS. Manager will prepare, in consultation
with Practice, annual capital and operating budgets reflecting, in reasonable
detail anticipated revenues and sources and uses of capital for growth in the
medical practice of Practice.
3.5 BUSINESS OFFICE SERVICES. Practice hereby appoints Manager as its
sole and exclusive manager and administrator of all business functions and
services related to Practice's services during the term of this Agreement.
Without limiting the generality of the foregoing, in providing the Management
Services, Manager shall perform the following functions:
(a) Manager shall evaluate, negotiate and administer all
managed care contracts on behalf of Practice and shall consult with Practice on
all professional or clinical matters relating thereto.
(b) Manager shall provide ongoing assessment of business
activity including product line analysis, outcomes monitoring and patient
satisfaction.
(c) Manager shall be responsible for ordering and purchasing
all medical and office supplies reasonably required in the day-to-day operation
of the medical practice of Practice at the Medical Offices.
(d) Manager shall make application and negotiate for the
procurement of professional liability insurance covering persons in the coverage
amounts set forth in Section 8.1. This coverage shall be made available to
Practice. Practice, however, shall have the right to obtain coverage from an
alternative provider reasonably acceptable to Manager.
(e) Manager shall xxxx and collect from payors, intermediaries
and patients all professional fees for medical services and for ancillary
services performed at the Medical Offices by Practice and Practice's employees
and agents, including, but not limited to, Physician
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Shareholders and Practice Employees. For the term of this Agreement, Practice
hereby appoints Manager power of attorney and as its true and lawful
attorney-in-fact for the following purposes:
(i) To xxxx payors, fiscal intermediaries or patients
in Practice's name, under its provider number(s) when obtained and on its
behalf, and until such time as Practice has obtained its provider number(s),
xxxx, in the Physician Shareholders' and Practice Employees' names under their
respective provider numbers and on their behalf;
(ii) To collect accounts receivable and claims for
reimbursement that are generated by such xxxxxxxx in Practice's name and on
Practice's behalf, and in the name and on behalf of all Physician Shareholders
and Practice Employees;
(iii) To place such accounts for collection, settle
and compromise claims, and institute legal action for the recovery of accounts;
(iv) Following receipt by Practice, to take
possession of payments from patients, Blue Shield, insurance companies,
Medicare, Medicaid and all other payors with respect to services rendered by
Practice, Physician Shareholders and Practice Employees, and Practice hereby
covenants to forward such payments to Manager for deposit;
(iv) To endorse in the name of Practice, or any
Physician Shareholder or Practice Employee, any notes, checks, money orders,
insurance payments and any other instruments received by Practice as payment of
such accounts receivable;
(v) To collect in Practice's name and on its behalf,
and in the name and on behalf of all Physician Shareholders and Practice
Employees, all Net Practice Revenues;
(vi) To pledge the accounts receivable as collateral
or otherwise encumber the accounts receivable without the approval of the
Advisory Board or Practice (all actions with respect to any discounting, selling
or encumbering accounts receivable involving Medicare or Medicaid shall not be
inconsistent with applicable laws and regulations relating thereto); and
(vii) To sign checks on behalf of Practice and make
withdrawals from Practice bank accounts for payments specified in this Agreement
and as requested from time to time by Practice.
3.6 DEPOSIT OF NET PRACTICE REVENUES. During the term of this
Agreement, all Net Practice Revenues collected shall be received directly by
Practice at the Practice location, and each business day Practice will transfer
all collected Net Practice Revenues into a bank account as specifically directed
by Manager, of which Manager shall be the owner and from which Manager shall
have the sole right to make withdrawals to pay Practice Expenses and Incentive
Compensation (as defined in Section 5.1) on a monthly basis and, at the
direction of Practice, to transfer pursuant to Section 5.2 remaining Net
Practice Revenues by the fifteenth day of each
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month in arrears to an account designated by Practice from which Practice will
pay Physician Expenses. Manager shall maintain its accounting records in such a
way as to clearly segregate Net Practice Revenues from other funds of Manager.
Practice and Manager hereby agree to execute from time to time such documents
and instructions as shall be required by the Credit Facility Lender (as defined
in Section 5.4(b)) and mutually agreed upon to effectuate the foregoing
provisions and to extend or amend such documents and instructions.
3.7 REVENUE REPORTS. Manager shall maintain revenue reports, as
determined by the books and records of Manager, with respect to the operations
of Practice. Revenue reports shall reflect the total gross revenues and Net
Practice Revenues generated by or on behalf of the medial practice of Practice.
Manager shall provide Practice with monthly revenue reports and shall provide a
year-end revenue report for Practice within ninety (90) days after the end of
each calendar year.
3.8 SUPPORT SERVICES. Manager shall provide all reasonable and
necessary computer, management information, bookkeeping, billing and collection
services, accounts receivable and accounts payable management services, laundry,
linen, janitorial and cleaning services and management services to improve
efficiency and workflow systems and procedures, as determined by Manager after
consultation with Practice.
3.9 ADMINISTRATOR. Manager shall provide an Administrator to manage and
administer all of the day-to-day business functions and services of the medical
practice of Practice. The Administrator will be selected by Manager after prior
consultation with Practice, and Manager shall determine the salary and fringe
benefits of the Administrator, but shall consult with Practice with respect
thereto.
3.10 PERSONNEL. Manager shall provide such non-physician personnel as
determined by Manager, after consultation with Practice, to be reasonably
necessary for the effective operation of the medical practice of Practice at the
Medical Offices, subject, however, to the following:
(a) Manager shall provide to Practice all nurses, medical
records personnel and other medical support personnel as requested by Practice
and as shall be reasonably necessary for the operation of Practice's medical
practice at the Medical Offices. As to the nursing and non-physician medical
support personnel provided under this Section 3.10(a), Manager shall determine
the salaries and benefits of all such personnel, but shall consult with Practice
with respect thereto. Manager shall also recommend the assignment of all such
personnel to perform services at the Medical Offices; provided, however, that
Practice shall have the right to approve, based primarily on professional
competence, the assignment of all non-physician medical support personnel to
provide services at the Medical Offices and Manager shall, at Practice's
request, reassign and replace such personnel from time to time who are not, in
Practice's reasonable and good faith judgment, adequately performing the
required professional services.
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(b) Manager shall provide to Practice all business office
personnel (i.e., clerical, secretarial, bookkeeping and collection personnel)
reasonably necessary for the maintenance of patient records, collection of
accounts receivable and upkeep of the financial books of account to the extent
that same are required for, and directly related to, the operation of the
medical practice by Practice. As to the personnel provided under this Section,
Manager shall determine the salaries and fringe benefits of all such personnel,
but shall consult with Practice with respect thereto.
(c) In exercising its judgment with regard to personnel as
provided in Section 3.9 and this Section 3.10, Practice agrees not to
discriminate against such personnel on the basis of race, religion, age, sex,
disability or national origin.
(d) In recognition of the fact that personnel provided to
Practice under this Agreement may perform services from time to time for others,
this Agreement shall not prevent Manager from performing such services for
others or restrict Manager from so using such personnel. Manager will make every
effort consistent with sound business practices to honor the specific requests
of Practice with regard to the assignment of such personnel; provided, however,
that except for non-physician medical support personnel, Manager hereby retains
the sole and exclusive decision-making authority regarding all such personnel
assignments.
(e) If Practice requests secretarial, clerical, bookkeeping,
management and non-physician medical support personnel in addition to personnel
determined to be necessary and/or appropriate by Manager, and such personnel
and/or services are provided by mutual agreement between Manager and Practice,
all costs and expenses incurred by Manager in providing such additional
personnel shall be paid to Manager by Practice.
3.11 PROFESSIONAL SERVICES. Manager shall use reasonable efforts to
arrange for or render to Practice such business, legal and financial management
consultation and advice as may be reasonably required or requested by Practice
and directly related to the operations of Practice. Manager shall not be
responsible for any services requested by or rendered to any individual,
employee or agent of Practice not directly related to the operations of Practice
nor shall Manager be responsible for rendering any legal or tax advice or
services or personal financial services to Practice or any employee or agent of
Practice.
3.12 PATIENT AND FINANCIAL RECORDS. Manager shall maintain all files
and records relating to the operation of Practice including, but not limited to,
customary financial records and patient files. The management of all files and
records shall comply with all applicable federal, state and local laws,
statutes, rulings, orders, ordinances and regulations ("Laws"), and all files
and records shall be located so that they are readily accessible for patient
care, consistent with ordinary records management practices. Practice shall
supervise the preparation of, and direct the contents of, patient medical
records, all of which shall be and remain confidential and the property of
Practice. Manager shall have reasonable access to such records and, subject to
applicable Laws and accreditation policies, Manager shall be permitted to retain
true and complete copies of such records. Manager hereby agrees to preserve the
confidentiality of such
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patient medical records and to use the information in such records only for the
limited purposes necessary to perform the Management Services and, within the
limits of its responsibilities hereunder, to ensure that provision is made for
appropriate care for patients of Practice.
3.13 MARKETING SERVICES. Manager shall use its commercially reasonable
efforts to market the medical services provided by Practice. Such marketing
shall be undertaken in a tasteful and professional manner, shall be in
compliance with applicable Laws relating to advertising by the medical
profession, and shall be subject to review by the Advisory Board as set forth in
Section 2.2(i). The parties agree that, at the option of Manager, the
"Physicians' Specialty Corp." name may be included on any or all signage,
letterhead, professional announcements and the like relating to Practice subject
to state law restrictions on the corporate practice of medicine.
3.14 PHYSICIAN RECRUITMENT. At the request of Practice, Manager shall
perform administrative services relating to the recruitment of physicians for
Practice. Practice shall determine the need for additional physicians in
consultation with Manager. All such physicians recruited by Manager and accepted
by Practice shall be shareholders or employees of Practice (if such physicians
are hired as employees) and not of Manager. Any expenses incurred in the
recruitment of physicians shall be treated as Practice Expenses. Practice agrees
that all physicians hired by the Practice shall execute a Physician Employment
Agreement in a form approved by Manager (the "Physician Employment Agreements").
Practice agrees not to change the form of the Physician Employment Agreement
without Manager's prior written consent.
3.15 EXPANSION OF PRACTICE. Manager will assist Practice in attempting
to add additional office-based procedures, in establishing new satellite
office(s) that are commercially reasonable and beneficial to Practice, as
determined by Practice and Manager to be beneficial to Practice, and in
developing relationships and affiliations with physicians and other specialists,
hospitals, networks, health maintenance organizations, preferred provider
organizations, etc., to assist in the continued growth and development of the
medical practice of Practice. Practice will cooperate with Manager in such
efforts and use its best efforts to assist Manager with respect thereto. Without
limiting the generality of the foregoing, Practice will not enter into any
agreements with respect to any such matters without the prior consent of
Manager.
3.16 PERFORMANCE OF BUSINESS OFFICE SERVICES. Manager is hereby
expressly authorized to perform its business office services hereunder in
whatever reasonable manner it deems appropriate to meet the day-to-day
requirements of the non-medical business functions of Practice's medical
practice at the Medical Offices. Manager may perform some or all of the business
office functions of Practice at locations other than at the Medical Offices.
3.17 FORCE MAJEURE. Manager shall not be liable to Practice for failure
to perform any of the services required under this Agreement in the event of
strikes, lockouts, calamities, acts of God, unavailability of supplies or other
events over which Manager has no control for so long as such event continues and
for a reasonable period of time thereafter.
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The information below marked by * and [ ] has been omitted pursuant to
a request for confidential treatment. The omitted portion has been separately
filed with the Commission.
3.18 PAYMENT OF PRACTICE EXPENSES. Manager shall pay all Practice
Expenses as they become due out of Net Practice Revenues; provided, however,
that Manager may, in the name of and on behalf of Practice, contest in good
faith any claimed Practice Expenses as to which there is any dispute regarding
the nature, existence or validity thereof. Manager shall be entitled, on a
monthly basis, as a Practice Expense payable to itself, to retain from Net
Practice Revenues the amount specified in Section 1.6(g). The amounts retained
pursuant to Section 1.6(g) will not exceed [*] on an annual basis, unless
Practice expands its number of Physician Shareholders or physician Practice
Employees in connection with an asset or practice acquisition consummated by
Manager or Parent (or affiliate thereof). In such case the amount of [*] in the
preceding sentence shall be increased by an amount equal to the product of (x)
[*], (y) the trailing twelve (12) months of net practice revenues of said
acquisition target and (z) [*]. For example, an acquisition of assets by
Manager or Parent (or affiliate thereof) of a practice which has physicians join
the Practice as Physician Shareholders or Practice Employees and has trailing
twelve months net practice revenue of [*] will result in an increase in the [*]
amount described above by [*], which would result an aggregate retained amount
on an annual basis of [*] after such acquisition. Practice acknowledges and
agrees that the amount to be retained by Manager pursuant to Section 1.6(g) is
reasonable and fair, given the undertakings of Manager as set forth in this
Agreement and the other benefits and value that accrue to Practice as a result
of this Agreement.
3.19 BUDGETS.
(a) As part of the Manager's responsibilities under this
Agreement, the Manager shall prepare annual capital and operating budgets for
the Practice for each budget period in accordance with the provisions of this
Section 3.19. As used herein, a budget period means a fiscal year of Practice
unless otherwise provided.
With respect to each budget period following the initial
budget period, the Manager shall prepare and deliver a preliminary draft of each
such budget to the Advisory Board at least 30 days prior to the commencement of
the budget period to which such budget relates. The Advisory Board shall provide
any comments or suggested changes to such preliminary drafts to the Manager
within 15 days after receipt thereof. The Manager shall then submit a revised
budget to the Advisory Board for approval by the Advisory Board no later than 15
days after the end of the 15-day period referred to in the immediately preceding
sentence. The Advisory Board shall then approve or disapprove of, but not modify
or amend the budget within 15 days of receiving it. The foregoing time periods
during which drafts of the budget are to be delivered and approved shall be
subject to adjustment from time to time as determined appropriate by the
Advisory Board and Manager.
If prior to the commencement of any budget period, the
Advisory Board has not yet approved the budget, then the Manager and the
Advisory Board will work diligently in good
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faith to obtain such approvals, and until such approvals are obtained, with
respect to the budget, (i) as to any disputed line items, the immediately
preceding budget period's budget shall be controlling until such time, if any as
agreement is reached on the amounts to be allocated to such disputed line items,
specifically as follows: (A) non-recurring or extraordinary items shall not be
continued from the budget for the immediately preceding budget period, (B) if
the previous budget was for a budget period of less than 12 months, it shall be
annualized, (C) all items subject to an automatic increase, such as rent and
taxes, shall be budgeted at the increased rate (D) for items such as employee
salaries and benefits, the total salary and benefits number shall be adjusted to
take into account changes in the number and classifications of employees
employed or contracted, and (ii) as to any line items which are not in dispute,
the revised budgets submitted by the Manager shall control.
(b) The parties agree that the Manager shall have the
authority and discretion to reallocate cost and expense line items within the
budget, so long as the pre-tax income targets within such budgets are not
adversely impacted.
SECTION 4. OBLIGATIONS OF PRACTICE.
4.1 PHYSICIAN EXPENSES. Practice shall be solely responsible for the
payment, when due, of all costs and expenses incurred in connection with
Practice's operations that are not Practice Expenses ("Physician Expenses"),
including, but not limited to, insurance premiums for policies of malpractice
insurance, deductibles under such policies of malpractice insurance, any and all
costs and expenses incurred with respect to claims under such policies of
malpractice insurance, salaries and benefits, workers' compensation, retirement
plan contributions, health, disability and life insurance premiums, payroll
taxes, cellular phone and automobile expenses incurred by or in connection with
the employment of all Physician Shareholders and Practice Employees. Practice
shall be responsible for paying as a Physician Expense salaries, benefits and
other similar direct costs for all Practice Employees and Physician
Shareholders. Practice shall pay all Physician Expenses as they become due.
However, Practice shall pay the salaries and benefits for those individuals
described in Section 1.5(b), but Manager shall reimburse Practice for all such
salaries and benefits and such reimbursement amounts shall be a Practice Expense
under Section 1.6.
4.2 PROFESSIONAL STANDARDS.
(a) It is expressly acknowledged by the parties to the
Agreement that all medical services provided at the Medical Offices shall be
performed solely by physicians and allied health care professionals duly
licensed to practice medicine in the State. The professional services provided
by Practice and its Physician Shareholders and Practice Employees shall at all
times be provided in accordance with applicable ethical standards and Laws
applying to the medical profession. Practice shall at all times during the term
of this Agreement be and remain legally organized and authorized to provide
medical care and services in a manner consistent with all state and federal
laws. Practice will cooperate with Manager in taking steps to resolve any
utilization review or quality assurance issues which may arise in connection
with the
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medical practice of Practice. If any disciplinary actions or professional
liability actions are initiated against any Physician Shareholder or Practice
Employee, Practice shall immediately inform Manager of such action and the
underlying facts and circumstances. Practice agrees to implement and maintain a
program to monitor the quality of medical care provided by Practice, and Manager
shall render administrative assistance to Practice on an as-requested basis to
assist Practice in implementing and maintaining such program.
(b) Practice shall at all times during the term of this
Agreement assure that each physician of the Practice shall:
(i) maintain an unrestricted license to practice
medicine in the State and maintain good standing with the Medical Board of the
State;
(ii) maintain a federal Drug Enforcement
Administration certificate without restrictions, to prescribe controlled
substances as are customarily prescribed by physicians practicing in Physician's
practice specialties;
(iii) maintain hospital medical staff memberships and
clinical privileges at those facilities set forth on Part Three of Exhibit A of
the Physician Employment Agreement as amended from time to time;
(iv) perform all professional services through
Practice and in accordance with all Laws and with prevailing standards of care
and medical ethics and with practice protocols and policies as adopted from time
to time by Practice;
(v) maintain Physician's skills through continuing
education and training, including participation in those programs designated by
Practice from time to time;
(vi) maintain eligibility for insurance under the
professional liability policy or policies at a commercially reasonable cost as
determined by Practice carried by or on behalf of Practice for Physician's
practice specialties, to the extent Physician is covered by such policy or
policies pursuant to Section 5.2 of the Physician Employment Agreement;
(vii) maintain Physician's board-certified or
board-eligible status in Physician's practice specialties;
(viii) qualify and maintain Physician's qualification
as a participating provider in the Medicare and State of Georgia Medicaid
programs;
(ix) abide by the Principles of Medical Ethics of the
American Medical Association and the Medical Society of the State;
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(x) comply with all Laws applicable to the conduct of
Physician's activities, as well as with the articles of incorporation, bylaws
and other corporate governance documents of Practice and other rules or
regulations adopted from time to time by Practice;
(xi) promptly disclose to Practice (i) the
commencement or pendency of any legal action, administrative proceeding or
investigation, medical staff or professional disciplinary actions against
Physician or (ii) the existence of any circumstances that could reasonably be
expected to form the basis of or lead to any such action, proceeding or
investigation;
(xii) abide by any guidelines adopted by Practice or
any person or entity providing management services to Practice designed to
encourage the appropriate, efficient and cost-effective delivery of medical
services, subject always to the clinical judgment of Physician, and cooperate
with and participate in all Practice programs regarding quality assurance,
utilization review, risk management and peer review;
(xiii) maintain appropriate and accurate medical
records in accordance with accepted medical standards and Practice policies with
respect to all patients evaluated and treated; and
(xiv) satisfy such other reasonable requirements as
are established from time to time by Practice.
4.3 PROVIDER AND PAYOR RELATIONSHIPS. Practice shall advise Manager on
matters relating to the establishment or maintenance of relationships with
institutional healthcare providers and third-party payors, including, but not
limited to, managed care programs, health maintenance organizations and
preferred provider organizations. Without limiting the generality of the
foregoing, Practice shall cooperate with Manager in the development and
operation of integrated healthcare delivery systems developed from time to time
by Manager for the benefit of Manager's affiliates.
4.4 PHYSICIAN CONTRACTS AND POWERS OF ATTORNEY. (a) During the term of
this Agreement Practice shall maintain Employment Agreements substantially in
the form of Exhibit A hereto with all Physician Shareholders and other physician
practitioners employed or otherwise retained by Practice as Practice Employees.
Practice shall not amend any of the Employment Agreements or waive any rights
thereunder without the prior consent of Manager.
(b) Practice shall require all Physician Shareholders and
physician Practice Employees to execute and deliver to Manager powers of
attorney, satisfactory in form and substance to Manager, appointing Manager as
attorney-in-fact for each such Physician Shareholder and physician Practice
Employee for the purposes set forth in Section 3.5(e) to the extent authorized
by law.
4.5 RESTRICTIVE COVENANTS.
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(a) Practice acknowledges and agrees that the services to be
provided by Manager hereunder are feasible only if Practice operates a vigorous
medical practice to which its Physician Shareholders and Practice Employees
devote their full time and attention (other than Physician Shareholders or
Practice Employees employed on a part-time basis with the consent of Manager
which consent will not be unreasonably withheld where it is in the best interest
of the Practice due to the approaching retirement of a physician or will not
adversely affect Net Practice Revenues). Accordingly, Practice agrees that,
during the term of this Agreement, it shall not, without the prior written
consent of Manager, establish, operate or provide physician services at any
medical office, clinic or other healthcare facility in the State which provides
services substantially similar to those offered by Practice at the Medical
Offices other than services at healthcare facilities in a manner consistent with
past practices of Practice or, prior to the date hereof, Atlanta Ear, Nose &
Throat Associates, P.C.
(b) During the term of this Agreement and for a period of
eighteen (18) months following the termination or expiration of this Agreement,
Practice shall not, in the State, alone or in conjunction with any other person
or entity, without the prior written consent of Manager, solicit or attempt to
solicit any employee, consultant, contractor or other personnel affiliated with
Manager (or who was affiliated with Manager at any point during the six months
prior to termination of this Agreement) to terminate, alter or lessen that
party's affiliation with Manager or to violate the terms of any agreement or
understanding between such employee, consultant, contractor or other person and
Manager.
(c) If this Agreement is terminated for any reason other than
by Practice pursuant to Section 6.2 (b) below, Practice shall not for a period
of eighteen (18) months following the effective date of such termination, engage
or contract with any person, firm or entity (or group of affiliated entities)
for the provision of comprehensive management services to Practice at the
Medical Offices (or at any new or replacement medical offices of Practice in the
State) substantially of the kind contemplated by this Agreement.
(d) The intellectual and other property rights in any work
product, discoveries or inventions developed or acquired by Practice, the
Physician Shareholders or Practice Employees or any other personnel or agents of
such parties (other than intellectual and other property rights developed or
acquired by a Physician Shareholder and specifically excluded in such
individual's employment agreement with Practice) during the term of this
Agreement (the "Practice IP") shall be deemed to be owned exclusively by the
Manager. The Practice hereby unconditionally and irrevocably transfers and
assigns to Manager all rights, title and interest the Practice may currently
have (or in the future may have) by operation of law or otherwise in or to any
Practice IP, including, without limitation, all patents, copyrights, trademarks,
service marks and other intellectual property rights. Practice agrees to execute
and deliver to Manager any transfers, assignments, documents or other
instruments which Manager may deem necessary or appropriate to vest complete
title and ownership of any Practice IP, and all associated rights, exclusively
in Manager. The Physician Employment Agreements shall have a provision
comparable to this paragraph (d) assigning these Practice IP rights from the
Practice physicians to Practice, in contemplation of their reassignment from
Practice to Manager as herein provided,
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subject only to such exclusions as are provided in the form of Physician
Employment Agreement approved by Manager.
(e) Practice acknowledges and agrees that Manager's Trade
Secrets and Confidential Information (both as defined below) represent a
substantial investment by Manager. Practice also acknowledges and agrees that
any unauthorized disclosure or use of any of Manager's Trade Secrets or
Confidential Information would be wrongful and would likely result in immediate
and irreparable injury to Manager. Except as required in order to perform
Practice's obligations under this Agreement, Practice shall not, without the
express prior written consent of Manager, redistribute, market, publish,
disclose or divulge to any other person or entity, or use or modify for use,
directly or indirectly in any way for any person or entity: (i) any Confidential
Information during the term of this Agreement and for a period of three (3)
years after the final date of the term of this Agreement; and (ii) any Trade
Secrets at any time (during or after the term of this Agreement) during which
such information or data shall continue to constitute a "trade secret" under
applicable law. Practice further agrees to cooperate with (and require its
physicians and other personnel to comply with) any reasonable confidentiality
requirements of Manager. Practice shall immediately notify Manager of any
unauthorized disclosure or use of any of the Trade Secrets or Confidential
Information of Manager of which Practice becomes aware. For purposes of this
Agreement "Confidential Information" shall mean valuable, non-public
competitively sensitive data and information relating to Manager's, Parent's or
PSC's business other than Trade Secrets (which shall have the meaning given that
term under applicable law) that is not generally known by or readily available
to competitors of Manager, including, without limitations, computer software and
management information systems provided by Manager.
(f) Unless otherwise agreed by Manager in writing, Practice
shall enforce vigorously the covenants (and any liquidated damages provisions)
of the Physician Shareholders and other physician employees of Practice set
forth in the Physician Employment Agreements (which the Parties agree will be in
substantially the form of Exhibit A) with counsel approved by Manager. Practice
and such counsel shall cooperate with Manager in any such litigation and all
major litigation decisions and strategy shall be subject to approval of Manager,
and Practice shall not compromise or settle any such litigation without
Manager's approval. In the event that the Practice recovers liquidated damages
(or other damages) from any physician for breach of such a covenant, then the
Practice shall promptly remit to Manager an amount equal to any and all such
amounts so received. Manager agrees to pay the fees and disbursements of counsel
of Practice approved by it. Practice shall not take any action that, under this
Agreement, is to be taken only by Manager. The Parties agree and the Physician
Employment Agreement shall provide that the actual losses to be suffered by
Manager will be difficult to ascertain, but the liquidated damages set forth
have been arrived at after good faith effort to estimate such losses. Practice
specifically acknowledges and agrees that Manager would not have entered into
this Agreement but for Practice's covenant to enforce the Physician Employment
Agreements as provided above and that the failure of any physician to comply
with such agreements will result in Manager suffering extensive economic
damages.
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(g) Manager and Practice acknowledge and agree that Manager's
remedy at law for any breach or attempted breach of the foregoing provisions may
be inadequate and that Manager shall be entitled to specific performance,
injunction or other equitable relief in the event of any such breach or
attempted breach, in addition to any other remedies which might be available at
law or in equity. If the duration, scope or geographic area contemplated by the
foregoing provisions is determined to be unenforceable by a court of competent
jurisdiction, the parties agree that such duration, scope or geographic area
shall be deemed to be reduced to the greatest scope, duration or geographic area
which would be enforceable.
4.6 PROFESSIONAL DUES AND EDUCATION EXPENSES. Practice and its
Physician Shareholders and Practice Employees, subject to Manager approval,
shall be solely responsible for all costs and expenses associated with
membership in professional associations and continuing professional education.
Practice shall ensure that each of its Physician Shareholders and Practice
Employees participates in such continuing medical education activities as are
necessary for such physicians to remain current in their respective specialties,
including, but not limited to, the minimum continuing medical education
requirements imposed by applicable laws and policies of applicable specialty
boards.
4.7 PROVISION OF SERVICES BY PRACTICE. Practice shall maintain at least
the same quality and scope of medical practice and other health care services
provided by Atlanta Ear, Nose & Throat Associates, P.C. prior to the date hereof
and shall use its reasonable good faith efforts to enhance the medical practice
of the Practice and to comply with all Practice budgets. Practice shall engage a
sufficient member of Physician Shareholders or physician Practice Employees to
provide services to patients of the Practice at normal office hours at the
Medical Offices and to provide coverage during all appropriate hours of all
hospitalized patients of Practice whether on any inpatient or outpatient basis.
4.8 PHYSICIAN SHAREHOLDER AGREEMENT. Practice represents that it has
delivered to Manager a true and correct copy of the shareholder agreement
between Practice and its Physician Shareholders and will cause all new
shareholders of Practice to execute such agreement prior to becoming a
shareholder in Practice. Practice shall not amend the shareholder agreement so
as to cause the shareholder agreement to contravene or conflict with this
Agreement or the Employment Agreements between Practice and its physician
employees.
SECTION 5. INCENTIVE COMPENSATION.
5.1 INCENTIVE AMOUNTS. Practice agrees that Manager shall be entitled
to incentive compensation ("Incentive Compensation") as set forth on Exhibit B.
With respect to any partial calendar years during which this Agreement is in
effect, Incentive Compensation shall be prorated according to the number of
calendar days actually elapsed during such partial calendar year. The Incentive
Compensation will be paid, as described below, in the form of monthly draws
(which will provide Manager with an amount that is estimated in accordance with
the
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formula set forth on Exhibit B) with an adjustment at each year end to account
for any differences between the amount of Incentive Compensation paid as draws
and the amounts calculated based on the complete year end revenue and expense
figures.
5.2 MECHANICS OF DRAWS. Following the end of each month, Manager shall
make an estimate of the collection percentage ("Estimated Collection
Percentage") for such month's gross Practice revenues. The Estimated Collection
Percentage may vary depending on historical collection percentages, changes in
fee schedules, changes in third party reimbursement, bad debt write-offs and
similar adjustments. The Estimated Collection Percentage will then be applied to
such month's gross Practice revenues, resulting in estimated Net Practice
Revenues for such month. Draws of Incentive Compensation attributable to such
month will be determined by applying the formula set forth on Exhibit B to the
excess of Net Practice Revenue over Practice Expenses and will be paid by the
15th day of the following month. An amount equal to the excess of Net Practice
Revenues over Practice Expenses will be transferred by Manager to Practice and
used by Practice to pay Physician Expenses on such 15th day.
5.3 RECONCILIATION.
(a) As soon as reasonably practicable, but in any event not
later than one hundred twenty (120) days after the end of each calendar year,
Manager will adjust the Estimated Collection Percentage based on actual net cash
collections attributable to the gross Practice revenues for such year and shall
determine actual Net Practice Revenues. Within forty-five (45) days after the
end of such one hundred twenty (120) day period, and based on the financial
statements prepared by Manager in good faith pursuant to Section 3.7, Manager
shall retain an amount equal to the aggregate Incentive Compensation payable
with respect to such calendar year, less the aggregate sum of all draws by
Manager pursuant to Section 5.2 during such period.
(b) In the event that, after making the calculation
contemplated by Section 5.3(a), it is determined that draws by Manager under
Section 5.2 for the applicable calendar year exceed the amount which it is
ultimately entitled to receive with respect to such year as Incentive
Compensation (an "overdraft"), Manager shall pay the amount of such overdraft to
Practice within ninety (90) days after the end of the year. In the event
Practice disagrees with Manager's computation of Net Practice Revenues or
Incentive Compensation, it shall have the right to review, upon reasonable
notice to Manager, the documents used in determining such amounts.
5.4 ASSIGNMENT OF SECURITY INTEREST.
(a) Practice hereby exclusively and irrevocably assigns and
sets over to Manager all of Practice's rights to all revenue generated by the
Physician Shareholders and Practice Employees with respect to any services
rendered prior to the effective date of expiration or termination of this
Agreement, except as otherwise provided in this Agreement, and grants to Manager
the right to retain such proceeds for its own account for application in
accordance with this Agreement, and shall obtain a like assignment from all
Physician Shareholders and Practice
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Employees; provided, that in the case of revenue generated as a result of
billing for services under Medicare or Medicaid such assignment shall only be an
assignment of proceeds of accounts receivable consistent with the provisions of
applicable law. Practice shall endorse (and shall cause each Physician
Shareholder or Practice Employee to endorse) any payments received on account of
such services to the order of Manager and shall take such other actions as may
be necessary to confirm to Manager the rights set forth in this Section 5.4(a).
Without limiting the generality of the foregoing, it is the
intent of the parties that the assignment to Manager of the rights described in
Section 5.4(a) above shall be inclusive of the rights of Practice and the
Physician Shareholders and Practice Employees to proceeds of payment with
respect to any services rendered prior to the effective date of any expiration
or termination of this Agreement. Practice agrees and shall cause each Physician
Shareholder and Practice Employee to agree, that Manager shall retain the right
to collect any and all accounts receivable and claims for reimbursement relating
to any such services rendered prior to the effective date of any such expiration
or termination ("Pre-Termination Accounts Receivable"), and that the proceeds
thereof will be transferred to Manager's account to be applied in accordance
with Section 3.6 and the other provisions of this Agreement.
In addition and as a supplement to Practice's obligations as otherwise
set forth herein, Practice shall, with all deliberate speed, apply for and
maintain in effect any and all provider and/or supplier numbers, including but
not limited to Medicare and Medicaid numbers, in Practice's name. If Practice is
unable to obtain such provider and/or supplier numbers, Practice shall cause
Physician Shareholders to maintain each of their provider numbers, including but
not limited to Medicare and Medicaid numbers, necessary or appropriate to obtain
payment or reimbursement for all medical services provided by such Physician
Shareholders and shall further cause each Physician-Shareholder who provides
services to the Practice to execute any and all documentation necessary to
effectuate the assignments of revenues to Manager as contemplated by this
Agreement.
(b) Practice acknowledges that Manager and Parent may, to the
extent permitted by law, grant a security interest in the Pre-Termination
Accounts Receivable and proceeds thereof to their factor(s) or lender(s) under
Manager's or Parent's working capital credit facility (whether one or more,
"Credit Facility Lender"), as in effect from time to time. Practice agrees that
such security interest of the Credit Facility Lender is intended to be a first
priority security interest and is superior to any right, title or interest which
may be asserted by Practice or any Physician Shareholder or Practice Employee
with respect to Pre-Termination Accounts Receivable or the proceeds thereof
under this Agreement. Practice further agrees, and shall cause each Physician
Shareholder and Practice Employee to agree, that, upon the occurrence of an
event which, under the terms of such working capital credit facility, would
allow the Credit Facility Lender to exercise its right to collect
Pre-Termination Accounts Receivable and apply the proceeds thereof toward
amounts due under such working capital credit facility, the Credit Facility
Lender will succeed to all rights and powers of Manager under the powers of
attorney provided for in Sections 3.5 and 4.4 above as if such Credit Facility
Lender had been named as the attorney-in-fact therein.
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(c) If, contrary to the mutual intent of Manager and Practice,
the assignment described in this Section 5.4 shall be deemed for any reason to
be ineffective, then Practice and each Physician Shareholder and Practice
Employee shall to the extent permitted by applicable Laws, effective as of the
date of this Agreement, be deemed to have granted (and Practice does hereby
grant, and shall cause each Physician Shareholder and Practice Employee to
grant) to Manager a first priority lien on and security interest in and to any
and all interests of Practice and such Physician Shareholders and Practice
Employees in any accounts receivable generated by the medical practice of
Practice and its Physician Shareholders and Practice Employees or otherwise
generated through the operations of the medical practice of Practice, and all
proceeds with respect thereto, to secure the payment to Manager hereunder of all
Practice Expenses and Incentive Compensation, and this Agreement shall be deemed
to be a security agreement to the extent necessary to give effect to the
foregoing. Practice shall execute and deliver, and cause each Physician
Shareholder and Practice Employee to execute and deliver, all such financing
statements as Manager may request in order to perfect such security interest.
Practice shall not grant (and shall not suffer any Physician Shareholder or
Practice Employee to grant) any other lien on or security interest in or to such
accounts receivable or any proceeds thereof or in or to this Agreement to any
other person or entity.
SECTION 6. TERM AND TERMINATION.
6.1 TERM. The initial term of this Agreement shall be for a period of
forty (40) years commencing on _______________, 1997 and ending on
_________________, 2037. This Agreement may be extended for separate and
successive five-year periods (each such five-year period referred to hereinafter
as an "extended term"), under such terms and conditions as stated herein with
respect to any such extended term; provided, however, that: (a) Practice and
Manager mutually agree to extend the term of this Agreement and mutually agree
upon the documents to be in effect during any such extended term hereto, not
less than sixty (60) days prior to expiration of the initial term or extended
term then in effect; and (b) Practice is not in material default hereunder on
the date of commencement of the extended term.
6.2 TERMINATION.
(a) Manager may terminate this Agreement, and have no further
liability or obligation hereunder, upon the occurrence of one or more of the
following events:
(i) Practice repeatedly fails to perform in a
material respect its material obligations hereunder and such repeated failure
continues for a period of forty-five (45) days after Practice's receipt of
written notice specifying such failure; provided, however, that if such failure
cannot be cured within forty-five (45) days, but is capable of being cured
within a reasonable period of time in excess of forty-five (45) days, then
Manager shall not be entitled to terminate this Agreement if Practice commences
the cure of such failure within the first forty-five (45) day period and
thereafter diligently and in good faith continues to prosecute such cure until
completion; provided, further, that if Practice or any Physician Shareholder or
Practice
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Employee breaches Section 4.5(a) of this Agreement, Manager may terminate this
Agreement immediately upon written notice to Practice.
(ii) Practice voluntarily files a petition in
bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under any federal or state bankruptcy, insolvency,
reorganization or moratorium statute, or Practice is the subject of an
involuntary petition in bankruptcy which is not set aside within sixty (60) days
of its filing.
(iii) Practice is in material breach or default under
any other written agreement with Manager, subject to any applicable notice and
cure periods provided in any such agreement.
(iv) Any representations and warranties made by
Practice in this Agreement prove to have been untrue or incorrect.
(v) If in any calendar year the licenses of 20% or
more in number of the Physician Shareholders or physician Practice Employees to
practice medicine in the State of Georgia are suspended or revoked, or are
subjected to final disciplinary action by the State Board of Medicine or any
similar body on any grounds, other than minor, immaterial or insubstantial
grounds, or die or become mentally or physically disabled and, by reason of such
disability, are in the reasonable judgment of Manager unable to conduct medical
practice on substantially the same basis as conducted prior to such disability,
or if in any calendar year 20% or more of the Physician Shareholders retire or
sell their interests in Practice and cease to practice medicine on substantially
a full-time basis as Practice Employees; provided, however, that in any such
event Practice shall have one hundred eighty (180) days from the date on which
Manager gives Practice written notice of its intent to terminate this Agreement
pursuant to this Section 6.2(a)(v) to replace the affected physicians with other
physicians satisfactory to Manager, in its reasonable discretion; provided
further, however, that Manager and Practice may agree to bring in a locum tenens
physicians to provide physician services during such one hundred eighty (180)
day period.
(vi) Manager and Practice are unable, notwithstanding
diligent efforts to do so, to agree on any modifications or amendments to the
then-current capital and operating budgets for the medical practice of Practice
which Manager reasonably deems to be necessary in light of the circumstances
then prevailing.
(b) Practice may terminate this Agreement, and have no further
liability hereunder, upon the occurrence of one or more of the following events:
(i) Manager repeatedly fails to perform in a material
respect its material obligations hereunder and such repeated failure continues
uncured for a period of forty-five (45) days after Manager's receipt of written
notice specifying such failure, provided, however, that if such failure cannot
be cured within forty-five (45) days, but is capable of being cured within a
reasonable period of time in excess of forty-five (45) days, then Practice shall
not
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be entitled to terminate this Agreement if Manager commences the cure of such
failure within the first forty-five (45) day period and thereafter diligently
and in good faith continues to prosecute such cure until completion.
(ii) Manager voluntarily files a petition in
bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under federal or state bankruptcy, insolvency,
reorganization or moratorium statute, or Manager is the subject of an
involuntary petition in bankruptcy which is not set aside within sixty (60) days
of its filing.
6.3 REMEDIES UPON TERMINATION.
(a) If this Agreement is terminated pursuant to Section 6.2,
Incentive Compensation shall be deemed earned through the date of termination.
Any Incentive Compensation due Manager shall be paid within thirty (30) days
after the effective date of termination. If this Agreement is terminated
pursuant to Sections 6.2(a)(i), 6.2(a)(iii), or 6.2(b)(i) of this Agreement, the
non-breaching party may pursue such other legal or equitable relief as may be
available in addition to such proration.
6.4 REPURCHASE OF EQUIPMENT AND SUPPLIES. Upon the termination of this
Agreement prior to the end of the forty (40) year initial term (other than a
termination by Practice pursuant to Section 6.2(b)(i)), Manager shall have the
right to require Practice to repurchase all or any portion of the FFE and all
then unused supplies located at the Medical Offices or purchased by Manager for
specific use at the Medical Offices (except pharmaceutical supplies), from
Manager at a repurchase price equal to the then book value of the FFE and such
unused supplies as reflected by Manager's (or Parent's) books and records of
account. Exercise of this right by Manager shall be accomplished by written
notice to Practice within thirty (30) days after the termination of this
Agreement. Such notice of exercise shall also specify a time and date for a
closing to be held to consummate such purchase and sale, such closing to be
within ninety (90) days after the termination of this Agreement at the offices
of Manager in [Atlanta, Georgia], or such other location as Manager shall
designate in such written notice. At the closing Practice shall purchase such
FFE and unused supplies from Manager hereunder by delivery of cash or
immediately available funds, against delivery of a xxxx of sale from Manager
transferring all its right, title or interest in or to same.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
7.1 REPRESENTATIONS AND WARRANTIES OF PRACTICE. Practice hereby
represents and warrants to Manager as follows:
(A) ORGANIZATION AND GOOD STANDING. Practice is a
professional corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia. Practice has all necessary power to own
all of its properties and assets and to carry on its business as now being
conducted.
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(B) NO VIOLATIONS. Practice has the corporate authority to
execute, deliver and perform this Agreement and all agreements executed and
delivered by it pursuant to this Agreement, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement and such
related documents. The execution and delivery of this Agreement does not and,
subject to the consummation of the transactions contemplated hereby, will not,
violate any provisions of the Articles or Certificate of Incorporation or Bylaws
of Practice or any provisions of or result in the acceleration of, any material
obligation under any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree, to which Practice is a party, or by which
it is bound. This Agreement has been duly executed and delivered by Practice and
constitutes the legal, valid and binding obligation of Practice, enforceable in
accordance with its terms.
(C) FINANCIAL INFORMATION. Practice has hereto furnished
Manager with complete copies of certain financial information about Practice
which information is true and correct and presents fairly the financial results
experienced by Practice for the periods set forth in such information.
(D) PROFESSIONAL LIABILITY. No Physician Shareholder or
physician Practice Employee has ever (a) had his license to practice medicine in
any state or his Drug Enforcement Agency number suspended, relinquished,
terminated, restricted or revoked; (b) been reprimanded, sanctioned or
disciplined by any licensing board, or any federal, state or local society or
agency, governmental body or specialty board; (c) had entered against him final
judgment in, or settle without judgment, a malpractice or similar action for an
aggregate award or amount to the plaintiff in excess of Fifty Thousand and
No/100 Dollars ($50,000.00); or (d) had his medical staff privileges at any
hospital or medical facility suspended, terminated, restricted or revoked other
than temporary suspension for failure to timely complete medical records.
7.2 REPRESENTATIONS AND WARRANTIES OF MANAGER. Manager hereby
represents and warrants as follows:
(A) ORGANIZATION AND GOOD STANDING. Manager is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Manager has all necessary power to own all of its properties
and assets and to carry on its business as now being conducted.
(B) NO VIOLATIONS. Manager has the corporate authority to
execute, deliver and perform this Agreement and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement. The
execution and delivery of this Agreement does not and, subject to the
consummation of the transactions contemplated hereby, will not, violate any
provisions of the Articles or Certificate of Incorporation or Bylaws of Manager
or any provisions of or result in the acceleration of, any material obligation
under any mortgage, lien, lease, agreement,
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instrument, order, arbitration award, judgment or decree, to which Manager is a
party, or by which it is bound. This Agreement has been duly executed and
delivered by Manager and constitutes the legal, valid and binding obligation of
Manager, enforceable in accordance with its terms.
SECTION 8. INSURANCE AND INDEMNITY.
8.1 INSURANCE TO BE MAINTAINED BY PRACTICE. Practice shall provide, or
shall arrange for the provision of, and maintain throughout the entire term of
this Agreement, professional liability insurance coverage on Practice and each
of Practice's employees and agents, including, but not limited to, all Physician
Shareholders and Practice Employees, in the minimum amount of Three Million and
No/100 Dollars ($3,000,000.00) per occurrence and Five Million and No/100
Dollars ($5,000,000.00) annual aggregate including "tail coverage" to the extent
necessary to ensure continuity of coverage. Practice shall provide to Manager
written documentation evidencing such insurance coverage. Practice shall, at its
sole cost and expense, pay the premium costs of all such professional liability
insurance coverage during the term of this Agreement. Practice shall provide, or
shall arrange for the provision of, and shall maintain throughout the entire
term of this Agreement, workers' compensation insurance coverage on Practice and
each of its employees and agents, including, but not limited to, all Physician
Shareholders and Practice Employees, in the amounts required by law. Practice
shall provide to Manager written documentation evidencing such insurance
coverage. Practice shall, at its sole cost and expense, pay the premium costs of
all such workers' compensation insurance coverage.
Manager agrees to administer and manage the above insurance.
8.2 INDEMNIFICATION BY MANAGER. Manager shall indemnify and hold
harmless Practice, its shareholders, directors, officers, agents, employees and
other personnel from and against any and all claims, demands, liabilities,
losses, damages, costs and expenses (including reasonable attorney's fees, court
costs and other expenses incurred in defending against claims or otherwise
connected therewith) (hereinafter a "Loss" or "Losses") resulting in any manner,
directly or indirectly, from the gross negligence or intentional acts or
omissions of Manager, its directors, officers, employees, independent
contractors or agents.
8.3 INDEMNIFICATION BY PRACTICE. Practice shall indemnify and hold
harmless Manager, its shareholders, directors, officers, agents, employees and
other personnel from and against any all Losses resulting in any manner,
directly or indirectly, from the gross negligence, professional malpractice or
intentional acts or omissions of Practice, its Physician Shareholders, Practice
Employees or independent contractors.
8.4 INDEMNIFICATION PROCEDURE. Within 60 days after an indemnified
person under Section 8.2 or 8.3 (an "Indemnified Person") receives written
notice of the commencement of any action or other proceeding, or otherwise
becomes aware of any claim or other circumstance, in respect of which
indemnification or reimbursement may be sought under Section 8.2 or Section 8.3,
such Indemnified Person shall notify the Party required to indemnify hereunder
(the "Indemnitor"). If any such action or other proceeding shall be brought
against any Indemnified
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Person, Indemnitor shall, upon written notice given within a reasonable time
following receipt by Indemnitor of such notice from Indemnified Person, be
entitled to assume the defense of such action or proceeding with counsel chosen
by Indemnitor and reasonably satisfactory to Indemnified Person; provided,
however, that any Indemnified Person may at its own expense retain separate
counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys in any
jurisdiction in any one action or proceeding or group of related actions or
proceedings. Indemnitor shall not, without the prior written consent of any
Indemnified Person, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding to which such
Indemnified Person is a party unless such settlement compromise or consent
includes an unconditional release of such Indemnified Person from all liability
arising or potentially arising from or by reason of such claim, action or
proceeding.
8.5 KEY MAN INSURANCE. Practice agrees, and shall cause its Physician
Shareholders and Practice Employees to agree, that Manager may obtain, at its
sole expense (and not as a Practice Expense) and for its sole benefit, "key man"
life insurance policies on any or all Physician Shareholders and Practice
Employees. Neither Practice nor any Physician Shareholder or Practice Employee
shall have any right, title or interest in or to the proceeds of any such
insurance policies. Practice shall cause its Physician Shareholders and Practice
Employees to cooperate with Manager, as reasonably requested by Manager from
time to time, in obtaining any such insurance policies, including, but not
limited to, causing such Physician Shareholders and Practice Employees to submit
to such physical examinations and providing such information relating to
insurability as Manager may reasonably request from time to time.
SECTION 9. ASSIGNMENT.
The parties hereby agree that this Agreement shall not be assigned or
transferred by either party without the prior written consent of the other;
provided, however, that this Agreement may be assigned, in whole or in part, by
Manager, in its sole discretion, without the consent of Practice, to any parent,
subsidiary or affiliate of Manager or to any person or entity that acquires all
or substantially all of the assets of Manager. Any such assignment shall not
affect the guaranty by Parent of the obligations of Manager hereunder.
SECTION 10. COMPLIANCE WITH REGULATIONS.
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10.1 PRACTICE OF MEDICINE. The parties hereto acknowledge that Manager
is not authorized or qualified to engage in any activity which may be construed
or deemed to constitute the practice of medicine. Neither of the Parties shall
suggest or hold Manager out to the public as being engaged in the practice of
medicine. To the extent any act or service herein required of Manager should be
construed or deemed to constitute the practice of medicine, the performance of
said act or service by Manager shall be deemed waived and forever unenforceable.
Practice and its Physician Employees and Practice Employees shall be unfettered
in the exercise of their professional medical judgment with respect to matters
under consideration which require the exercise of such judgment.
10.2 SUBCONTRACTS. Pursuant to Title 42 of the United States Code and
applicable rules and regulations thereunder, until the expiration of four (4)
years after termination of this Agreement, Manager shall make available, upon
appropriate written request by the Secretary of the United States Department of
Health and Human Services or the Comptroller General of the United States
General Accounting Office, or any of their duly authorized representatives, a
copy of this Agreement and such books, documents and records as are necessary to
certify the nature and extent of the costs of the services provided by Manager
under this Agreement. Manager further agrees that if it carries out any of its
duties under this Agreement through a subcontract with a value or cost of Ten
Thousand and No/100 Dollars ($10,000.00) or more over a twelve (12) month period
with a related organization, such subcontract shall contain a clause to the
effect that until the expiration of four (4) years after the furnishing of such
services pursuant to such subcontract, the related organization shall make
available, upon appropriate written request by the Secretary of the United
States Department of Health and Human Services or the Comptroller General of the
United States General Accounting Office, or any of their duly authorized
representatives, a copy of such subcontract and such books, documents and
records of such organization as are necessary to verify the nature and extent of
such costs. Disclosure pursuant to this Section shall not be construed as a
waiver of any other legal right to which Manager may be entitled under law or
regulation.
SECTION 11. INDEPENDENT RELATIONSHIP.
11.1 INDEPENDENT CONTRACTOR STATUS.
(a) It is acknowledged and agreed that Practice and Manager
are at all times acting and performing hereunder as independent contractors.
Manager shall neither have nor exercise any control or direction over the
methods by which Practice, Physician Shareholders and Practice Employees
practice medicine. The sole function of Manager hereunder is to provide all
Management Services in a competent, efficient and satisfactory manner. Manager
shall not, by entering into and performing its obligations under this Agreement,
become liable for any of the existing obligations, liabilities or debts of
Practice unless otherwise specifically provided for under the terms of this
Agreement. In its management role, Manager will have only an obligation to
exercise reasonable care in the performance of the Management Services. Manager
shall have no liability whatsoever for damages suffered on account of the
willful misconduct or negligence of any employee, agent or independent
contractor of Practice. Each
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party shall be solely responsible for compliance with all state and federal laws
pertaining to employment taxes, income withholding, unemployment compensation
contributions and other employment related statutes regarding their respective
employees, agents and servants.
(b) If any court or regulatory authority shall determine that
the independent contractor relationship established hereby violates any
statutes, rules or regulations (or in the event that Manager, in good faith,
determines that there is a material risk that such a determination would be made
by any court or regulatory authority), then the parties will negotiate in good
faith to enter into an employment arrangement between Manager and the
then-current Physician Shareholders and Practice Employees which substantially
preserves for the parties the relative economic benefits of this Agreement. If
the parties cannot reach agreement on such an employment arrangement, Manager
may terminate this Agreement upon ninety (90) days prior written notice to
Practice.
11.2 REFERRAL ARRANGEMENTS. The parties hereby acknowledge and agree
that no benefits to Practice hereunder require or are in any way contingent upon
the admission, recommendation, referral or any other arrangement for the
provision of any item or service offered by Manager or any of its affiliates, to
any patients of Practice, Practice's employees or agents.
SECTION 12. GUARANTEES.
(a) Irrevocable Guaranty by Parent. To induce Practice to execute and
deliver this Agreement, Parent hereby unconditionally and irrevocably guarantees
the Practice the full, prompt and faithful performance by Manager of all
covenants and obligations to be performed by Manager under this Agreement. This
guaranty shall be a guaranty of payment, not merely collection, and shall be
unaffected by any subsequent modification or amendment of this Agreement whether
or not Parent has knowledge of or consented to such modification or amendment.
In the event that Manager fails to fully perform all such covenants and
obligations in accordance with their terms or pay all or any part of such sums
or deliver all or any part of such property when due, Parent will perform all
such covenants and obligations in accordance with their terms or immediately pay
or deliver to Practice (or such other payee or transferee as may be provided in
any such agreement) the amount due and unpaid or the property not delivered, as
the case may be, by Manager. In the event of bankruptcy, termination,
liquidation or dissolution of Manager, this unconditional guaranty shall
continue in full force and effect. In the event of any extension of time for
payment or performance or other modification of any guaranteed obligation or
covenant, or any waiver thereof or other compromise or indulgence with respect
thereto or any release or impairment of any security for any such obligation or
covenant, or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor, no notice to, or consent of,
Parent shall be required.
(b) Irrevocable Guaranty by Physician Shareholders. To induce Manager
to execute and deliver this Agreement, the undersigned Physician Shareholders
severally hereby unconditionally and irrevocably guarantee to Manager the full,
prompt and faithful performance
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by Practice of all covenants and obligations to be performed by Practice under
Sections 3.6, 4.4, 4.5, 5.4, 6.4, 8.1, 8.3, 12(b) and 14.7 of this Agreement
during the term of such Physician Shareholder's employment with Practice and for
a period of five (5) years thereafter. This guaranty shall be a guaranty of
payment and performance, not merely collection, and shall be unaffected by any
subsequent modification or amendment of this Agreement whether or not such
guarantor has knowledge of or consented to such modification or amendment. In
the event that Practice fails to fully perform all such covenants and
obligations in accordance with their terms or pay all or any part of such sums
or deliver all or any part of such property when due, the Physician Shareholders
severally will perform all such covenants and obligations in accordance with
their terms or immediately pay or deliver to Manager (or such other payee or
transferee as may be provided in any such agreement) their pro rata share (as
defined below) of the amount due and unpaid or the property not delivered, as
the case may be, by Practice. In the event of bankruptcy, termination,
liquidation or dissolution of Practice, this unconditional guaranty shall
continue in full force and effect. In the event of any extension of time for
payment or performance or other modification of any guaranteed obligation or
covenant, or any waiver thereof or other compromise or indulgence with respect
thereto or any release or impairment of any security for any such obligation or
covenant, or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor, no notice to, or consent of,
Practice or any other Physician Shareholder shall be required. With respect to
any and all amounts which may be due and payable to Manager hereunder, the pro
rata share of each Physician Shareholder's guaranty thereof shall be limited to
the percentage amount thereof listed in Exhibit 12(b) hereto.
SECTION 13. NAME; LICENSE. Practice agrees that it shall conduct its medical
practice under the name of, and only under the name of "Atlanta Ear, Nose &
Throat Associates, P.C.", subject to the terms of the Trademark License between
the parties of even date herewith. In the event of any termination of the
Trademark License, Practice agrees to change the name under which it conducts
its medical practice to a distinctly different name.
SECTION 14. MISCELLANEOUS.
14.1 NOTICES. Any notice required or permitted by this Agreement or any
agreement or document executed and delivered in connection with this Agreement
shall be deemed to have been served properly if hand delivered or sent by
overnight express, charges prepaid and properly addressed, to the respective
party to whom such notice relates at the following addresses:
If to Practice:
New Atlanta Ear, Nose & Throat Associates, P.C.
0000 Xxxxxxxxx Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, M.D.
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Facsimile: (000) 000-0000
with a copy of each notice directed to:
Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
If to Manager:
PSC MANAGEMENT CORP.
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Secretary
Facsimile: (000) 000-0000
If to Parent:
PHYSICIANS' SPECIALTY CORP.
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Secretary
Facsimile:(000)000-0000
with a copy of each notice directed to Manager or Parent to:
Xxxxxxx X. Xxxxx
Xxxxxxxx Xxxxxxx LLP
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
or such other address as shall be furnished in writing by any party to the other
party. All such notices shall be considered received when hand delivered or one
business day after delivery to the overnight courier.
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14.2 ADDITIONAL ACTS. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.3 GOVERNING LAW. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State applied without giving effect
to any conflicts-of-law principles.
14.4 CAPTIONS, ETC. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement. All Addenda and Exhibits to this Agreement are hereby incorporated
into this Agreement by this reference.
14.5 SEVERABILITY. In the event any term, covenant, condition,
agreement, section or provision hereof shall be deemed invalid or unenforceable
by a court of competent and final jurisdiction in the premises, the same shall
be severable and this Agreement shall not terminate or be deemed void or
voidable, but shall continue in full force and effect without such stricken
provision.
14.6 CHANGES IN REIMBURSEMENT. If Medicare, Medicaid, Blue Shield or
any other third party payor, or any other Federal, state or local laws, rules,
regulations or interpretations, at any time during the term of this Agreement,
prohibit, restrict or in any way materially and adversely change the method or
amount of reimbursement or payment for services rendered by Practice pursuant to
this Agreement or of the method of compensation for either party provided for in
this Agreement, then the parties shall amend this Agreement to provide for
payment of compensation in a manner consistent with any such prohibition,
restriction or limitation and which takes into account any materially adverse
change in reimbursement or payment from such third party payors for such
physician services, provided such amendments are consistent with the overall
economic and other objectives of the parties set forth in this Agreement.
14.7 MODIFICATIONS. This instrument contains the entire agreement of
the parties and supersedes any and all prior or contemporaneous negotiations,
understandings or agreements between the parties, written or oral, with respect
to the transactions contemplated hereby. This Agreement may not be changed or
terminated orally, but may only be changed by an agreement in writing signed by
a duly authorized officer of Manager if Manager is the party against whom
enforcement of any such waiver, change, modification, extension, discharge or
termination is sought, or by Practice if Practice is the party against whom
enforcement of any such waiver, change, modification, extension, discharge or
termination is sought. The parties expressly acknowledge that this Section 14.7
may not be waived, modified or changed by any other persons except the Chief
Executive Officer or Chief Financial Officer of Manager and Practice.
14.8 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by Manager solely as a convenience and that all
parties and their counsel have read and fully negotiated all the language used
in this Agreement. The parties acknowledge and
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agree that because all parties and their counsel participated in negotiating and
drafting this Agreement, no rule of construction shall apply to this Agreement
which construes any language, whether ambiguous, unclear or otherwise, in favor
of, or against any party by reason of that party's role in drafting this
Agreement.
14.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
14.10 BINDING EFFECT. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto, and their successors and permitted
assigns. Subject to the foregoing sentence, no person not a party hereto shall
have any right under or by virtue of this Agreement.
14.11 ENFORCEMENT RIGHTS. Practice acknowledges that both Practice and
Manager will be directly or indirectly affected by the enforcement of Practice's
rights against third parties and by practice's enforcement of the rights of
third parties the enforcement rights of which were delegated to Practice by such
third parties, and that Manager may need from time to time to take legal action
against third parties to enforce such rights. Therefore, Practice hereby
appoints Manager its nonexclusive true and lawful attorney-in-fact to enforce
any and all rights of Practice, other than any rights Practice may have against
Manager, and to enforce the rights of third parties the enforcement rights of
which were delegated to Practice by such third parties, to the extent not
contrary to applicable law. Practice agrees to execute any instrument reasonably
requested by Manager to evidence such appointment or to reappoint Manager as
such attorney-in-fact upon any termination of the appointment made hereby. Such
appointment is coupled with an interest and irrevocable.
14.12 COSTS OF ENFORCEMENT. If either party files suit in any court
against the other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable costs, including reasonable attorneys' fees,
from the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if any)
is rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those attorneys' fees actually incurred in obtaining a
judgment in favor of the prevailing party.
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IN WITNESS WHEREOF, Practice, Manager and Parent have duly executed
this Agreement on the day and year first above written.
PSC MANAGEMENT CORP. NEW ATLANTA EAR, NOSE &
THROAT ASSOCIATES, P.C.
By: By:
---------------------------------- ----------------------------------
Printed Name: Xxxxxx X. Xxxxxxxx Printed Name: Xxxxx X. Xxxxx, M.D.
Title: Title:
------------------------------- -------------------------------
PHYSICIANS' SPECIALTY CORP.
By:
----------------------------------
Printed Name: Xxxxxx X. Xxxxxxxx
Title:
------------------
The undersigned, constituting all of the Physician Shareholders, hereby
ratify and confirm the above Agreement and agree to be bound by its terms,
including, but not limited to, the terms of Sections 3.6, 4.4, 4.5, 5.4, 6.4,
8.1, 8.3, 12(b), and 14.7 this Agreement on the basis and to the extent provided
in Section 12(b) hereof.
-----------------------------
Xxxxx X. Xxxxx, M.D.
-----------------------------
Xxxxxx X. Xxxxx, III, M.D.
-----------------------------
Xxxxxxx X. Xxxxxxxx, M.D.
-----------------------------
Xxxxx Xxxxxxx, M.D.
-----------------------------
Xxxxx X. Xxxxx, M.D.
-----------------------------
Xxx X. Xxxxx, M.D.
[ADDITIONAL SIGNATURE LINES]
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The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT B
INCENTIVE COMPENSATION TO MANAGER
On an annual basis, after Manager has received the annual retained amount of [*]
(or such increased amount as provided in Section 3.18) pursuant to Section
1.6(g) (the "Retained Amount"), Manager shall receive as incentive compensation
an amount equal to the product of (A) the excess of Net Practice Revenues over
Practice Expenses with respect to the period after the Retained Amount was
reached in such year, determined in accordance with generally accepted
accounting principles, multiplied by (B) [*], multiplied by (C) a fraction, the
numerator of which is the Retained Amount and the denominator of which is the
excess of Net Practice Revenues over Practice Expenses (without regard to the
Retained amount) with respect to the period ending when the Retained Amount was
reached, determined in accordance with generally accepted accounting principles.
An example of the calculation of incentive compensation follows:
(000's) 11 Months 1 Month Total Year
------------------- ----------------- ------------
$ % $ % $ %
--- --- --- --- --- ---
Net Practice Revenues
Practice Expenses
Base Fee [*]
Incentive Fee
Available for M.D.
Compensation & Benefits
Base Fee as % of Excess
(A) [*]
(B) [*]
In applying the formula stated above, Manager will fairly allocate
expenses in accordance with generally accepted accounting principles to the
periods before and after the Retained Amount is achieved and account on a proper
basis for partial months. In the event of a dispute over such calculations, the
parties agree to refer the matter to the Manager's independent public
accountants for an independent determination of the calculation, which
determination shall be final and binding on all parties.
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APPENDIX A
DEFINITIONS
-----------
Defined Term Section
------------ -------
Asset Purchase Agreement Background
Confidential Information 4.6(e)
Credit Facility Lender 5.4(b)
Effective Date Preamble
Estimated Collection Percentage 5.2
extended term 6.1
FFE 3.3
GAAP 1.2
Incentive Compensation 5.1
Indemnified Person 8.4
key man 8.5
Laws 3.12
Management Services 3.1
Manager Preamble
Medical Offices 3.1
Net Practice Revenues 1.3
Parent Preamble
Parties Background
Physician Employment Agreements 3.14
Physician Expenses 4.1
Physician Shareholders 1.4
Practice Preamble
Practice IP 4.6(d)
Practice Employees 1.5
Practice Expenses 1.6
PSC Background
Reasonable attorneys' fees 14.11
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EXHIBIT 12(B)
The Pro rata liability of each Physician Shareholder under Section
12(b) hereof shall be 2 times the percentage amount of the outstanding shares of
Atlanta Ear, Nose & Throat Associates, P.C. ("AENT") held by such Physician
Shareholder as of the date of execution of the Asset Acquisition Agreement
between AENT, Manager, Parent and the Physician Shareholders, as follows:
% of Shares Pro Rata Liability
Name of Physician Shareholder of AENT under 12(b)
----------------------------- ------- -----------
Xxxxx X. Xxxxx, M.D.
Xxxxxx X. Xxxxx, III, M.D.
Xxxxxxx X. Xxxxxxxx, M.D.
Xxxxx Xxxxxxx, M.D.
Xxxxx X. Xxxxx, M.D.
Xxx X. Xxxxx, M.D.
[ADDITIONAL PHYSICIAN SHAREHOLDERS]
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SCHEDULE OF OTHER MANAGEMENT SERVICES AGREEMENTS
Management Services Agreement to be entered into between the Registrant, PSC
Management Corp. and PSC Alabama Corp. which will be materially similar to the
filed exhibit.
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