Certain information in this exhibit is subject to a request for
confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been omitted and filed
separately with the Securities and Exchange Commission. The location of omitted
information is indicated with an asterisk [*].
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
AMERICAN ONCOLOGY RESOURCES, INC.
A DELAWARE CORPORATION
AND
CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A.
A TEXAS PROFESSIONAL ASSOCIATION
TABLE OF CONTENTS
Page No.
ARTICLE I. DEFINITIONS................................................... 2
Section 1.1 Adjusted Gross Revenue.................................... 2
Section 1.2 Adjustments............................................... 2
Section 1.3 Ancillary Revenue......................................... 2
Section 1.4 Base Management Fee....................................... 2
Section 1.5 Budget.................................................... 2
Section 1.6 Business Manager.......................................... 2
Section 1.7 Business Manager Consent.................................. 2
Section 1.8 Business Manager Expense.................................. 3
Section 1.9 Capitation/Case Rate Revenues............................. 3
Section 1.10 Confidential Information.................................. 3
Section 1.11 GAAP...................................................... 4
Section 1.12 Management Fee............................................ 4
Section 1.13 Management Services....................................... 4
Section 1.14 Management Services Agreement............................. 4
Section 1.15 Master Transaction Agreement.............................. 4
Section 1.16 Medical Services.......................................... 4
Section 1.17 New PA.................................................... 4
Section 1.18 New PA Account............................................ 4
Section 1.19 New PA Consent............................................ 4
Section 1.20 New PA Expense............................................ 5
Section 1.21 Office.................................................... 5
Section 1.22 Office Expense............................................ 5
Section 1.23 Performance Fee........................................... 6
Section 1.24 Physician................................................. 6
Section 1.25 Policy Board.............................................. 6
Section 1.26 Practice Territory........................................ 6
Section 1.27 Professional Services Revenues............................ 6
Section 1.28 Representatives........................................... 7
Section 1.29 State..................................................... 7
Section 1.30 Subcontractor Costs....................................... 7
Section 1.31 Term...................................................... 7
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER................ 7
Section 2.1 Appointment............................................... 7
Section 2.2 Authority................................................. 7
Section 2.3 Patient Referrals......................................... 7
i
Section 2.4 Internal Management of New PA............................. 8
Section 2.5 Practice of Medicine...................................... 8
ARTICLE III. RESPONSIBILITIES OF THE POLICY BOARD........................ 8
Section 3.1 Formation and Operation of the Policy Board............... 8
Section 3.2 Duties and Responsibilities of the Policy Board........... 8
Section 3.3 Medical Decisions......................................... 9
Section 3.4 Formation of Texas Oncology Associates.................... 9
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER........... 10
Section 4.1 Office and Equipment...................................... 10
Section 4.2 Medical Supplies.......................................... 11
Section 4.3 Support Services.......................................... 11
Section 4.4 Quality Assurance, Risk Management, and Utilization Review 11
Section 4.5 Licenses and Permits...................................... 11
Section 4.6 Personnel................................................. 11
Section 4.7 Contract.................................................. 12
Section 4.8 Billing and Collection.................................... 12
Section 4.9 New PA Account............................................ 13
Section 4.10 Fiscal Matters............................................ 14
Section 4.11 Reports and Records....................................... 16
Section 4.12 Recruitment of New PA Physicians.......................... 17
Section 4.13 Confidential and Proprietary Information.................. 17
Section 4.14 Business Manager's Insurance.............................. 18
Section 4.15 No Warranty............................................... 18
Section 4.16 Noncompetition Covenant from Business Manager............. 18
ARTICLE V. COVENANTS AND RESPONSIBILITIES OF NEW PA...................... 18
Section 5.1 Organization and Operation................................ 18
Section 5.2 New PA Personnel.......................................... 19
Section 5.3 Professional Standards.................................... 19
Section 5.4 Medical Services.......................................... 20
Section 5.5 Code of Business Conduct.................................. 20
Section 5.6 Peer Review/Quality Assurance............................. 20
Section 5.7 New PA's Insurance........................................ 20
Section 5.8 Confidential and Proprietary Information.................. 21
Section 5.9 Noncompetition............................................ 21
Section 5.10 Name, Trademark........................................... 23
Section 5.11 Peer Review............................................... 23
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ARTICLE VI. FINANCIAL ARRANGEMENT........................................ 23
Section 6.1 Definitions............................................... 23
Section 6.2 Management Fee............................................ 23
Section 6.3 Adjustments............................................... 24
Section 6.4 Reasonable Value.......................................... 24
Section 6.5 Payment of Management Fee................................. 25
Section 6.6 Accounts Receivable....................................... 25
Section 6.7 Disputes Regarding Fees................................... 25
ARTICLE VII. TERM AND TERMINATION........................................ 26
Section 7.1 Initial and Renewal Term.................................. 26
Section 7.2 Termination............................................... 26
Section 7.3 Effects of Termination.................................... 27
Section 7.4 Repurchase Obligation..................................... 28
Section 7.5 Repurchase Option......................................... 29
Section 7.6 Closing of Repurchase..................................... 29
ARTICLE VIII. MISCELLANEOUS.............................................. 30
Section 8.1 Administrative Services Only.............................. 30
Section 8.2 Status of Contractor...................................... 30
Section 8.3 Notices................................................... 30
Section 8.4 Governing Law............................................. 31
Section 8.5 Assignment................................................ 31
Section 8.5A PRN Assignment............................................ 32
Section 8.6 Arbitration............................................... 33
Section 8.7 Waiver of Breach.......................................... 33
Section 8.8 Enforcement............................................... 33
Section 8.9 Gender and Number......................................... 33
Section 8.10 Additional Assurances..................................... 33
Section 8.11 Consents, Approvals, and Exercise of Discretion........... 33
Section 8.12 Force Majeure............................................. 34
Section 8.13 Severability.............................................. 34
Section 8.14 Divisions and Headings.................................... 34
Section 8.15 Amendments and Management Services Agreement Execution.... 34
Section 8.16 Entire Management Services Agreement...................... 34
EXHIBIT 4.8 POWER OF ATTORNEY
EXHIBIT 5.1 EMPLOYMENT AGREEMENT (SHAREHOLDERS)
iii
EXHIBIT 5.1A LIST OF SHAREHOLDERS
EXHIBIT 5.1B BUY-SELL AGREEMENT
EXHIBIT 5.2(a) EMPLOYMENT AGREEMENT (NONSHAREHOLDERS)
EXHIBIT 5.5 CODE OF BUSINESS CONDUCT
iv
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective as of
September 1, 1996, by and between American Oncology Resources, Inc., a Delaware
corporation ("Business Manager"), and Central Texas Oncology Associates, P.A., a
Texas professional association ("New PA").
RECITALS
This Management Services Agreement is made with reference to the following
facts:
A. New PA is a validly existing Texas professional association, formed
for and engaged in the conduct of a medical practice and the provision of
medical services to the general public in and around the Austin, Texas
metropolitan areas through individual physicians who are licensed to practice
medicine in the State of Texas and who are employed or otherwise retained by New
PA.
B. Business Manager is a validly existing Delaware corporation which is
in the business of managing medical practices.
C. New PA desires to focus its energies, expertise and time on the
practice of medicine and on the delivery of medical services to patients, and to
accomplish this goal it desires to delegate the increasingly more complex
business functions of its medical practice to persons with business expertise.
D. New PA wishes to engage Business Manager to provide such management,
administrative and business services as are necessary and appropriate for the
day-to-day administration of the nonmedical aspects of New PA's medical practice
in the Practice Territory (as defined below), and Business Manager desires to
provide such services all upon the terms and conditions hereinafter set forth.
E. New PA and Business Manager have determined a fair market value for
the services to be rendered by Business Manager, and based on this fair market
value, have developed a formula for compensation for Business Manager that will
allow the parties to establish a relationship permitting each party to devote
its skills and expertise to the appropriate responsibilities and functions.
F. Business Manager is willing to commit significant resources to New PA
based upon the representations and warranties of New PA that the current
shareholders of New PA will continue
to practice medicine for New PA in the Practice Territory for five (5) years
from the effective date of this Management Services Agreement.
G. For accounting purposes, it is expressly recognized that for the
purpose of assessing Business Manager's performance of its management,
consulting, supervisory and other obligations under this Agreement and
determining Business Manager's compensation therefor, all Office Expenses,
whether such expenses are paid or incurred by New PA or Business Manager as
defined herein, shall be considered costs of the Business Manager due to
Business Manager's care, custody, and control over such expenses with respect to
its management, supervisory, and related responsibilities, all as required by
law and regulation.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions
hereinabove and hereinafter set forth, the parties agree as follows:
ARTICLE I. DEFINITIONS
For the purposes of this Management Services Agreement, the following terms
shall have the following meanings ascribed thereto, unless otherwise clearly
required by the context in which such term is used.
Section 1.1 Adjusted Gross Revenue. The term "Adjusted Gross Revenue"
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
Section 1.2 Adjustments. The term "Adjustments" shall mean any
adjustments on an accrual basis for uncollectible accounts, Medicare, Medicaid
and other payor contractual adjustments, discounts, workers' compensation
adjustments, professional courtesies, and other reductions in collectible
revenue that result from activities that do not result in collectible charges.
Section 1.3 Ancillary Revenue. The term "Ancillary Revenue" shall mean
all other revenue actually recorded each month (net of Adjustments) that is not
Professional Services Revenues or Subcontractor Capitation Revenues, and shall
include (a) any amounts received by New PA as liquidated damages under Section
4.2 or Section 4.3 of any Physician's employment agreement and (b) any amounts
paid to New PA under any Physician's Notes (as defined in the Master Transaction
Agreement) that have been assigned or have been deemed to have been assigned to
New PA under the terms of Section 2.02(b) of the Purchase Agreement.
Section 1.4 Base Management Fee. The term "Base Management Fee" shall
mean the amount set forth in Section 6.1.
Section 1.5 Budget. The term "Budget" shall mean an operating budget
and capital expenditure budget for each fiscal year as prepared by Business
Manager and adopted by New PA.
Section 1.6 Business Manager. The term "Business Manager" shall mean
American Oncology Resources, Inc., a Delaware corporation or any entity that
succeeds to the interests of American Oncology Resources, Inc., a Delaware
corporation and to whom the obligations of Business Manager are assigned and
transferred.
Section 1.7 Business Manager Consent. The term "Business Manager
Consent" shall mean the consent granted by Business Manager's representatives
(or either representative) to the Policy Board created pursuant to Article III
herein. When any provision of this Management Services Agreement requires
Business Manager Consent, Business Manager Consent shall not be unreasonably
withheld and shall be binding on Business Manager.
Section 1.8 Business Manager Expense. The term "Business Manager
Expense" shall mean an expense or cost incurred by the Business Manager and for
which the Business Manager, and not New PA, is financially liable. Business
Manager Expense shall specifically include the costs of American Oncology
Resources, Inc. ("AOR") corporate personnel and the travel costs of such
corporate personnel.
Section 1.9 Capitation/Case Rate Revenues. The term "Capitation/Case
Rate Revenues" shall mean all revenues from managed care organizations, third
party payors, or employers where such payment is made based on a per member,
case rate, or other similar basis (i.e., all payments which are not made based
on a fee for service reimbursement methodology) for the partial or total medical
needs of a subscribing patient. Capitation/Case Rate Revenues shall include any
associated plan payments received such as patient co-payments, incentive
bonuses, or incentive fund penalties. All Capitation/Case Rate Revenues shall be
allocated in good faith on an actuarial basis as follows:
(a) Professional Services Capitation: the portion or payments designated
for physician services currently performed by New PA (e.g., office and hospital
visits, chemotherapy administration, pharmaceuticals, laboratory, radiation,
etc.). Professional Services Capitation shall be Professional Services
Revenues; and
(b) Subcontractor Capitation Revenues: the portion of payments designated
for physician or other medical services that will be Subcontractor Costs (e.g.,
reinsurance, hospitalization, surgical procedures, stem cell harvesting,
radiation therapy, etc.), including incentive bonuses or penalties, will first
be allocated to cover subcontractor services, including an estimate for incurred
but not reported claims. Subcontractor Capitation Revenues shall not be
Professional Services Revenues, but shall be revenues of New PA.
The final allocation methodology is subject to approval by the Policy Board or
Joint Policy Board.
3
Section 1.10 Confidential Information. The term "Confidential
Information" shall mean any information of Business Manager or New PA, as
appropriate (whether written or oral), including all notes, studies, patient
lists, information, forms, business or management methods, marketing data, fee
schedules, or trade secrets of the Business Manager or of New PA, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Management Services
Agreement. Confidential Information shall also include the terms and provisions
of this Management Services Agreement and any transaction or document executed
by the parties pursuant to this Management Services Agreement. Confidential
Information does not include any information that (i) is or becomes generally
available to and known by the public (other than as a result of an unpermitted
disclosure directly or indirectly by the receiving party or its affiliates,
advisors, or Representatives); (ii) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the furnishing party
or its affiliates, advisors, or Representatives, provided that such source is
not and was not bound by a confidentiality agreement with or other obligation of
secrecy to the furnishing party of which the receiving party has knowledge at
the time of such disclosure; or (iii) has already been or is hereafter
independently acquired or developed by the receiving party without violating any
confidentiality agreement with or other obligation of secrecy to the furnishing
party.
Section 1.11 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 and statements and pronouncements of the Financial Accounting
Standards Board or 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 the determination. For purposes of this Management Services Agreement, GAAP
shall be applied on an accrual basis in a manner consistent with the historic
practices of the person to which the term applies.
Section 1.12 Management Fee. The term "Management Fee" shall mean
Business Manager's compensation established as described in Article VI hereof.
Section 1.13 Management Services. The term "Management Services" shall
mean the business, administrative, and management services to be provided for
New PA, including without limitation the provision of equipment, supplies,
support services, nonmedical personnel, office space, management,
administration, financial recordkeeping and reporting, and other business office
services.
Section 1.14 Management Services Agreement. The term "Management
Services Agreement" shall mean this Management Services Agreement by and between
New PA and Business Manager and any amendments hereto as may be adopted as
provided in this Management Services Agreement.
4
Section 1.15 Master Transaction Agreement. The term "Master Transaction
Agreement" shall mean the agreement effective as of September 1, 1996, by and
between American Oncology Resources, Inc. ("AOR"), AOR of Texas Management
Limited Partnership, Central Texas Diagnostic Center, a professional
association, New PA, and Xxxx X. Xxxx, M.D., Xxxxxxx X. Xxxxxx, M.D., Xxxxxx X.
Xxxxxx, M.D., Xxxxxx X. Xxxxxx, M.D., J. Xxxxxx Xxxxxx, M.D., Xxxxxx X. Xxxx,
M.D., Xxxxxxxxx X. Xxxxxx, M.D., Xxxxxx X. Xxxxxx, M.D., Xxxx X. Xxxxxxxx, M.D,
Xxxxxxx X. Xxxxx, M.D., Xxxxx X. Xxxxx, M.D., and Xxxx X. Xxxxxxx, M.D.
Section 1.16 Medical Services. The term "Medical Services" shall mean
medical care and services, including but not limited to the practice of
hematology and oncology and all related health care services provided by New PA
through New PA's Physicians and other health care providers that are retained by
or professionally affiliated with New PA.
Section 1.17 New PA. The term "New PA" shall mean Central Texas Oncology
Associates, P.A., a Texas professional association.
Section 1.18 New PA Account. The term "New PA Account" shall mean the
bank account of New PA established as described in Sections 4.8 and 4.9.
Section 1.19 New PA Consent. The term "New PA Consent" shall mean the
consent granted by New PA's representatives (or either representative) to the
Policy Board created pursuant to Article III herein. When any provision of this
Management Services Agreement requires New PA Consent, New PA Consent shall not
be unreasonably withheld and shall be binding on New PA.
Section 1.20 New PA Expense. The term "New PA Expense" shall mean an
expense incurred by the Business Manager or New PA and for which New PA, and not
the Business Manager, is financially liable. New PA Expense shall include such
items as salaries for Physicians, physician assistants, and other physician
"extenders," benefits, and other direct costs (including professional dues,
subscriptions, continuing medical education expenses, and travel costs for
continuing medical education or other business travel but excluding business
travel requested by Business Manager which shall be an Office Expense). In the
event New PA incurs consulting, accounting or legal fees without coordinating
such engagement through Business Manager, all fees and expenses so incurred
shall be New PA Expenses.
Section 1.21 Office. The term "Office" shall mean any office space,
clinic, facility, including satellite facilities, that Business Manager shall
own or lease or otherwise procure for the exclusive use of New PA.
Section 1.22 Office Expense. The term "Office Expense" shall mean all
operating and non-operating expenses incurred by the Business Manager or New PA
in the provision of services to New PA. Office Expense shall not include any
State or federal income tax, any Medical Assets (as defined in the Master
Transaction Agreement), any payment by AOR on the Note (as defined in
5
Article I of the Master Transaction Agreement), or any other expense that is a
New PA Expense or a Business Manager Expense. Without limitation, Office Expense
shall include:
(a) the salaries, benefits, and other direct costs of all employees of
Business Manager at the Office and the salaries, benefits, and other direct
costs of the nonphysician employees of New PA (including those of any Business
Manager managed care/payor contracting developer or New PA's pro rata share of
such costs if such developer's services are not dedicated solely to New PA but
is otherwise approved as an Office Expense in the Budget) but not the salaries,
benefits, or other direct costs of the Physicians (which are New PA Expenses
pursuant to Section 1.20 above);
(b) the direct cost of any employee or consultant that provides services at
or in connection with the Office for improved clinic performance, such as
management, billing and collections, business office consultation, accounting
and legal services, but only when such services are coordinated by Business
Manager;
(c) reasonable recruitment costs and out-of-pocket expenses of Business
Manager or New PA associated with the recruitment of additional physician
employees of New PA;
(d) malpractice insurance expenses for Physicians, Business Manager
employees, and nonphysician employees; comprehensive and general liability and
vicarious liability insurance covering the Office and employees of New PA and
Business Manager at the Office; and key person life and disability insurance on
any shareholder or physician employee of New PA in amounts, if any, as
determined reasonable and sufficient by Business Manager; proceeds from which
shall not be Professional Services Revenues but shall be revenues of New PA.
(e) the expense of using, leasing, purchasing or otherwise procuring the
Office and related equipment, including depreciation but not including monies
paid by third parties;
(f) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of New PA or as reasonable imputed interest on capital
advanced by Business Manager) to finance or refinance obligations of New PA,
purchase medical or nonmedical equipment, or finance new ventures of New PA;
(g) the Base Management Fee;
(h) direct costs related to obtaining and maintaining Capitation/Case Rate
Revenues contracts for professional medical services or health care service
contracts with medical or health care providers not associated with New PA;
(i) the reasonable travel expenses (except for the corporate staff of AOR)
associated with attending meetings, conferences, or seminars to benefit New PA;
6
(j) the cost of medical supplies (including but not limited to drugs,
pharmaceuticals, products, substances, items, or medical devices), office
supplies, inventory, and utilities other than those medical supplies or medical
inventory owned by New PA on the date of this Management Services Agreement; and
(k) any state sales tax, assessed on those certain enumerated services in
Article IV that have been determined to be taxable services by the state.
Section 1.23 Performance Fee. The term "Performance Fee" shall mean the
amount payable to the Business Manager, if any, determined under Section 6.2, as
a Management Fee based upon the Business Manager assisting New PA to achieve
certain pre-determined performance criteria.
Section 1.24 Physician. The term "Physician" shall mean each
individually licensed professional who is employed or otherwise retained by or
associated with New PA, each of whom shall meet at all times the qualifications
described in Section 5.2 and Section 5.3.
Section 1.25 Policy Board. The term "Policy Board" shall refer to the
body responsible for developing and implementing management and administrative
policies for the overall operation of New PA's facilities. If New PA becomes a
partner in Texas Oncology Associates, the term "Policy Board" may, as
applicable, instead refer to the Joint Policy Board formed pursuant to the
Affiliation Agreement (as defined by the Master Transaction Agreement).
Section 1.26 Practice Territory. The term "Practice Territory" shall
mean the geographic area within a radius of thirty (30) miles of any current or
future facility from which New PA provides Medical Services in Texas,
representing the geographic boundaries of the medical practice conducted by New
PA.
Section 1.27 Professional Services Revenues. The term "Professional
Services Revenues" shall mean the sum of (i) all professional fees actually
recorded each month on an accrual basis under GAAP (net of Adjustments) as a
result of professional medical services and related health care services
rendered by the Physicians whether rendered in an outpatient or inpatient
setting, and (ii) Professional Services Capitation allocated to Professional
Services Revenues. Professional Services Revenues shall not include those
monies specifically excluded from Professional Fees pursuant to Section 1.2 of
the separate Physician Employment Agreement executed by Physicians, liquidated
damages and applicable insurance proceeds.
Section 1.28 Representatives. The term "Representatives" shall mean a
party's officers, directors, employees, or other agents or representatives.
Section 1.29 State. The term "State" shall mean the State of Texas.
7
Section 1.30 Subcontractor Costs. The term "Subcontractor Costs" shall
mean the amounts due third parties for providing medical services pursuant to
Capitation/Case Rate Revenues.
Section 1.31 Term. The term "Term" shall mean the initial and any
renewal periods of duration of this Management Services Agreement as described
in Section 7.1.
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 Appointment. New PA hereby appoints Business Manager as its
sole and exclusive agent for the management, and administration of the business
functions and business affairs of New PA, and Business Manager hereby accepts
such appointment, subject at all times to the provisions of this Management
Services Agreement.
Section 2.2 Authority. Consistent with the provisions of this
Management Services Agreement, Business Manager shall have the responsibility
and commensurate authority to provide Management Services for New PA. Subject
to the terms and conditions of this Management Services Agreement, Business
Manager is hereby expressly authorized to provide the Management Services in any
reasonable manner Business Manager deems appropriate to meet the day-to-day
requirements of the business functions of New PA. Business Manager is also
expressly authorized to negotiate and execute on behalf of New PA contracts that
do not relate to the provision of Medical Services, provided that such contracts
shall be consistent with the Budget. New PA shall give Business Manager thirty
(30) days prior notice of New PA's intent to execute any agreement obligating
New PA to perform Medical Services or otherwise creating a binding legal
obligation on New PA. Unless an expense is expressly designated as a Business
Manager Expense in this Management Services Agreement, all expenses incurred by
Business Manager in providing services pursuant to this Management Services
Agreement shall be an Office Expense. The parties acknowledge and agree that
New PA, through its Physicians, shall be responsible for and shall have complete
authority, responsibility, supervision, and control over the provision of all
Medical Services and other professional health care services performed for
patients, and that all diagnoses, treatments, procedures, and other professional
health care services shall be provided and performed exclusively by or under the
supervision of Physicians as such Physicians, in their sole discretion, deem
appropriate. Business Manager shall have and exercise absolutely no control or
supervision over the provision of Medical Services.
Section 2.3 Patient Referrals. Business Manager and New PA agree that
the benefits to New PA hereunder do not require, are not payment for, and are
not in any way contingent upon the referral, admission, or any other arrangement
for the provision of any item or service offered by Business Manager to patients
of New PA in any facility, laboratory, infusion center, or health care operation
controlled, managed, or operated by Business Manager.
Section 2.4 Internal Management of New PA. Matters involving the
internal management, control, or finances of New PA, including specifically the
allocation of professional
8
income among the shareholders and Physician employees of New PA, tax planning,
and investment planning, shall remain the responsibility of New PA and the
shareholders of New PA.
Section 2.5 Practice of Medicine. The parties acknowledge that Business
Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of medicine. To the extent any
act or service herein required by Business Manager should be construed by a
court of competent jurisdiction or by the Texas State Board of Medical Examiners
constitute the practice of medicine, the requirement to perform that act or
service by Business Manager shall be deemed waived and unenforceable.
ARTICLE III RESPONSIBILITIES OF THE POLICY BOARD
Section 3.1 Formation and Operation of the Policy Board. The parties
hereby establish a Policy Board which shall be responsible for developing and
implementing management and administrative policies for the overall operation of
New PA's facilities. The Policy Board shall consist of six (6) members.
Business Manager shall designate, in its sole discretion, two (2) members of the
Policy Board. The members of New PA Executive Committee shall be the four (4)
New PA members of the Policy Board. The Policy Board members selected by New PA
shall be full-time physician employees of New PA practicing in the Practice
Territory. Each party's representatives to the Policy Board shall have the
authority to make decisions on behalf of the respective party. Except as may
otherwise be provided, the number of total votes the members shall be authorized
to cast shall be equal as between Business Manager and New PA and a majority
vote of the members of the Policy Board shall be the act of the Policy Board.
Section 3.2 Duties and Responsibilities of the Policy Board. The Policy
Board, except as otherwise limited by Section 3.3, shall have the following
duties, obligations, and authority:
(a) Capital Improvements and Expansion. Any renovation and expansion plans
and capital equipment expenditures with respect to New PA's facilities shall be
reviewed and approved by the Policy Board and shall be based upon economic
feasibility, physician support, productivity and then current market conditions.
(b) Marketing and Advertising. All marketing and other advertising of the
services performed at New PA's facilities shall be subject to the prior review
and approval of the Policy Board.
(c) Patient Fees; Collection Policies. As a part of the annual operating
budget, in consultation with New PA and Business Manager, the Policy Board shall
review and approve the fee schedule and collection policies for all physician
and ancillary services rendered by New PA.
(d) Ancillary Services. The Policy Board shall approve New PA-provided
ancillary services based upon the pricing, access to and quality of such
services.
9
(e) Provider and Payor Relationships. Decisions regarding the
establishment or maintenance of relationships with institutional health care
providers and third party payors shall be approved by the Policy Board in
consultation with New PA. The Policy Board shall review and approve discounted
fee schedules, including capitated fee arrangements, and shall allocate
Capitation/Case Rate Revenues.
(f) Strategic Planning. The Policy Board shall develop long-term strategic
planning objectives.
(g) Capital Expenditures. The Policy Board shall determine the priority of
major capital expenditures.
(h) Physician Hiring. The Policy Board shall recommend to New PA and
confirm or approve New PA's decisions regarding the number and type of
physicians required for the efficient operation of New PA's facilities. The
Policy Board shall review and approve any variations to the restrictive
covenants in any physician employment contract.
(i) Fee Dispute Resolution. Upon submission by New PA of a dispute
concerning a set-off or reduction in Management Fees, the Policy Board shall
consider, develop, and implement a resolution to New PA and Business Manager.
(j) Grievance Referrals. The Policy Board shall consider and make
recommendations to New PA regarding grievances pertaining to matters not
specifically addressed in this Management Services Agreement as referred to it
by New PA's Board of Directors.
Section 3.3 Medical Decisions. Despite the above listing of activities
and areas of interest, all medical decisions will be made solely by physicians,
but nonphysician members of the Policy Board may participate in the discussion
process. The physician members of the Policy Board shall review and resolve
issues relating to:
(a) Types and levels of Medical Services to be provided;
(b) Recruitment of physicians to New PA, including the specific
qualifications and specialties of recruited physicians;
(c) Acquisition of or merger with any other medical practices in the
Practice Territory;
(d) Fee schedules; and
(e) Any other function or decision that the parties agree is medical
related.
10
The Policy Board meetings shall be held as mutually agreed, but at least
quarterly, in Texas. Meetings shall be open to any shareholder in New PA.
Section 3.4 Formation of Texas Oncology Associates. If New PA becomes a
partner in Texas Oncology Associates ("Global P") pursuant to Section 2.05 of
the Master Transaction Agreement, the Policy Board shall delegate to the Joint
Policy Board (created pursuant to the Affiliation Agreement as defined in the
Master Transaction Agreement) decision-making authority for those matters
specifically described in the Affiliation Agreement. It is intended that the
Joint Policy Board assume responsibility for only those matters that are
specified in the Affiliation Agreement which have an effect on two or more
parties to the Affiliation Agreement. However, it is intended that
notwithstanding the formation of the Joint Policy Board, the Policy Board shall
continue in effect with its same rights, obligations and duties subject only to
the rights of the Joint Policy Board as described in this Section 3.4. In
addition, New PA agrees that it shall fully cooperate with Business Manager to
obtain a provider number for Global P, that it shall cease to use its provider
number when Global P obtains a provider number, and that it shall begin to use
the provider number of Global P.
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall serve generally in a supervisory
capacity in order to best oversee all aspects of the Management Services
provided hereunder, specifically by arranging and coordinating such Management
Services as Business Manager, in its supervisory capacity, deems necessary and
appropriate to facilitate the day-to-day administration of the business aspects
of New PA's operations, including without limitation those set forth in this
Article IV in accordance with all law, rules, regulations and guidelines
applicable to the provision of Management Services.
Section 4.1 Office and Equipment.
(a) Subject to Section 4.1(b), as necessary and appropriate, taking into
consideration the professional concerns of New PA, Business Manager shall lease,
acquire or otherwise procure an Office in a location or locations reasonably
acceptable to New PA and shall permit New PA to use the Office. Any Office
procured by Business Manager for the use by New PA shall be procured at
commercially reasonable rates. Any move from New PA's present practice
location(s) shall be done only after Business Manager has received New PA's
Consent.
(b) In the event New PA is the lessee of the Office under a lease with an
unrelated and nonaffiliated lessor, Business Manager may require New PA to
assign such lease to Business Manager upon receipt of consent from the lessor.
New PA shall use its best efforts to assist in obtaining the lessor's consent to
the assignment. Upon request, New PA shall execute any instruments and shall
take any acts that Business Manager may deem necessary to accomplish the
assignment of the lease. Any expenses incurred in the assignment shall be Office
Expenses.
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(c) Business Manager shall provide all nonmedical equipment, fixtures,
office supplies, furniture and furnishings deemed reasonably necessary by
Business Manager for the operation of the Office and reasonably necessary for
the provision of Medical Services.
(d) Business Manager shall provide, finance, or cause to be provided or
financed medical related equipment as required by New PA. Subject to economic
feasibility, New PA shall have final authority in all medical equipment
selections, and Business Manager shall have no authority in regard to medical
equipment selection issues. Business Manager may, however, advise New PA on the
relationship between its medical equipment decisions and the overall
administrative and financial operations of the practice. All medical and
nonmedical equipment, other than Physician-owned automobiles, acquired for the
use of New PA shall be owned by Business Manager.
(e) Business Manager shall be responsible for the care, custody, and
control, including repair and maintenance of the Office, consistent with
Business Manager's responsibilities under the terms of any lease or other use
arrangement, and for the repair, maintenance, and replacement of all equipment
other than such repairs, maintenance and replacement necessitated by the
negligence or willful misconduct of New PA, its Physicians or other personnel
employed by New PA, the repair or replacement of which shall be a New PA Expense
and not an Office Expense.
Section 4.2 Medical Supplies. Business Manager shall order, procure,
purchase and provide on behalf of and as agent for New PA all reasonable medical
supplies unless otherwise prohibited by federal and/or State law. Furthermore,
Business Manager shall ensure that the Office is at all times adequately stocked
with the medical supplies that are necessary and appropriate for the operation
of New PA and required for the provision of Medical Services. The ultimate
oversight, supervision and ownership for all medical supplies is and shall
remain the sole responsibility of New PA. As used in this provision the term
"medical supplies" shall mean all drugs, pharmaceuticals, products, substances,
items or devices whose purchase, possession, maintenance, administration,
prescription or security requires the authorization or order of a licensed
health care provider or requires a permit, registration, certification or other
governmental authorization held by a licensed health care provider as specified
under any federal and/or State law.
Section 4.3 Support Services. Business Manager shall coordinate,
supervise, or otherwise arrange for all printing, stationery, forms, postage,
duplication or photocopying services, and other support services as are
reasonably necessary and appropriate for the operation of the Office and the
provision of Medical Services therein.
Section 4.4 Quality Assurance, Risk Management, and Utilization Review.
Business Manager shall assist New PA in New PA's establishment and
implementation of procedures to ensure the consistency, quality,
appropriateness, and medical necessity of Medical Services provided by New PA,
and shall arrange for administrative support for New PA's overall quality
assurance, risk management, and utilization review programs. Business Manager
shall perform these tasks in a
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manner to ensure the confidentiality and nondiscoverability of these program
actions to the fullest extent allowable under State and federal law.
Section 4.5 Licenses and Permits. Business Manager shall, on behalf of
and in the name of New PA, coordinate all development and planning processes,
and apply for and use reasonable efforts to obtain and maintain all federal,
State, and local licenses and regulatory permits required for or in connection
with the operation of New PA and equipment (existing and future) located at the
Office, other than those relating to the practice of medicine or the
administration of drugs by Physicians retained by or associated with New PA.
Section 4.6 Personnel. Except as specifically provided in Section
5.2(b) of this Management Services Agreement, Business Manager shall, consistent
with the Budget, coordinate and supervise New PA's retention of and shall
oversee the selection, hiring, training, supervision and termination of all
management, administrative, clerical, secretarial, bookkeeping, accounting,
payroll, billing and collection and other nonprofessional personnel of New PA to
enable Business Manager to perform its duties and obligations under this
Management Services Agreement. The Business Manager personnel required
hereunder shall include, but not be limited to, an executive director, a
practice administrator, a controller, an assistant controller, a managed
care/payor contracting developer, and a business office manager, as applicable,
the majority of whose time shall be devoted to performing supervisory and
managerial functions on behalf of Business Manager, and each of whom shall
maintain time records to reflect the appropriate allocation between supervision
versus performance of such duties. Business Manager shall have sole
responsibility for determining the salaries and providing such fringe benefits,
and for withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law
or governmental requirement.
Section 4.7 Contract Negotiations. Upon the request of New PA, Business
Manager shall advise New PA with respect to and negotiate, either directly or on
New PA's behalf, as appropriate, all contractual arrangements with third parties
as are reasonably necessary and appropriate for New PA's provision of Medical
Services, including, without limitation, negotiated price agreements with third
party payors, alternative delivery systems, or other purchasers of group health
care services. No contract or arrangement regarding the provision of Medical
Services shall be entered into without New PA Consent.
Section 4.8 Billing and Collection. On behalf of and for the account of
New PA, Business Manager shall assist New PA in New PA's establishment and
maintenance of credit and billing and collection policies and procedures, and
shall coordinate and supervise New PA personnel to ensure the timely billing and
collection of all professional and other fees for all billable Medical Services
provided by New PA or Physicians. Business Manager shall advise and consult
with New PA regarding the fees for Medical Services provided by New PA; it being
understood, however, that New PA shall establish the fees to be charged for
Medical Services and that Business Manager shall have no authority whatsoever
with respect to the establishment of such fees. In connection with the
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billing and collection services to be provided hereunder, and throughout the
Term (and thereafter as provided in Section 7.3), New PA hereby grants to
Business Manager an exclusive special power of attorney and appoints Business
Manager as New PA's exclusive true and lawful agent and attorney-in-fact, and
Business Manager hereby accepts such special power of attorney and appointment,
for the following purposes:
(a) To supervise and coordinate the billing of New PA's patients, in the
name of Global P and on behalf of New PA or Global P, as applicable, for all
billable Medical Services provided by New PA to patients.
(b) To supervise and coordinate the billing in Global P's name and on New
PA's or Global P's behalf, as applicable, all claims for reimbursement or
indemnification from Blue Shield/Blue Cross, insurance companies, Medicare,
Medicaid, and all other third party payors or fiscal intermediaries for all
covered billable Medical Services provided by New PA to patients.
(c) To ensure the collection and receipt in Business Manager's name and for
Business Manager's account all accounts receivable of New PA purchased by
Business Manager, and to deposit such collections in an account selected by
Business Manager and maintained in Business Manager's name.
(d) To ensure the collection and receipt in Global P's name and on New PA's
or Global P's behalf, as applicable, all accounts receivable generated by such
xxxxxxxx and claims for xxxx bursement that have not been purchased by Business
Manager, to administer such accounts including, but not limited to, (i)
extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) discharging or releasing the obligors of any such accounts;
(iii) with the consent of the Policy Board, suing, assigning or selling at a
discount such accounts to collection agencies; or (iv) with the consent of the
Policy Board, taking other measures to require the payment of any such ac
counts.
(e) To deposit all amounts collected in Global P's name and on behalf of
New PA or Global P, as applicable, into New PA Account which shall be and at all
times remain in New PA's name. New PA covenants to transfer and deliver to
Business Manager for deposit into New PA Account or itself to make such deposit
of all funds received by New PA from patients or third party payors for Medical
Services. Upon receipt by Business Manager of any funds from patients or third
party payors or from New PA pursuant hereto for Medical Services, Business
Manager shall immedi ately deposit same into the New PA Account. Business
Manager shall disburse such deposited funds to creditors and other persons on
behalf of New PA, maintaining records of such receipt and disbursement of funds
as directed by New PA.
(f) To take possession of, endorse in the name of New PA or Global P, as
appropriate, and deposit into the New PA Account any notes, checks, money
orders, insurance payments, and any other instruments received in payment for
Medical Services.
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(g) To sign checks, drafts, bank notes or other instruments on behalf of
New PA or Global P, as appropriate, and to make withdrawals from the New PA
Account for payments specified in this Management Services Agreement and as
requested from time to time by New PA.
Upon request of Business Manager, New PA shall execute and deliver to the
financial institution wherein the New PA Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
and limited power of attorney granted to Business Manager by New PA pursuant to
this Section 4.8 or pursuant to Section 4.9 of this Management Services
Agreement. The special and limited power of attorney granted herein shall be
coupled with an interest and shall be irrevocable except with Business Manager's
written consent. The irrevocable power of attorney shall expire on the later of
when this Management Services Agreement has been terminated, when all accounts
receivable purchased by Business Manager have been collected or when all
Management Fees due to Business Manager have been paid. If Business Manager
assigns this Management Services Agreement in accordance with its terms, then
New PA shall execute a power of attorney in favor of the assignee and in the
form of Exhibit 4.8 attached hereto.
Section 4.9 New PA Account.
(a) Power of Attorney. Business Manager shall have access to the New PA
Account solely for the purposes stated herein. In connection herewith and
throughout the Term (and thereafter as provided in Section 7.3), New PA hereby
grants to Business Manager an exclusive special power of attorney for the
purposes herein and appoints Business Manager as New PA's exclusive true and
lawful agent and attorney-in-fact, and Business Manager hereby accepts such
special power of attorney and appointment, to deposit into the New PA Account
all funds, fees, and revenues generated from the New PA's provision of Medical
Services and collected by Business Manager, and to make withdrawals from New PA
Account for payments specified in this Management Services Agreement and as
requested from time-to-time by New PA. Notwithstanding the exclusive special
power of attorney granted to Business Manager hereunder, New PA may, upon
reasonable advance notice to Business Manager, draw checks on the New PA
Account; provided, however, that New PA shall neither draw checks on the New PA
Account nor request Business Manager to do so if the balance remaining in the
New PA Account after such withdrawal would be insufficient to enable Business
Manager to pay on behalf of New PA any Office Expense attributable to the
operations of New PA or to the provision of Medical Services, and/or any other
obligations of New PA. Disbursements made without prior New PA Consent shall be
consistent with the type and amount of expenditures authorized by the Budget.
Limits on authority to sign checks and purchase orders shall be mutually agreed
upon by Business Manager and New PA's representatives to the Policy Board (or
Joint Policy Board).
(b) Priority of Payments. Each month Business Manager shall apply funds
that are in the New PA Account in the following order of priority:
15
(1)
(2)
(3) [*]
(4)
(5)
Section 4.10 Fiscal Matters.
(a) Annual Budget.
(1) Initial Budget. The initial Budget shall be agreed upon by the
parties before the execution of this Management Services Agreement. To
assure that New PA receives the full amount of the charges for the
provision of Medical Services by Physician, physician assistants and all
other "physician extenders" who can xxxx for their own services, such
amounts shall be set forth in the initial Budget and shall be increased or
decreased as set forth in the Budget and mutually agreed upon by Business
Manager and New PA. The initial Budget shall also set forth the criteria
under which Business Manager shall be entitled to receive the Performance
Fee and the Budget shall also set forth the amount of the Performance Fee.
(2) Process for Succeeding Budgets. Annually and at least thirty (30)
days prior to the commencement of each fiscal year of New PA, Business
Manager, in consultation with New PA's representatives to the Policy Board
(or Joint Policy Board), shall prepare and deliver to New PA for New PA's
approval a proposed Budget, setting forth an estimate of New PA's revenues
and expenses for the upcoming fiscal year (including, without limitation,
the Management Fee and Performance Fee associated with the services
provided by Business Manager hereunder). New PA shall review the proposed
Budget and either approve the proposed Budget or request any changes within
twenty-one (21) days after receiving the proposed Budget. Upon the
Budget's adoption by New PA after reasonable review and comment, the Budget
may be revised or modified only after consultation with the Business
-----------------
*This information has been omitted from this exhibit and is subject to a request
for confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been filed separately
with the Securities and Exchange Commission.
16
Manager. If New PA does not adopt the proposed Budget, the Budget process
shall be governed by Section 4.10(a)(4).
(3) Succeeding Budgets; Special Rates. In each succeeding Budget,
unless the parties otherwise mutually agree, New PA shall continue to
retain for New PA Expenses the full amount of the charges for the provision
of Medical Services, as adjusted as provided for in paragraph 4.10(a)(1)
above. In each succeeding Budget, unless the parties otherwise mutually
agree, the criteria for the Performance Fee and Business Manager's right to
receive the Performance Fee shall be continued on the same basis. If the
option is exercised pursuant to that certain Option Agreement of even date
herewith between the shareholder of New PA and the Optionee (as defined in
the Option Agreement) such that the Optionee becomes the controlling
shareholder of New PA, the amount of the Performance Fee and method of
determining the Performance Fee for all succeeding years shall not be
changed and shall be determined exactly as specified in the last Budget
approved before the exercise of the option, and New PA shall continue to
retain the full amount of the charges for professional services, as
adjusted as provided in paragraph 4.10(a)(1) above for New PA Expense
through the Term.
(4) Deadlock. In the event the parties are unable to agree on a
Budget by the beginning of the fiscal year, until an agreement is reached,
the Budget (including the performance criteria set forth therein) for the
prior year (as adjusted in accordance with Section 4.10(a)(1)) shall be
deemed to be adopted as the Budget for the current year, with each line
item in the Budget (with the exception of the Base Management Fee)
increased or decreased by (i) the percentage by which the Adjusted Gross
Revenue in the current year, excluding any liquidated damages paid or
payable by any Physician, has increased or decreased compared to the
corresponding period of the prior year; (ii) the increase or decrease from
the prior year in the Consumer Price Index - Health Medical Services,
Austin Texas area; and (iii) the proportionate increase or decrease in
mutually agreed upon personnel costs as measured by the increase or
decrease in full-time equivalent personnel.
(5) Obligation of Business Manager. Business Manager shall use
commercially reasonable efforts to manage and administer the operations of
New PA as herein provided so that the actual revenues, costs and expenses
of the operation and maintenance of New PA during any applicable period of
New PA's fiscal year shall be consistent with the Budget.
(b) Accounting and Financial Records. Business Manager shall establish and
administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business and financial affairs of New PA and the
provision of Medical Services all of which shall be prepared and maintained in
accordance with GAAP and applicable laws and regulations. Business Manager
shall prepare and deliver to New PA, within ninety (90) days of the end of each
calendar year, a balance sheet and a profit and loss statement reflecting the
financial status of New PA as of the end of such calendar
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year, all of which shall be prepared in accordance with GAAP consistently
applied. In addition, Business Manager shall prepare and deliver such other
financial statements or records as New PA may reasonably request.
(c) Review of Expenditures. Either one of New PA's representatives to the
Policy Board shall review all expenditures related to the operation of New PA,
but neither shall have the power to prohibit or invalidate any expenditure that
is consistent with the Budget. Business Manager shall not make any expenditures
not consistent with the Budget without New PA Consent.
(d) Tax Matters.
(1) In General. Business Manager shall prepare or arrange for the
preparation by an accountant approved in advance by New PA (which approval
shall not be unreasonably withheld) of all appropriate tax returns and
reports required of New PA.
(2) Sales, Franchise, Use or Other Taxes. Business Manager and New PA
acknowledge and agree that although Business Manager generally acts in a
supervisory and consultative capacity hereunder by coordinating, overseeing
and otherwise facilitating the provision of services, there are certain
services provided by Business Manager hereunder that may be subject to
State sales, franchise, use or other taxes and for which Business Manager
may have a legal obligation to collect such taxes and to remit same to the
appropriate tax collection authorities. New PA agrees to the payment of
such taxes as an Office Expense.
Section 4.11 Reports and Records.
(a) Medical Records. Business Manager shall establish, monitor, and
maintain procedures and policies for the timely creation, preparation, filing
and retrieval of all medical records generated by New PA in connection with New
PA's provision of Medical Services; and, subject to applicable law, shall ensure
that medical records are promptly available to Physicians and any other
appropriate persons. All such medical records shall be retained and maintained
in accordance with all applicable State and federal laws relating to the
confidentiality and retention thereof. All medical records shall be and remain
the property of New PA.
(b) Other Reports and Records. Business Manager shall timely create,
prepare, and file such additional reports and records as are reasonably
necessary and appropriate for New PA's provision of Medical Services, and shall
be prepared to analyze and interpret such reports and records upon the request
of New PA.
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Section 4.12 Recruitment of New PA Physicians. Upon New PA's request,
Business Manager shall coordinate, supervise or perform all administrative
services reasonably necessary and appropriate to recruit potential physician
personnel to become employees of New PA. Business Manager shall provide New PA
with model agreements to document New PA's employment, retention or other
service arrangements with such individuals. It will be and remain the sole and
complete responsibility of New PA to interview, select, contract with,
supervise, control and terminate all Physicians performing Medical Services or
other professional services, and Business Manager shall have no authority
whatsoever with respect to such activities.
Section 4.13 Confidential and Proprietary Information.
(a) Business Manager will not disclose any Confidential Information of New
PA to other persons without New PA's express written authorization, such
Confidential Information will not be used in any way directly or indirectly
detrimental to New PA, and Business Manager will keep such Confidential
Information confidential and will ensure that its affiliates and advisors who
have access to such Confidential Information comply with these nondisclosure
obligations; provided, however, that Business Manager may disclose Confidential
Information to those of its Representatives who need to know Confidential
Information for the purposes of this Management Services Agreement, it being
understood and agreed to by Business Manager that such Representatives will be
informed of the confidential nature of the Confidential Information, will agree
to be bound by this Section, and will be directed by Business Manager not to
disclose to any other person any Confidential Information. Business Manager
agrees to be responsible for any breach of this Section by its affiliates,
advisors, or Representatives. If Business Manager is requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands, or similar processes) to disclose or
produce any Confidential Information furnished in the course of its dealings
with New PA or its affiliates, advisors, or Representatives, Business Manager
will (i) provide New PA with prompt notice thereof and copies, if possible, and,
if not, a description, of the Confidential Information requested or required to
be produced so that New PA may seek an appropriate protective order or waive
compliance with the provisions of this Section and (ii) consult with New PA as
to the advisability of New PA's taking of legally available steps to resist or
narrow such request. Business Manager further agrees that, if in the absence of
a protective order or the receipt of a waiver hereunder Business Manager is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning New PA to any tribunal legally
authorized to request and entitled to receive such Confidential Information or
to stand liable for contempt or suffer other censure or penalty, Business
Manager may disclose or produce such Confidential Information to such tribunal
without liability hereunder; provided, however, that Business Manager shall give
New PA written notice of the Confidential Information to be so disclosed or
produced as far in advance of its disclosure or production as is practicable and
shall use its best efforts to obtain, to the greatest extent practicable, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced.
19
(b) Notwithstanding clause (a) above, Business Manager may share, subject
to the restrictions of this section, with other professional corporations,
associations, medical practices, or health care delivery entities the practice
statistics of New PA, including utilization review data, quality assurance data,
cost data, outcomes data, or other practice data. The practice statistics may
be disclosed within New PA, to AOR or AOR's management, to other medical groups
with whom Business Manager has a management relationship, to managed care
providers or other third party payors for the purpose of obtaining or
maintaining third party payor contracts, or to financial analysts and
underwriters; provided that any disclosure outside of New PA or AOR for any
purpose not related to managed care contracting shall not identify any Physician
by name without New PA Consent. In addition, Business Manager may disclose all
practice-related information necessary or desirable in connection with any
public or private offering of any AOR security, or in accordance with its
reporting requirements under the Securities Exchange Act of 1934, but no such
data will disclose or divulge patient identifying information.
Section 4.14 Business Manager's Insurance. Throughout the Term, Business
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof, appropriate
workers' compensation coverage for Business Manager's employed personnel
provided pursuant to this Management Services Agreement, and professional,
casualty and comprehensive general and vicarious liability insurance covering
Business Manager, Business Manager's personnel, and all of Business Manager's
equipment in such amounts, on such basis and upon such terms and conditions as
Business Manager deems appropriate. Upon the request of New PA, Business
Manager shall provide New PA with a certificate evidencing such insurance
coverage. Business Manager may also carry, as an Office Expense, key person life
and disability insurance on any shareholder or Physician employee of New PA in
amounts determined reasonable and sufficient by Business Manager. Business
Manager shall be the owner and beneficiary of any such insurance.
Section 4.15 No Warranty. New PA acknowledges that Business Manager has
not made and will not make any express or implied warranties or representations
that the services provided by Business Manager will result in any particular
amount or level of medical practice or income to New PA.
Section 4.16 Noncompetition Covenant from Business Manager. Business
Manager represents, warrants and covenants that during the Term, neither
Business Manager nor any person or entity affiliated directly or indirectly with
Business Manager will, anywhere in the Practice Territory, enter into a direct
or indirect relationship similar to the relationship between New PA and Business
Manager with, or acquire the nonmedical assets of, any medical oncology practice
group without approval of the Policy Board.
20
ARTICLE V. COVENANTS AND RESPONSIBILITIES OF NEW PA
Section 5.1 Organization and Operation. New PA, as a continuing
condition of Business Manager's obligations under this Management Services
Agreement, shall at all times during the Term be and remain legally organized
and operated to provide Medical Services in a manner consistent with all State
and federal laws. New PA shall operate and maintain within the Practice
Territory a full time practice of medicine specializing in the provision of
oncology Medical Services, and for the first five (5) years of the Term of this
Management Services Agreement, New PA shall maintain and enforce employment
agreements in the form of Exhibit 5.1 with the shareholders of New PA specified
in Exhibit 5.1A. New PA shall also maintain and enforce employment agreements
in the form of Exhibit 5.2(a) with any nonshareholder Physician employees, as
applicable, of New PA. New PA shall not amend the employment agreements in any
manner which would cause the employment agreement to be in breach of the terms
of this Management Services Agreement. Recognizing that Business Manager would
not have entered into this Management Services Agreement but for New PA's
covenant to maintain employment agreements with its original shareholders, New
PA agrees that any damages, compensation, payment, or settlement received by New
PA as liquidated damages from a Physician who terminates the employment
agreement without cause or whose employment agreement is terminated by New PA
for cause shall be treated as Ancillary Revenue under this Agreement. Throughout
the term of this Management Services Agreement, New PA shall maintain and
enforce written Buy-Sell Agreements in the form of Exhibit 5.1B with the
shareholders of New PA specified in Exhibit 5.1A, and shall cause all new
shareholders of New PA to execute such agreements prior to becoming a
shareholder in New PA. New PA shall not amend the Buy-Sell Agreement or waive
any rights thereunder without the prior written consent of Business Manager.
Section 5.2 New PA Personnel.
(a) Physician Personnel. New PA shall retain, as a New PA Expense and not
as an Office Expense, that number of Physicians, as are reasonably necessary and
appropriate in the sole discretion of New PA for the provision of Medical
Services. Each Physician shall hold and maintain a valid and unrestricted
license to practice medicine in the State, and shall be competent in the
practice of oncology, including such subspecialties as medical infusion,
radiation therapy or other subspecialties that such Physician will practice on
behalf of New PA. New PA shall enter into and maintain with each such retained
Physician a written employment agreement substantially in the form of either
Exhibit 5.1 for shareholders of New PA or consistent with Exhibit 5.2(a) for
nonshareholders and will not commit and permit to remain outstanding any breach
of such employment agreement that would allow the Physician to terminate for
cause. New PA shall be responsible for paying the compensation and benefits as
applicable, for all Physicians and any other physician personnel or other
contracted or affiliated physicians, and for withholding, as required by law,
any sums for income tax, unemployment insurance, social security, or any other
withholding required by applicable law. Business Manager may, on behalf of New
PA, establish and administer
21
the compensation program with respect to such individuals in accordance with the
written agreement between New PA and each Physician. Business Manager shall
neither control nor direct any Physician in the performance of Medical Services
for patients.
(b) Nonphysician Health Care Personnel. All nonphysician health care
personnel who provide patient care services in the diagnostic areas shall be
employed by or retained by New PA as an Office Expense and shall be under New
PA's control, supervision and direction in the performance of Medical Services
for patients; however, supervision and direction of such personnel's daily
performance of all other responsibilities shall be Business Manager's as set
forth in Section 4.6 of this Management Services Agreement.
Section 5.3 Professional Standards. As a continuing condition of
Business Manager's obligations hereunder, each Physician and any other physician
personnel retained by New PA to provide Medical Services must (i) comply with,
be controlled and governed by and otherwise provide Medical Services in
accordance with the Code of Business Conduct referenced in Section 5.5 and all
applicable federal, State and municipal laws, rules, regulations, ordinances and
orders, and the ethics and standard of care of the medical community wherein the
principal office of each Physician is located and (ii) obtain and retain
appropriate medical staff membership with appropriate clinical privileges at any
hospital or health care facility at which Medical Services are to be provided.
Procurement of temporary staff privileges pending the completion of the medical
staff approval process shall satisfy this provision, provided the Physician
actively pursues full appointment and actually receives full appointment within
a reasonable time.
Section 5.4 Medical Services. New PA shall ensure that Physicians and
nonphysician health care personnel are available to provide Medical Services to
patients. In the event that Physicians employed by, or shareholders of, New PA
are not available to provide Medical Services coverage, New PA shall assure
consistent and continuous coverage, which shall include New PA's engagement and
retention of locum tenens coverage as necessary and appropriate. Physicians
retained on a locum tenens basis shall meet all of the requirements of Section
5.3, and the cost of providing locum tenens coverage shall be a New PA Expense.
With the assistance of the Business Manager, New PA and the Physicians shall be
responsible for scheduling Physician and nonphysician health care personnel
coverage of all medical procedures. New PA shall cause all Physicians to
develop and promote New PA.
Section 5.5 Code of Business Conduct. New PA shall adopt by resolution
the American Oncology Resources, Inc. Code of Business Conduct ("Code") in
substantially the form of Exhibit 5.5, and shall require the compliance of all
New PA shareholders and employees with such Code.
Section 5.6 Peer Review/Quality Assurance. New PA shall adopt a peer
review/quality assurance program to monitor and evaluate the quality and cost-
effectiveness of Medical Services provided by physician personnel of New PA.
Upon request of New PA, Business Manager shall pro vide administrative
assistance to New PA in performing its peer review/quality assurance activities,
22
but only if such assistance can be provided consistent with maintaining the
confidentiality and nondiscoverability of the processes and actions of the peer
review/quality assurance process of New PA.
Section 5.7 New PA's Insurance. New PA shall, as an Office Expense,
obtain and maintain with commercial carriers reasonably acceptable to Business
Manager appropriate worker's compensation coverage for New PA's employed
personnel, if any, and professional and comprehensive general liability and
vicarious liability insurance covering New PA and each of the Physicians New PA
retains or employs to provide Medical Services. The comprehensive general
liability and vicarious liability coverage shall be in the minimum amount of Two
Million Dollars ($2,000,000); and professional liability coverage shall be in
the minimum amount of Two Million Dollars ($2,000,000) for each occurrence and
Four Million Dollars ($4,000,000) annual aggregate. The insurance policy or
policies shall provide for at least thirty (30) days advance written notice to
New PA from the insurer as to any alteration of coverage, cancellation, or
proposed cancellation for any cause. New PA shall cause to be issued to
Business Manager by such insurer or insurers a certificate reflecting such
coverage and shall provide written notice to Business Manager promptly upon
receipt of notice given to Physician of the cancellation or proposed
cancellation of such insurance for any cause. Upon the termination of this
Management Services Agreement for any reason, New PA shall obtain and maintain
as a New PA Expense "tail" professional liability coverage, in the amounts
specified in this section for the reporting period or extended reporting period
that is standard in the industry or as may otherwise be required by law, and New
PA shall be responsible for paying all premiums for "tail" insurance coverage.
In no event shall the professional liability insurance carrier be replaced or
changed without New PA Consent.
Section 5.8 Confidential and Proprietary Information. New PA will not
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization, such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
New PA will keep such Confidential Information confidential and will ensure that
its affiliates and advisors who have access to such Confidential Information
comply with these nondisclosure obligations; provided, however, that New PA may
disclose Confidential Information to those of its Representatives who need to
know Confidential Information for the purposes of this Management Services
Agreement, it being understood and agreed to by New PA that such Representatives
will be informed of the confidential nature of the Confidential Information,
will agree to be bound by this Section, and will be directed by New PA not to
disclose to any other person any Confidential Information. New PA agrees to be
responsible for any breach of this Section by its affiliates, advisors, or
Representatives. If New PA is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demands, or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its affiliates, advisors, or Representatives, New PA will (i) provide
Business Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that Business Manager may seek an appropriate protective order or
waive compliance with the provisions of this
23
Section and (ii) consult with Business Manager as to the advisability of
Business Manager's taking of legally available steps to resist or narrow such
request. New PA further agrees that, if in the absence of a protective order or
the receipt of a waiver hereunder New PA is nonetheless, in the written opinion
of its legal counsel, compelled to disclose or produce Confidential Information
concerning Business Manager to any tribunal legally authorized to request and
entitled to receive such Confidential Information or to stand liable for
contempt or suffer other censure or penalty, New PA may disclose or produce such
Confidential Information to such tribunal without liability hereunder; provided,
however, that New PA shall give Business Manager written notice of the
Confidential Information to be so disclosed or produced as far in advance of its
disclosure or production as is practicable and shall use its best efforts to
obtain, to the greatest extent practicable, an order or other reliable assurance
that confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced.
Section 5.9 Noncompetition. New PA hereby recognizes and acknowledges
that Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Management Services Agreement and
that in the process of providing services under this Management Services
Agreement, New PA will be privy to financial and Confidential Information, to
which New PA would not otherwise be exposed. The parties also recognize that
the services to be provided by Business Manager will be feasible only if New PA
operates an active practice to which the Physicians associated with New PA
devote their full professional time and attention. New PA agrees and
acknowledges that the noncompetition covenants described hereunder are necessary
for the protection of Business Manager, and that Business Manager would not have
entered into this Management Services Agreement without the following covenants.
(a) During the Term of this Management Services Agreement and except for
its obligations pursuant to this Management Services Agreement, New PA shall not
establish, operate, or provide Medical Services at a medical office, clinic or
other health care facility anywhere within the Practice Territory.
(b) Except as specifically agreed to by Business Manager in writing, New PA
covenants and agrees that during the Term of this Management Services Agreement
and for a period of five (5) years from the date this Management Services
Agreement is terminated, New PA shall not directly or indirectly own (excluding
ownership of less than five percent (5%) of the equity of any publicly traded
entity), manage, operate, control, or be otherwise associated with, lend funds
to, lend its name to, or maintain any interest whatsoever in any enterprise (i)
having to do with the provision, distribution, promotion, or advertising of any
type of management or administrative services or products to third parties in
competition with Business Manager, in the Practice Territory; and/or (ii)
offering any type of service(s) or product(s) to third parties similar to those
offered by Business Manager to New PA in the Practice Territory.
Notwithstanding the above restriction, nothing herein shall prohibit New PA or
any of its shareholders from providing management and administrative
24
services to its or their own medical practices after the termination of this
Management Services Agreement.
(c) The written employment agreements described in Section 5.1 shall
contain covenants of the shareholder employees pursuant to which the
shareholders agree not to compete with New PA within the Practice Territory for
one (1) year after termination of the employment agreement.
(d) New PA shall obtain and enforce formal written agreements from its
nonshareholder physician employees in the form of Exhibit 5.2(a), pursuant to
which the employees agree not to compete with New PA within the Practice
Territory for one (1) year after termination of the employment agreement.
(e) New PA understands and acknowledges that the foregoing provisions in
Section 5.8 and Section 5.9 are designed to preserve the goodwill of Business
Manager and the goodwill of the individual Physicians of New PA. Accordingly,
if New PA breaches any obligation of Section 5.8 or Section 5.9, in addition to
any other remedies available under this Management Services Agreement, at law or
in equity, Business Manager shall be entitled to enforce this Management
Services Agreement by injunctive relief and by specific performance of the
Management Services Agreement, such relief to be without the necessity of
posting a bond, cash or otherwise. Additionally, nothing in this paragraph
shall limit Business Manager's right to recover any other damages to which it is
entitled as result of New PA's breach. If any provision of the covenants is
held by a court of competent jurisdiction to be unenforceable due to an
excessive time period, geographic area, or restricted activity, the covenant
shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable.
Section 5.10 Name, Trademark. New PA represents and warrants that until
New PA becomes a partner in Global P, New PA shall conduct its professional
practice under the name of, and only under the name of "Central Texas Oncology
Associates, P.A." and that such name is the name of New PA under State law, and
that New PA is the sole and absolute owner of the name. New PA covenants and
promises that, without the prior written consent of the Business Manager, New PA
will not:
(a) take any action or omit to take any action that is reasonably likely to
result in the change or loss of the name;
(b) license, sell, give, or otherwise transfer the name or the right to use
the name to any medical practice, physician, professional corporation,
professional association, or any other entity; or
(c) cease conducting the professional practice of New PA under the name.
25
New PA covenants and promises that, when New PA becomes a partner in Global P
pursuant to Section 1.1 of the Partnership Agreement of Global P, New PA shall
cease conducting the professional practice of New PA under the name and shall
begin conducting the professional practice of New PA under the name of Global P.
Section 5.11 Peer Review. New PA shall designate a committee of
Physicians to function as a medical peer review committee to review credentials
of potential recruits, perform quality assurance functions, and otherwise
resolve medical competence issues. The medical peer review committee shall
function pursuant to formal written policies and procedures.
ARTICLE VI. FINANCIAL ARRANGEMENT
Section 6.1 Definitions. For purposes of this Article VI, capitalized
terms used herein shall have the meanings ascribed as follows:
(a) Monthly Fee. The Monthly Fee shall be [*]
(b) Fee Amount. The Fee Amount shall be [*]
(c) Base Management Fee. The Base Management Fee shall be [*]
Section 6.2 Management Fee. New PA and Business Manager agree to the
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. Each month, in the priority established by
Section 4.9(b), Business Manager shall cause the following to be paid:
(i) the amount of all Office Expenses (other than the Base
Management Fee) paid on behalf of New PA.
(ii) the Base Management Fee.
(iii) the Performance Fee if the pre-established criteria for payment
of the Performance Fee set forth in the Budget have been met.
Section 6.3 Adjustments. Adjustments to the Management Fee calculation
shall be made as follows:
----------------
*This information has been omitted from this exhibit and is subject to a request
for confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been filed separately
with the Securities and Exchange Commission.
26
(a) Upon termination of this Management Services Agreement, a liability for
the Management Fee shall be established in an amount equal to the difference, if
any, between
[*]
(b) After the fifth anniversary of this Management Services Agreement, the
Monthly Fee shall
[*]
(c) If there are not sufficient funds to pay the Performance Fee, unpaid
amounts shall accumulate and carry over from month to month until paid. No
amounts carried over shall earn interest. Furthermore, the amount of the
Performance Fee paid will be monitored and reconciled consistent with the Budget
period and any overpayments of the Performance Fee shall be promptly refunded by
the Business Manager.
Section 6.4 Reasonable Value. Payment of the Base Management Fee or
Performance Fee is not intended to be and shall not be interpreted or applied as
permitting Business Manager to share in New PA's fees for Medical Services or
any other services. Rather, such payment is acknowledged as the parties'
negotiated agreement as to the reasonable fair market value of the management
expertise, strategic planning, capital access, resource retention, equipment,
contract analysis and support, purchasing, office space, and other management
and administrative oversight services supervised, coordinated, arranged for or
otherwise facilitated by Business Manager pursuant to this Management Services
Agreement, as more specifically set forth in Article IV herein, as well as for
the personnel services Business Manager provides under Section 4.6 hereof,
considering the nature and extent of the services required and the risks assumed
by Business Manager.
Section 6.5 Payment of Management Fee. To facilitate the payment of the
Management Fee as provided in Section 6.2 hereof, New PA hereby expressly
authorizes Business Manager to make withdrawals of the Management Fee from the
New PA Account as such fee becomes due and payable during the Term and
thereafter as provided in Section 7.3.
Section 6.6 Accounts Receivable. To assure that New PA receives the
entire amount of professional fees for its services and to assist New PA in
maintaining reasonable cash flow for the payment of Office Expenses, Business
Manager may purchase, with recourse to New PA for the amount of the purchase,
the accounts receivable of New PA arising during the previous month by
transferring the amount set forth below into the New PA Account. The
consideration for the
----------------
*This information has been omitted from this exhibit and is subject to a request
for confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been filed separately
with the Securities and Exchange Commission.
27
purchase shall be an amount equal to the Adjusted Gross Revenue recorded each
month (according to GAAP on an accrual basis net of Adjustments) less the Office
Expenses due to Business Manager under Section 6.2 above. Although it is the
intention of the parties that Business Manager purchase and thereby become the
owner of the accounts receivable of New PA, in the event such purchase shall be
ineffective for any reason, New PA is concurrently herewith granting to Business
Manager a security interest in the accounts receivable, and New PA shall
cooperate with Business Manager and execute all documents in connection with the
pledge of such accounts receivable to Business Manager. All collections in
respect to such accounts receivable purchased by Business Manager shall be
received by Business Manager as the agent of New PA and shall be endorsed to
Business Manager and deposited in a bank account at a bank designated by
Business Manager. To the extent New PA comes into possession of any payments in
respect of such accounts receivable, New PA shall direct such payments to
Business Manager for deposit in bank accounts designated by Business Manager.
Section 6.7 Disputes Regarding Fees.
(a) It is the parties' intent that any disputes regarding performance
standards of the Business Manager be resolved to the extent possible by good
faith negotiation. To that end, the parties agree that if New PA in good faith
believes that Business Manager has failed to perform its obligations, and that
as a result of such failure, New PA is entitled to a set-off or reduction in its
Management Fees, New PA shall give Business Manager notice of the perceived
failure and request in the notice a set-off or reduction in Management Fees.
Business Manager and New PA shall then negotiate the dispute in good faith, and
if an agreement is reached, the parties shall implement the resolution without
further action.
(b) If the parties cannot reach a resolution within a reasonable time, New
PA shall, at its option, submit the dispute to mediation. Mediation shall be
conducted in Austin, Texas in accordance with the rules of the National Health
Lawyers Association Alternative Dispute Resolution Service, and if the amount in
dispute is $25,000 or less, the mediation shall be binding.
(c) If the amount in dispute is greater than $25,000, or if the mediation
process fails to resolve the dispute, the dispute shall be submitted by either
party to binding arbitration as described by Article XI of the Purchase
Agreement (as defined by the Master Transaction Agreement).
ARTICLE VII TERM AND TERMINATION
Section 7.1 Initial and Renewal Term. The Term of this Management
Services Agreement will be for an initial period of forty (40) years after the
effective date, and shall be automatically renewed for successive five (5) year
periods thereafter, provided that neither Business Manager nor New PA shall have
given notice of termination of this Management Services Agreement at least one
hundred twenty (120) days before the end of the initial term or any renewal
term, or unless otherwise terminated as provided in Section 7.2 of this
Management Services Agreement.
28
Section 7.2 Termination.
(a) Termination By Business Manager. Business Manager may terminate this
Management Services Agreement upon the occurrence of any one of the following
events which shall be deemed to be "for cause":
(i) The revocation, suspension, cancellation or restriction of any
New PA shareholder Physician's license to practice medicine in
the State if, in the reasonable discretion of the Business
Manager, New PA will not be financially viable after such
revocation, suspension, cancellation, or restriction;
(ii) New PA's loss or suspension of its Medicare or Medicaid provider
number, and/or New PA's restriction from treating beneficiaries
of the Medicare or Medicaid programs, except as effected in
connection with the formation and operation of Global P;
(iii) The dissolution of New PA or the filing of a petition in
voluntary bankruptcy, an assignment for the benefit of creditors,
or other action taken voluntarily or involuntarily under any
State or federal statute for the protection of debtors;
(iv) New PA materially defaults in the performance of any of its
material duties or obligations hereunder, and such default
continues for sixty (60) days after New PA receives notice of the
default.
(b) Termination By New PA. New PA may terminate this Management Services
Agreement upon any of the following occurrences which shall be deemed to be "for
cause":
(i) In the event that Business Manager materially defaults in the
performance of any of its material obligations hereunder and such
default continues for sixty (60) days after Business Manager
receives notice of the default;
(ii) In the event that an arbitrator pursuant to Section 8.6 makes a
final determination that Business Manager has materially failed
to perform its obligations to New PA hereunder, New PA may
terminate this Management Services Agreement upon ten (10) days
written notice to Business Manager;
(iii) In the event Business Manager in two (2) separate instances
over a five (5) year period, intentionally and in bad faith
misappropriates or misapplies New PA's funds in amounts exceeding
one hundred thousand dollars
29
($100,000) in each such instance, and after the parties agree,
(or an arbitrator determines the appropriate amount of such
misappropriation or misapplication if the parties cannot agree)
and Business Manager fails to correct such misappropriation or
inappropriate application within thirty (30) days of agreement by
the parties or decision of the arbitrator that describes with
reasonable particularity the misappropriation or misapplication;
(iv) If there is payment Event of Default under any Note or under any
Short-Term Note (each as defined in the Master Transaction
Agreement) or Business Manager breaches its delivery obligation
for the shares of AOR Common Stock and if such payment Event of
Default or failure to deliver the shares of AOR Common Stock
continues for ten (10) days after notice has been given to
Business Manager, New PA may terminate this Management Services
Agreement not less than thirty (30) days after Business Manager's
receipt of such notice; or
(v) In the event there is a dissolution of Business Manager.
Termination by New PA hereunder shall require the affirmative vote of three-
fourths of the outstanding voting shares of the common shareholders of New PA
entitled to vote.
(c) Termination by Agreement. In the event New PA and Business Manager
shall mutually agree in writing, this Management Services Agreement may be
terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event there
shall be a change in the Medicare or Medicaid statutes, State statutes, case
laws, regulations or general instructions, the interpretation of any of the
foregoing, the adoption of new federal or State legislation, or a change in any
third party reimbursement system, any of which are reasonably likely to
materially and adversely affect the manner in which either party may perform or
be compensated for its services under this Management Services Agreement or
which shall make this Management Services Agreement unlawful, the parties shall
immediately enter into good faith negotiations regarding a new service
arrangement or basis for compensation for the services furnished pursuant to
this Management Services Agreement that complies with the law, regulation, or
policy and that approximates as closely as possible the economic position of the
parties prior to the change. If good faith negotiations cannot resolve the
matter, it shall be submitted to arbitration as referenced in Section 8.6.
Section 7.3 Effects of Termination. Upon termination of this Management
Services Agreement, as hereinabove provided, neither party shall have any
further obligations hereunder except for (i) obligations accruing prior to the
date of termination, including, without limitation, payment of the Management
Fees and New PA Expenses relating to services provided prior to the termination
of this Management Services Agreement, (ii) obligations, promises, or covenants
set
30
forth herein that are expressly made to extend beyond the Term, including,
without limitation, indemnities and noncompetition provisions, which provisions
shall survive the expiration or termination of this Management Services
Agreement by Business Manager for cause, and (iii) the obligations of New PA and
Business Manager described in Section 7.4. In effectuating the provisions of
this Section 7.3, New PA specifically acknowledges and agrees that Business
Manager shall continue to collect and receive on behalf of New PA all cash
collections from accounts receivable in existence at the time this Management
Services Agreement is terminated, it being understood that such cash collections
will represent, in part, compensation to Business Manager for management
services already rendered and compensation on accounts receivable purchased by
Business Manager. Upon the expiration or termination of this Management Services
Agreement for any reason or cause whatsoever, Business Manager shall immediately
surrender to New PA all books and records pertaining to New PA's medical
practice.
Section 7.4 Repurchase Obligation. Upon termination of this Management
Services Agreement by Business Manager for cause or by New PA without cause, New
PA shall:
(a) Purchase from Business Manager at book value the intangible assets,
deferred charges, and all other amounts on the books of the Business Manager
relating to the Management Services Agreement as adjusted through the last day
of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of the intangible
assets, deferred charges, or covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and New
PA, each selecting a duly qualified appraiser, who in turn will agree on a third
appraiser. This agreed-upon appraiser shall perform the appraisal which shall
be binding on both parties. In the event either party fails to select an
appraiser within fifteen (15) days of the selection of an appraiser by the other
party, the appraiser selected by the other party shall make the selection of the
third party appraiser;
(c) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Office and that
relate solely to the performance of Business Manager's obligations under this
Management Services Agreement;
(d) Assume all debt, and all contracts, payables, and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased hereunder by Business Manager; and
(e) Purchase from Business Manager at book value all of the equipment
listed as set forth in the Master Transaction Agreement or an exhibit thereto,
including all replacements and additions
31
thereto made by Business Manager pursuant to the performance of its obligations
under this Management Services Agreement, and all other assets, including
inventory and supplies, tangibles and intangibles, set forth on the books of the
Business Manager as adjusted through the last day of the month most recently
ended prior to the date of such termination in accordance with GAAP to reflect
operations of the Office, depreciation, amortization, and other adjustments of
assets shown on the books of the Business Manager.
New PA acknowledges that certain assets listed above have been pledged as
collateral pursuant to that certain Loan Agreement dated December 5, 1994
between AOR, as borrower, and First Union National Bank of North Carolina, as
agent for various lenders.
Section 7.5 Repurchase Option. Upon termination of this Management
Services Agreement by New PA for cause or Business Manager without cause, New PA
shall have the option but not the obligation to do all or none of the following:
(a) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and New
PA, each selecting a duly qualified appraiser, who in turn will agree on a third
appraiser. This agreed-upon appraiser shall perform the appraisal which shall
be binding on both parties. In the event either party fails to select an
appraiser within fifteen (15) days of the selection of an appraiser by the other
party, the appraiser selected by the other party shall make the selection of the
third party appraiser;
(b) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Office and that
relate solely to the performance of Business Manager's obligations under this
Management Services Agreement;
(c) Assume all debt, and all contracts, payables, and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased by Business Manager; and
(d) Purchase from Business Manager at book value all of the equipment
listed as set forth in the Master Transaction Agreement or an exhibit thereto,
including all replacements and additions thereto made by Business Manager
pursuant to the performance of its obligations under this Management Services
Agreement, and all other tangible assets, including inventory and supplies, set
forth on the books of the Business Manager as adjusted through the last day of
the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect operations of the Office, depreciation,
amortization, and other adjustments of assets shown on the books of the Business
Manager.
32
New PA acknowledges that certain assets listed above have been pledged as
collateral pursuant to that certain Loan Agreement dated December 5, 1994
between AOR, as borrower, and First Union National Bank of North Carolina, as
agent for various lenders.
Section 7.6 Closing of Repurchase. New PA shall pay cash for the
repurchased assets. The amount of the purchase price shall be reduced by the
amount of debt and liabilities of Business Manager, if any, assumed by New PA.
New PA and any Physician associated with New PA shall execute such documents as
may be required to assume the liabilities set forth in Section 7.4(d) or Section
7.5(c) and to remove Business Manager from any liability with respect to such
repurchased asset and with respect to any property leased or subleased by
Business Manager. The closing date for the repurchase shall be determined by
Business Manager but shall in no event occur sooner than sixty (60) days or
later than one hundred eighty (180) days from the date of the notice of
termination. The termination of this Management Services Agreement shall become
effective upon the closing of the sale of the assets under Section 7.4 or the
delivery of assets (or the date upon which New PA is prepared to receive the
assets) under Section 7.5 and all parties shall be released from any restrictive
covenants provided for in Section 4.16 or Section 5.9 on the closing date. From
and after any termination, each party shall provide the other party with
reasonable access of the books and records then owned by it to permit such
requesting party to satisfy reporting and contractual obligations that may be
required of it.
ARTICLE VIII MISCELLANEOUS
Section 8.1 Administrative Services Only. Nothing in this Management
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which New PA and
its Physicians perform Medical Services or other professional health care
services. The rendition of all Medical Services, including, but not limited to,
infusion therapy and the prescription or administration of medicine and drugs
shall be the sole responsibility of New PA and its Physicians, and Business
Manager shall not interfere in any manner or to any extent therewith. Nothing
contained in this Management Services Agreement shall be construed to permit
Business Manager to engage in the practice of medicine, it being the sole
intention of the parties hereto that the services to be rendered to New PA by
Business Manager are solely for the purpose of providing nonmedical management
and administrative services to New PA so as to enable New PA to devote its full
time and energies to the professional conduct of its medical practice and
provision of Medical Services to its patients and not to administration, or
practice management.
Section 8.2 Status of Contractor. It is expressly acknowledged that the
parties hereto are "independent contractors," and nothing in this Management
Services Agreement is intended and nothing shall be construed to create an
employer/employee, partnership, or joint venture relationship, or to allow
either to exercise control or direction over the manner or method by which the
other performs the services that are the subject matter of this Management
Services Agreement; provided always that the services to be provided hereunder
shall be furnished in a manner consistent with the
33
standards governing such services and the provisions of this Management Services
Agreement. Each party understands and agrees that (i) the other will not be
treated as an employee for federal tax purposes, (ii) neither will withhold on
behalf of the other any sums for income tax, unemployment insurance, social
security, or any other withholding pursuant to any law or requirement of any
governmental body or make available any of the benefits afforded to its
employees, (iii) all of such payments, withholdings, and benefits, if any, are
the sole responsibility of the party incurring the liability, and (iv) each will
indemnify and hold the other harmless from any and all loss or liability arising
with respect to such payments, withholdings, and benefits, if any.
Section 8.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be in writing and shall be
served on the parties at the following respective addresses:
New PA: Central Texas Oncology Associates, P.A.
000 Xxxx 00xx Xxxxxx, Xxxxx X-0
Xxxxxx, Xxxxx 00000
Attn: President
with a copy to: Xxx & Xxxxx Incorporated
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx
Business Manager: American Oncology Resources, Inc.
00000 Xxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
with a copy to: American Oncology Resources, Inc.
00000 Xxxxxxxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxx
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder shall be
sent either (a) by hand delivery, in which case notice shall be deemed received
when actually delivered, (b) by prepaid certified or registered mail, return
receipt requested, in which case notice shall be deemed received five calendar
days after deposit, postage prepaid in the United States Mail, or (c) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after deposit with such courier.
Section 8.4 Governing Law. This Management Services Agreement shall be
governed by the laws of the State of Texas applicable to agreements to be
performed wholly within the State.
34
Texas law was chosen by the parties after negotiation to govern interpretation
of this Management Services Agreement because Xxxxxx County, Texas is the seat
of management for Business Manager. The federal and State courts of Xxxxxx
County, Texas shall be the exclusive venue for any litigation, special
proceeding, or other proceeding between the parties that may arise out of, or be
brought in connection with or by reason of, this Management Services Agreement.
Section 8.5 Assignment. Except as may be herein specifically provided
to the contrary, this Management Services Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that New PA may not
assign this Management Services Agreement without the prior written consent of
Business Manager, which consent may be withheld. The sale, transfer, pledge, or
assignment of any of the common shares held by any shareholder of New PA or the
issuance by New PA of common or other voting shares to any other person, or any
combination of such transactions within a period of one (1) year, such that the
existing shareholders in New PA fail to maintain a majority of the voting
interests in New PA shall be deemed an attempted assignment by New PA, and shall
be null and void unless consented to in writing by Business Manager prior to any
such transfer or issuance. Any breach of this provision, whether or not void or
voidable, shall constitute a material breach of this Management Services
Agreement, and in the event of such breach, Business Manager may terminate this
Management Services Agreement upon twenty-four (24) hours notice to New PA. The
parties agree that American Oncology Resources, Inc. ("AOR") shall assign and
deliver all of its rights and obligations hereunder to its wholly-owned
subsidiary, AOR of Texas Management Limited Partnership ("AOR Management"). AOR
Management shall then become the Business Manager under this Management Services
Agreement. In addition, Business Manager or the transferee shall have the right
to (i) assign all (but not less than all) its rights and obligations hereunder
to any third party, and (ii) collaterally assign its interest in this Management
Services Agreement and its right to collect Management Fees hereunder to any
financial institution or other third party in a bonafide financing transaction
without the consent of New PA. New PA acknowledges that Business Manager's
interest in this Management Services Agreement and Business Manager's right to
collect Management Fees under this Management Services Agreement have been
collaterally assigned pursuant to that certain Loan Agreement dated December 5,
1994 between AOR, as borrower, and First Union National Bank of North Carolina,
as agent for various lenders.
Section 8.5A PRN Assignment.
(a) If Business Manager assigns all of its rights, benefits and privileges
in and under this Management Services Agreement to Physician Reliance Network,
Inc., to any direct or indirect subsidiaries of Physician Reliance Network, Inc.
or to any entity that Physician Reliance Network, Inc. directly or indirectly
controls (collectively, "PRN"), and if PRN assumes all of Business Manager's
liabilities and obligations under this Management Services Agreement, then,
Business Manager shall immediately give written notice to New PA and for a
period of thirty (30) days after receipt of such notice of such assignment to,
and assumption by, PRN of this Management Services
35
Agreement, New PA shall have the right to terminate this Management Services
Agreement by paying in cash to PRN the net aggregate amount of consideration
that PRN paid to Business Manager for such assignment and assumption. Business
Manager shall not be entitled to assign less than all of its rights, benefits
and privileges in and under this Management Services Agreement to PRN, nor to
permit the assignment of less than all of Business Manager's liabilities and
obligations hereunder.
(b) If there is a Change of Control (as defined below), then, for a period
of thirty (30) days after the Change of Control Purchase Price (as defined
below) is determined, New PA shall have the right to terminate this Management
Services Agreement by paying in cash to PRN the Change of Control Purchase
Price.
(c) In the event that New PA terminates this Management Services Agreement
pursuant to this Section 8.5A, then, other than Section 8.6 hereof, no provision
of this Management Services Agreement shall have any force or effect whatsoever,
including without limitation Section 5.9 or Section 7.4 hereof.
(d) For purposes of this Section 8.5A, "Change of Control" shall mean the
occurrence of any one or more of the following: (i) the Business Manager (or any
entity or entities that control(s) the Business Manager) shall merge or
consolidate with or into PRN with the effect that those persons who were the
shareholders of PRN immediately prior to the effective date of such merger or
consolidation hold more than 50% of the combined voting power of the outstanding
securities of the surviving corporation of such merger or the corporation
resulting from such consolidation ordinarily having the right to vote in the
election of directors or (ii) PRN shall, directly or indirectly, as a result of
a tender or exchange offer, open market purchase(s), privately negotiated
purchase(s) or otherwise have become the "beneficial owner" (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of the Business Manager (or any entity or entities that control(s)
Business Manager) representing 50% or more of the combined voting power of the
then outstanding securities of the Business Manager (or such entity or entities
that control(s) Business Manager) having the right to vote in the election of
directors.
(e) For purposes of this Section 8.5A, "Change of Control Purchase Price"
shall mean the fair market value of Business Manger's rights, benefits, and
privileges and liabilities and obligations under this Management Services
Agreement, and shall be determined as follows. Within thirty days after a
Change of Control, PRN shall notify New PA in writing of such Change of Control.
Within thirty (30) days after receipt of such notice, PRN shall select an
independent accounting firm or valuation firm (the costs of which are to be
borne by PRN), and New PA shall select an independent accounting firm or
valuation firm (the costs of which are to be borne by New PA). The two (2)
firms so selected shall then select a nationally recognized independent
accounting firm or valuation firm (the costs of which are to be borne equally by
PRN and New PA). Such three firms shall determine such fair market value.
36
Section 8.6 Arbitration. The parties shall use good faith negotiation
to resolve any controversy, dispute or disagreement arising out of or relating
to this Management Services Agreement or the breach of this Management Services
Agreement. Any matter not resolved by negotiation shall be submitted to binding
arbitration and such arbitration shall be governed by the terms of Article XI of
the Purchase Agreement, which, as it applies to the parties hereto, is
incorporated herein by reference in its entirety.
Section 8.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
Section 8.8 Enforcement. In the event either party resorts to legal
action to enforce or interpret any provision of this Management Services
Agreement, the prevailing party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
Section 8.9 Gender and Number. Whenever the context of this Management
Services Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
Section 8.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Management Services Agreement
shall be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall execute
such additional instruments and take such additional acts as are reasonable and
as the requesting party may deem necessary to effectuate this Management
Services Agreement.
Section 8.11 Consents, Approvals, and Exercise of Discretion. Whenever
this Management Services Agreement requires any consent or approval to be given
by either party, or either party must or may exercise discretion, and except
where specifically set forth to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that such
discretion shall be reasonably exercised.
Section 8.12 Force Majeure. Neither party shall be liable or deemed to
be in default for any delay or failure in performance under this Management
Services Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military authority, acts of public
enemy, war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either party's employees,
or any other similar cause beyond the reasonable control of either party unless
such delay or failure in performance is expressly addressed elsewhere in this
Management Services Agreement.
37
Section 8.13 Severability. The parties hereto have negotiated and
prepared the terms of this Management Services Agreement in good faith with the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective parties. Accordingly, if
any one or more of the terms, provisions, promises, covenants or conditions of
this Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises, covenants and
conditions of this Management Services Agreement or their application to other
persons or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Management Services Agreement is in violation of applicable law, then the
parties agree to negotiate in good faith to amend the Management Services
Agreement, to the extent possible consistent with its purposes, to conform to
law.
Section 8.14 Divisions and Headings. The divisions of this Management
Services Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith is solely for convenience and
shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
Section 8.15 Amendments and Management Services Agreement Execution.
This Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of New PA by its President, and on behalf
of Business Manager by a duly designated officer. Each multiple copy shall be
deemed an original, but all multiple copies together shall con stitute one and
the same instrument.
Section 8.16 Entire Management Services Agreement. With respect to the
subject matter of this Management Services Agreement, this Management Services
Agreement supersedes all previous contracts and constitutes the entire agreement
between the parties. Neither party shall be entitled to benefits other than
those specified herein. No prior oral statements or contemporaneous
negotiations or understandings or prior written material not specifically
incorporated herein shall be of any force and effect, and no changes in or
additions to this Management Services Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to become
effective on the date stipulated in such amendment(s). The parties specifically
acknowledge that, in entering into and executing this Management Services
Agreement, the parties rely solely upon the representations and agreements
contained in this Management Services Agreement and no others.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
38
IN WITNESS WHEREOF, New PA and Business Manager have caused this Management
Services Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
NEW PA: Central Texas Oncology Associates, P.A.
a Texas professional association
By:
-------------------------------------
Name: Xxxxxxxxx X. Xxxxxx, M.D.
Title: President
BUSINESS MANAGER: AMERICAN ONCOLOGY RESOURCES, INC.
a Delaware corporation
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
39
AMENDMENT TO
MANAGEMENT SERVICES AGREEMENT
This Amendment to Management Services Agreement (the "Amendment"), dated
and effective as of April 25, 1997 is by and between AOR of Texas Management
Limited Partnership, a Texas limited partnership ("Business Manager"), Central
Texas Oncology Associates, P.A., a Texas professional corporation, ("CTOA") and
Central Texas Radiation Oncology Physicians, P.A. ("New PA").
R E C I T A L S
1. CTOA and American Oncology Resources, a Delaware corporation
(whose rights and obligations thereunder were assigned to Business Manager)
executed and delivered that certain Management Services Agreement,
effective as of September 1, 1996 (the "Management Services Agreement").
2. New PA and CTOA have executed and delivered a Merger Agreement,
pursuant to which New PA merged with and into CTOA with the latter being
the surviving corporation.
3. The parties hereto desire to amend certain terms and provisions of
the Management Services Agreement.
NOW THEREFORE in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Section 1.6 of the Management Services Agreement shall be amended
in its entirety to read as follows:
Section 1.6 Business Manager. The term "Business Manager"
shall mean American Oncology Resources, Inc., a Delaware corporation
or any entity that succeeds to the interests of American Oncology
Resources, Inc., a Delaware corporation and to whom the obligations of
Business Manager are assigned and transferred, subject to Section
8.5A.
2. Section 1.27 of the Management Services Agreement shall be amended
in its entirety to read as follows:
Section 1.27 Professional Services Revenues. The term
"Professional Services Revenues" shall mean the sum of (i) all
professional fees actually recorded each month on an annual accrual
basis under GAAP (Net of Adjustment)
40
as a result of professional medical services and related health care
services rendered by the Physicians whether rendered in an outpatient
or inpatient setting, and (iii) Professional Services Capitation
allocated to Professional Services Revenues. Professional Services
Revenues shall not include those monies specifically excluded from
Professional Fees pursuant to Section 1.2 of the separate Physician
Employment Agreement executed by Physicians, liquidated damages,
applicable insurance proceeds, and those fees for technical services,
e.g., those services billed under the 77000 series of the American
Medical Associations Physicians Current Professional Terminology 197
(CPT code).
3. Section 2.2 of the Management Services Agreement shall be amended
in its entirety to read as follows:
Section 2.2 Authority. Consistent with the provisions of this
Management Services Agreement, Business Manager shall have the
responsibility and commensurate authority to provide Management
Services for New PA. Subject to the terms and conditions of this
Management Services Agreement, Business Manager is hereby expressly
authorized to provide the Management Services in any reasonable manner
Business Manager deems appropriate to meet the day-to-day requirements
of the business functions of New PA. Business Manager is also
expressly authorized to negotiate and execute on behalf of New PA
contacts that do not relate to the provision of Medical Services,
provided that such contracts shall be consistent with the Budget. Any
non-medical contracts inconsistent with the Budget shall be referred
to the Policy Board for its review. New PA shall give Business
Manager thirty (30) days prior notice of New PAs intent to execute any
agreement obligating New PA to perform Medical Services or otherwise
creating a binding legal obligation on New PA. Unless an expense is
expressly designated as a Business Manager Expense in this Management
Services Agreement, all expenses incurred by Business Manager in
providing services pursuant to this Management Services Agreement
shall be an Office Expense. The parties acknowledge and agree that
New PA, through its Physicians, shall be responsible for and shall
have complete authority, responsibility, supervision, and control over
the provision of all Medical Services and other professional health
care services performed for patients, and that all diagnoses,
treatments, procedures, and other professional health care services
shall be provided and performed exclusively by or under the
supervision of Physicians as such Physicians, in their sole
discretion, deem appropriate. Business Manager shall have and
exercise absolutely no control or supervision over the provision of
Medical Services.
4. Section 3.2 of the Management Services Agreement shall be amended
to add a new subsection (k) as follows:
41
(k) Non-Medical Contracts. The Policy Board shall consider and
make recommendations to Business Manager on non-medical contracts
which are not consistent with the Budget.
5. Section 4.10 of the Management Services Agreement is amended to add
a new subsection 9(d) as follows, and to reorder the existing subsection
(d), Tax Matters, to be subsection (e):
(d) Disputes Regarding Billing. It is the parties intent that
any issues regarding financial penalties related to billing assessed
by government programs or any other third party payor shall be
resolved to the extent possible by good faith negotiation. To that
end, if New PA and Business Manager in good faith agree that any such
financial penalty is the result of or attributable to the acts of New
PA or Physicians, then all penalty monies assessed and paid shall be
New PA Expense. Alternatively, if New PA and Business Manager in good
faith agree that any such financial penalty is the result of or
attributable to the acts of Business Manager, then all penalty monies
assessed and paid shall be Business Manager Expense. If the parties
cannot agree which is responsible or if responsibility may be
allocable between the parties and they cannot in good faith agree on
their respective share of such penalty, then either party may submit
the dispute to binding arbitration as governed by Article VI of the
Master Transaction Agreement.
6. Section 4.16 of the Management Services Agreement shall be amended
to include the words "or radiation oncology" directly following "medical
oncology."
7. Section 5.9(b) of the Management Services Agreement shall be
amended to add the following final sentence:
This Section 5.9(b) shall be null and void upon the termination
of this Management Services Agreement for cause by New PA or without
cause by Business Manager.
8. Section 6.1(a) of the Management Services Agreement shall be
amended in its entirety to read as follows:
The Monthly Fee shall be [*]
9. The final sentence of Section 6.3(b) of the Management Services
Agreement shall be amended in its entirety to read as follows:
----------------
*This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
42
[*]
10. Sections 7.4 and 7.5 of the Management Services Agreement shall
be amended to add the following final sentence to the end of the last
paragraph in each section:
Business Manager shall transfer such assets free and clear of any and
all encumbrances upon payment of the purchase price.
11. Effect. This Amendment shall be effective only for the specific
purposes set forth herein, and, except as modified by this Amendment, the
terms, covenants and provisions of the Management Services Agreement are
hereby ratified and confirmed and shall continue in full force and effect.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
----------------
*This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
43
IN WITNESS WHEREOF the parties have executed this Amendment effective
as of the day and year first above written.
"BUSINESS MANAGER"
AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
"CTOA"
CENTRAL TEXAS ONCOLOGY ASSOCIATES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
"NEW PA"
CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
44
