MANAGEMENT AND SERVICES AGREEMENT
This MANAGEMENT AND SERVICES AGREEMENT is dated as of November 1, 1997, the
("Agreement") by and between U.S. PHYSICIANS, Inc., a Pennsylvania corporation
("Manager") and U.S. Medical Services of Delaware, P.A., a Delaware professional
corporation ("P.C.").
BACKGROUND
A. P.C. intends to provide specialty and primary medical care and related
medical services (collectively, "Medical Services") to the general public at
various locations in the State of Delaware (the "Sites").
B. For reasons of quality, efficiency and economy, P.C. has determined that
it should obtain the services of another entity to manage the Sites and to
perform certain administrative, billing and marketing services for P.C.
C. P.C. believes that such delegation of the management aspects of its
practice will enable it to better concentrate on the practice of medicine and
therefore improve the Medical Services provided by P.C.
D. P.C. will maintain the sole responsibility of providing Medical Services
at the Sites and for matters involving patient care.
E. Manager desires to assume the management of the business operations of
P.C. and to negotiate agreements with insurers, employers and other purchasers
of health care services for the provision of Medical Services by P.C.
F. Manager will provide financing to P.C. necessary for the operations of
P.C.
G. Manager has developed facilities and management services designed to
make available to qualified physicians the facilities, equipment, supplies,
management services, capital financing, support staff, marketing and other
support services necessary to permit such physicians to provide medical services
on a cost-efficient basis and to enhance the ability of P.C. to enter into
competitive arrangements with insurers, employers and other purchasers of health
care services.
H. P.C. desires that Manager make available to P.C. such financing,
management services and facilities, and agrees hereby to compensate Manager for
such services as described herein.
I. Manager is willing to make such financing, management services and
facilities available to P.C. on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the promises
and mutual covenants contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Agreement to Manage and Provide Technical and Support Services. P.C.
hereby engages Manager, and Manager accepts such engagement, to manage the Sites
on behalf of P.C. and for its account, to market Medical Services provided
through P.C. to purchasers of health care services and to provide the financing,
services and facilities set forth in this Agreement, on the terms and conditions
set forth herein.
2. Term. The term of this Agreement shall begin as of the date hereof (the
"Commencement Date") and shall end on the fortieth (40th) anniversary of such
date unless sooner terminated in accordance with the provisions of Paragraph 12.
Unless either party elects to terminate this Agreement at the end of the initial
term or any renewal term, by giving written notice to the other party ninety
(90) days before the expiration of the then current term, this Agreement shall
be deemed to have been automatically renewed for an additional term of five (5)
years.
3. Duties and Responsibilities of P.C. P.C. shall be responsible for all
Medical Services at the Sites and shall render such Medical Services to the
public as will maximize the quality and efficiency of the treatment of patients.
P.C. shall be solely responsible for the following items:
(a) Physicians and Other Health Care Providers. P.C. shall hire,
engage, supervise, evaluate and terminate all physicians, nurses, physical
therapists, technicians and other health care providers (collectively,
"Professionals") at the Sites, whether they are employees of P.C. or
independent contractors of P.C., and, subject to the prior written consent
of Manager, establish compensation and benefits for such Professionals.
P.C. shall not increase or decrease the amount of such compensation and/or
benefits without the prior written consent of Manager. P.C. shall be
responsible for the payment of all compensation payable to Professionals,
except to the extent that nurses, physical therapists, technicians and
other health care providers may become employees of Manager pursuant to
Section 4(a)(iv) of this Agreement.
(b) Medical Directors. P.C. shall designate one or more Medical
Directors, each of whom is properly qualified to perform the supervisory,
quality assurance and credentialing (collection and verification of
information) functions necessary for the rendering of appropriate Medical
Services at the Sites.
(c) Quality and Cost-Effectiveness of Medical Services. P.C. shall
monitor the quality of Medical Services practiced by all Professionals at
the Sites, to assure that such care meets currently accepted standards of
medical competence and is in accordance with currently approved methods and
practices in the medical profession and related fields. P.C. shall adopt a
peer review/quality assessment program to monitor and evaluate the quality
and cost-effectiveness of Medical Services provided by Professionals at the
Sites, and shall assure
-2-
that appropriate Medical Services are rendered in a cost-effective manner.
(d) Medical Records. P.C. shall maintain the medical records of the
patients of P.C. in accordance with applicable law. Manager may, at its
option, assist in the development of policies and procedures for efficient
maintenance and retrieval of medical records, subject to applicable law.
Confidentiality, and availability of medical records for inspection by
authorized agencies or individuals, shall be maintained in accordance with
applicable state and federal laws.
(e) Medical Fees. For purposes of establishing budgetary assumptions
for the Sites, P.C., after consultation with Manager, shall:
(i) determine a fee schedule or schedules for each Site prior to
the inception of operations at that Site; and
(ii) determine revisions to such fee schedule or schedules not
less than thirty (30) days prior to the effective date of any proposed
amendment to such fee schedule. Manager shall be authorized to
negotiate fees for services with third-party payors on behalf of P.C.
(f) Daily Statements. P.C. shall prepare and submit to Manager, or
cause its physicians and, if applicable, other Professionals, to prepare
and submit, daily statements of professional services rendered and any
prescribed related matters, on such form, with such detail and in such
manner as Manager shall from time to time provide to P.C., in order to
permit Manager to cause proper billing for such services to be rendered.
(g) Protocols. P.C. shall cooperate with Manager to develop
utilization review standards, treatment protocols and similar guidelines,
as required, to establish measures for the delivery of high quality and
cost-effective medical care.
4. Duties and Responsibilities of Manager.
(a) Management Services. Manager shall be solely responsible for the
business operation of the Sites and assumes responsibility for the management of
all non-medical aspects of the Sites, except as otherwise specifically
prohibited by law or limited by this Agreement, and shall provide the following
services:
(i) Manager shall lease, acquire or otherwise procure one or more
Sites in which P.C. shall conduct its practice.
(ii) Manager shall provide all reasonable and necessary medical
equipment, furnishings and furniture required in the day-to-day operation
of the Sites. MANAGER SUPPLIES THE EQUIPMENT AS IS. MANAGER IS NOT A
MANUFACTURER OF, AND IS NOT ENGAGED IN THE SALE OR DISTRIBUTION OF, THE
EQUIPMENT. MANAGER IS NOT AN AGENT OF THE MANUFACTURER OR
-3-
THE SELLER OF THE EQUIPMENT. MANAGER MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, REGARDING THE MERCHANTABILITY, FITNESS, DESIGN OR
SUITABILITY FOR ANY PURPOSE OR ANY CONDITION OF, OR THE QUALITY OR CAPACITY
OF, OR THE MATERIAL OR WORKMANSHIP, IN THE EQUIPMENT.
(iii) Manager shall employ all necessary clerical, secretarial and
bookkeeping personnel reasonably necessary for the conduct of P.C.'s
operations at the Sites. Manager shall determine and cause to be paid the
salaries and fringe benefits of all such personnel.
(iv) Manager shall assist in negotiating employment agreements or
contracts with nursing staff, technicians and other allied and ancillary
health care personnel. All persons whose services are billed to Medicare,
Medicaid or other third-party payors as under the supervision of physicians
shall be employed by P.C.; provided, however, that employment agreements
may be assumed by and assigned to Manager at the request of Manager if and
to the extent applicable law authorizes xxxxxxxx by P.C. for supervised
services rendered by persons not employed by P.C.
(v) Manager shall administer P.C.'s payroll and personnel-related
activities.
(vi) Manager shall supervise all of Manager's employees; provided,
however, that P.C. shall supervise Professionals to the extent necessary to
maintain P.C.'s responsibility for the medical aspects of the practice and
to comply with requirements of applicable law.
(vii) Manager shall, unless prohibited by law, order and procure all
Medical Supplies (as hereinafter defined), office supplies and other
supplies necessary in the operation of the Sites to enable P.C. to deliver
quality Medical Services in a cost-effective manner. The ultimate
oversight, supervision and ownership for all Medical Supplies is and shall
remain the sole responsibility of P.C. "Medical Supplies" shall mean all
drugs, pharmaceuticals, products, substances, items or devices whose
purchase, possession, maintenance, administration, prescription or security
require the authorization or order of a licensed health care provider or
require a permit, registration, certification or other governmental
authorization held by a licensed health care provider as specified under
any applicable federal or state law.
(viii) Manager shall cause to be placed and kept in force all forms of
insurance needed to protect adequately P.C. and itself, in connection with
the operation of the Sites, including, but not limited to, where
appropriate, workers' compensation insurance, public liability insurance,
fire and extended coverage insurance, surety bonding, business interruption
insurance, burglary and theft insurance; provided, however, that P.C. shall
have the exclusive responsibility for maintaining malpractice liability
insurance for the Professionals pursuant to Paragraph 6, but which the
Manager shall procure and administer for P.C.
-4-
(ix) Manager shall maintain a comprehensive system of office records,
books and accounts reflecting the income and expenses of the Sites, which
books and records may be inspected by P.C. at any reasonable time during
regular business hours. Records shall be maintained for at least four (4)
years from the date of service or from any governmental inquiry related
thereto, and made available upon request to officers, representatives or
agents of the Secretary of Health and Human Services or of the Comptroller
General of the United States General Accounting Officer.
(x) Manager shall prepare and submit to P.C. monthly financial
statements with respect to the operation of the Sites.
(xi) Manager shall provide all janitorial, grounds and maintenance
services for the Sites.
(xii) Manager shall maintain, service and repair all equipment, or use
reasonable efforts to have lessors or contracted service providers perform
such necessary maintenance, service and repair.
(xiii) Manager shall provide printing, stationery, forms, postage,
duplicating, telecopying, photocopying and other support services as are
reasonably necessary and appropriate for the operation of the Sites.
(b) Billing Services. Manager shall provide, or cause to be provided, the
following billing services to P.C.:
(i) a competent management executive for the supervision of the
billing and collection functions of P.C.'s business;
(ii) services with respect to billing of patients, insurance
companies, government entities and third party payors and collecting all
charges made to P.C.'s patients for deposit to a lock box in the name of
and under the control of P.C., excluding, however, any obligation to
initiate legal proceedings for collection, although Manager may do so at
its sole and absolute discretion;
(iii) preparation of all necessary medical letters and reports,
insurance forms, governmental agencies' claim forms and workers'
compensation claim forms;
(iv) preparation and mailing of all necessary and required patient
statements and invoices and reasonable follow-up on such preparation and
mailing;
(v) response by telephone or letter with reasonable dispatch and
promptness to any reasonable patient inquiry or request for assistance in
the interpretation of insurance policies or reimbursement programs and
handling, to the best of its ability, of any complaint involving
professional services or fees; and
-5-
(vi) operating procedure manuals for clerical staff.
(c) Marketing Services. Manager, at its sole discretion and with due regard
to the economic costs and anticipated benefits, may provide, or cause to be
provided, the following marketing services to P.C.:
(i) promotion of the Sites' services and facilities by marketing
representatives of Manager through contact with referring physicians and
potential referring physicians;
(ii) preparation and distribution of informational and promotional
materials, including descriptions of services, fee schedules, newsletters,
testimonials and other sales promotional pieces, subject to prior approval
of P.C., which shall be deemed to be given unless Manager receives written
disapproval within three (3) days after P.C. receives the promotional
materials;
(iii) subject to the need of certain third party payors to maintain
some form of exclusivity, promotion of the Sites through contact and
continued liaison with administrative directors of area HMO's, PPO's,
unions and self-insured clients and other third-party payors; and
(iv) conducting open house receptions for new Sites, seminars for
physicians and office staff, speaking engagements for physicians who
request Manager to assist them in organizing such engagements, newspaper
interviews and magazine articles when initiated and requested by an
interviewer or magazine.
(d) Provision of Funds. Manager shall arrange financing for P.C. or, if no
financing can be reasonably arranged, Manager shall advance funds to P.C. in the
event P.C. does not have sufficient cash on hand to pay its expenses as and when
due. Any such advance by Manager shall be repaid to Manager together with
interest at the rate from time to time charged to Manager by its primary lender
(or in the event there is no such lender, at an annual rate equal to the prime
rate announced from time to time in the Wall Street Journal plus 2%) out of
available cash in subsequent months prior to the payment of fees due Manager
pursuant to subparagraph 8(a).
(e) Deposit of Collections. Manager, in the name of P.C., shall deposit in
the appropriate bank accounts of P.C. ("Bank Accounts") all receipts (other than
from Medicare or Medicaid) arising from the operation of the Site(s) received by
Manager on behalf of P.C. and shall use reasonable diligence to see that
disbursements from such accounts are made by and on behalf of P.C. in such
amounts and at such times as may be required by this Agreement. P.C. shall
direct the Medicare and Medicaid programs to deposit payments directly to the
Bank Accounts. P.C. shall provide Manager with all authorizations necessary to
enable Manager to make the deposits and disbursements required by this
subparagraph (e).
-6-
(f) Other Services. Any additional services required by P.C. that are not
listed or identified in this Agreement shall be rendered for P.C. only by an
amendment to this Agreement.
5. Relationship of the Parties.
(a) Independent Contractors. P.C. and Manager are independent contractors
and the relationship between them is that of professional corporation and an
independent supplier of non-medical services and facilities. Nothing in this
Agreement shall be construed to create a principal-agent, employer-employee,
master-servant, partnership or joint venture relationship.
(b) P.C. - Patient - Manager Relationships. The professional relationship
between P.C. and its patients shall, at all times during the term of this
Agreement, be solely between P.C., its physicians and other Professionals and
their patients. P.C. shall have complete responsibility for its medical practice
and that of Professional employees or independent contractors. Manager shall not
interfere with the exercise of medical judgment by the physicians and other
Professionals employed by P.C. nor shall Manager interfere with, control,
direct, or supervise P.C., or any physician or other Professional employee or
independent contractor, in connection with the provision of medical or ancillary
services by P.C. In connection with the care and treatment of its patients, P.C.
shall be solely responsible for supervising all personnel performing medical or
ancillary services. To the extent any act or service set forth in this Agreement
required to be performed by Manager is construed by a court of competent
jurisdiction or by the appropriate licensure bureaus or divisions of the
Delaware Department of State to constitute the practice of medicine, the
requirement to perform that act or service by Manager shall be deemed waived and
unenforceable. In addition, if in the opinion of counsel to Manager, any act or
service set forth in this Agreement required to be performed by Manager is
likely to be considered to constitute the practice of medicine, the requirement
to perform that act or service by Manager shall be deemed waived and
unenforceable. All decisions as to which individuals shall utilize the services
of P.C. shall be the sole responsibility of P.C.; provided, however, that
Manager may negotiate contracts with employers, unions, health care insurers,
HMOs, PPOs and other third-party payors to arrange for the provision of Medical
Services by P.C.
6. Malpractice Insurance.
(a) Minimum Policy. On its own behalf and on behalf of each physician or
other Professional its employs, and each physician or other Professional
contracting with P.C. for the provision of professional services, P.C. shall
provide and keep in force a malpractice insurance policy or policies of standard
form in the State of Delaware, with limits mutually acceptable to Manager and
P.C. The policies shall be obtained by P.C. or, as the case may be, by each such
physician or other Professional employed by P.C., or contracting with P.C., and
certificates thereof shall be delivered to Manager prior to the inception of
operations of any Site, together with evidence of the payment of the premiums
thereon, and shall be placed with insurance companies authorized and licensed to
issue such
-7-
policies in the Commonwealth of Pennsylvania at rates deemed reasonable and
appropriate and having reserves in an amount deemed to be reasonably adequate by
P.C. and Manager. P.C. shall use its best efforts to name Manager as an
additional insured party on all malpractice insurance and Manager may, at its
option, participate in the procurement of cost-effective coverage on behalf of
P.C. P.C. shall provide documentation to Manager that all such insurance is in
full force and effect on each subsequent anniversary of the Commencement Date
and not less than ten (10) days prior to the earlier of the dates upon which
P.C. employs or enters into a contract with any Professional to provide services
at a Site.
(b) Loss of Malpractice Insurance of Medicare/Medicaid Provider Services.
P.C. hereby agrees that it will immediately suspend any physician or other
Professional for whom malpractice insurance cannot be reasonably obtained or
whose malpractice insurance is canceled, and such physician or other
Professional shall not be reinstated or permitted to practice at any Site until
such time as the malpractice policy is reinstated. P.C. will notify Manager
within 24 hours of receipt of notice or information that any physician or other
Professional is not in compliance with the provisions of this Agreement
pertaining to malpractice insurance, or has been suspended or terminated from
participation in Medicare or Medicaid. Manager shall have the right to cancel
this Agreement within three (3) days of learning that such physician or other
Professional has not been suspended by P.C. Failure to suspend a physician or
other Professional who is not in compliance with the provisions of this
Agreement pertaining to Medicare/Medicaid participation status, malpractice
insurance, failure to replace such insurance should it be canceled, or failure
to provide such timely notice, shall constitute a breach of this Agreement
pursuant to Paragraph 12.
7. Representations of P.C. P.C. hereby makes the following representations
to Manager, each of which is material and is being relied on by Manager, and
shall be true as of the date hereof and shall survive the date hereof:
(a) Professional Corporation. P.C. is a professional corporation duly
incorporated under the laws of the State of Delaware and has the power and
authority to carry on its business as it is contemplated by this Agreement.
(b) Physicians and Medical Professionals Licensed. Each physician employed
by or under contract with P.C. to provide Medical Services is, and will continue
to be, duly licensed to practice medicine in the State of Delaware, is properly
trained, competent and experienced in his or her medical specialty, and has in
force, and will continue to maintain, medical malpractice insurance pursuant to
the provisions of this Agreement. P.C. will assure that all other Professionals
rendering services pursuant to this Agreement shall be duly licensed and
appropriately supervised by P.C. in accordance with applicable laws and current
community standards. P.C. shall enter into a written agreement in form and
substance satisfactory to Manager, with each Professional employed by or under
contract with P.C. to render services hereunder (the "Employment Agreements").
(c) Provider Numbers. P.C. shall maintain provider numbers for Blue Cross,
Blue Shield, Medicare and Medicaid (collectively "Provider Numbers"). To the
extent
-8-
practicable, group assignment accounts will be established to facilitate
xxxxxxxx.
(d) Information Accurate. Any and all factual information furnished by P.C.
to Manager including, but not limited to, financial statements and fee schedules
of P.C., are true and accurate in every material respect as of the date on which
such information was furnished.
(e) Professional Conduct. P.C. has and will continue to conduct its
professional activities in accordance and compliance with any and all laws,
regulations and ethical and professional standards applicable thereto. P.C. will
assure that all Professionals employed by or under contract with P.C. maintain
appropriate licenses, credentials and privileges in good standing, and have not
been terminated or otherwise precluded from rendering services under Medicare or
Medicaid, other federal or state health care programs, or for other third-party
payors with which Manager may negotiate agreements to provide Medical Services.
8. Compensation.
(a) Payment of Fees. The parties hereto recognize that Manager's expenses,
and the expenses of the Sites, will vary substantially depending on the volume
and type of patient services. The parties further recognize the inherent
uncertainties and the difficulty of predicting monthly expenses, volume of
services, the collection of revenues, the extent of obligations and the risks
that Manager has taken and will take with respect to capital expenditures,
equipment lease obligations and other obligations incurred in connection with
the establishment and furnishing of the Sites, and additionally recognize the
need to provide Manager with sufficient revenues to pay all operating expenses
and to provide Manager with a return on its investment commensurate with the
risks being assumed by Manager. Therefore, the parties agree that P.C. shall pay
to Manager as compensation for all the services rendered by Manager pursuant to
the terms of this Agreement an amount equal to the Gross Collected Revenues
less: (i) the amount of the Permitted Expenses of P.C. and (ii) the amount of
advances repaid to Manager pursuant to subparagraph 8(d). The term "Gross
Collected Revenues" shall mean all xxxxxxxx (including, without limitation,
xxxxxxxx for Medical Services and for the services of other Professionals,
medical supplies, charges for ancillary medical services and facility and
equipment charges) collected by P.C. for services rendered at the Sites. The
term "Permitted Expenses" shall mean: (i) all salaries, bonuses and fringe
benefits required to be paid in accordance with the Employment Agreements or
pursuant to applicable law; (ii) insurance costs; (iii) legal and accounting
fees; (iv) taxes; and (v) other incidental expenses that for purposes of
convenience are paid by P.C. but would otherwise be the obligation of Manager.
Payment for the services provided hereunder shall be made through a daily sweep
pursuant to instructions by P.C., of the cash contained in the bank accounts of
P.C., into bank accounts of Manager. Manager shall reconcile amounts payable
hereunder on a quarterly basis.
(b) Application of Revenues. P.C. hereby agrees to the application of the
Gross Collected Revenues to the purposes and priorities specified in this
Agreement.
-9-
(c) P.C.'s Expenses. P.C. agrees that its Permitted Expenses shall not
exceed twenty percent (20%) of the Gross Collected Revenues calculated on an
annual basis, without the consent of Manager; provided, however, that P.C. shall
not be subject to any such limit with respect to payment of amounts due under
the Employment Agreements between P.C. and its physician employees.
(d) Grant of Security Interest. As security for the payment by P.C. of the
compensation due to Manager pursuant to this Agreement and for any advances made
by Manager to P.C. pursuant to subparagraph 4(d), P.C. hereby grants Manager a
security interest in all of P.C.'s accounts receivable, cash, bank accounts,
Medical Supplies and proceeds of the foregoing (collectively, the "Secured
Assets"). At the request of Manager, P.C. shall execute and deliver to Manager
any and all documents requested by Manager to evidence or perfect the security
interest granted hereby, including, but not limited to, UCC-1 Financing
Statements. This Agreement shall constitute a security agreement.
(e) Review of Books. Each party shall have the right at least annually to
have a certified public accountant review the other party's books to determine
whether that party has complied with this Agreement.
9. Books, Office Equipment, Etc.
(a) P.C.'s Ownership. All Medical Supplies (as defined in Paragraph
4(a)(vii)) and patient records shall at all times be and remain P.C.'s property;
provided, however, that, upon termination of this Agreement, P.C. shall provide
any successor entity providing services at any Site, upon request by such
successor within ninety (90) days after termination of this Agreement and at the
successor's expense, access to, and copies of, such records relating to Medical
Services performed at such Site by P.C. during the term hereof as such successor
feels are reasonably necessary in order for such successor to provide continuing
Medical Services. Notwithstanding the foregoing, no patient records will be made
available without the written consent of the patient if such is required by law.
Manager shall reimburse P.C. the reasonable cost of making such copies as are
required to comply with this subparagraph 9(a).
(b) Manager's Ownership. All professional instruments, equipment,
computers, computer software programs and other management information systems,
supplies, samples, forms, charts, logs, brochures, building information,
policies and procedures, protocols, outcome studies, contracts or any other
materials or information furnished to P.C. by Manager are and shall remain the
sole property of Manager; if Manager requests the return of such equipment or
materials at any time after the term of this Agreement, P.C. shall immediately
deliver the same to Manager.
-10-
10. Exclusivity, Non-Competition and Non-Disclosure Agreement.
(a) Exclusivity. P.C. agrees that during the term of this Agreement it
shall provide Medical Services exclusively at Sites managed by Manager pursuant
to this Agreement unless the parties hereto otherwise expressly agree in
writing.
(b) Non-Competition. During the term of this Agreement and for two (2)
years following termination, P.C. shall not:
(i) employ any individual previously working for Manager as its
employee;
(ii) directly or indirectly induce or attempt to influence any
employee of Manager to terminate employment with Manager; or
(iii) engage in, or have any interest in, directly or indirectly (as
proprietor, partner, stockholder, principal, agent, broker, employee,
consultant, or lender) any business or medical facility within the
Restricted Area which is engaged in providing Medical Services such as
those provided at the Sites or providing management services similar to
those provided by Manager. Restricted Area shall mean the area within a six
(6) mile radius of any Site.
(c) Non-disclosure. During the term of this Agreement and at all times
thereafter, neither P.C. nor its shareholders or physicians shall disclose,
communicate or divulge, or use for the direct or indirect benefit of any person,
firm, association or company (except any material referred to in subparagraph
9(a) above) any information regarding the business methods, business policies,
procedures, protocols, techniques, information systems or trade secrets, or
other knowledge or processes of or developed or used by Manager, or any other
confidential information relating to or dealing with the business operations or
activities of Manager (including, but not limited to financial information),
made known to P.C. or its employees or independent contractors or learned or
acquired by P.C., its employees or independent contractors during the term of
this Agreement. In furtherance of the foregoing, P.C. agrees not to disclose,
communicate or divulge to any third party the terms of this Agreement.
(d) Reasonableness of Restrictions. The parties acknowledge that the
restrictions contained in subparagraphs 10(a), 10(b) and 10(c) are reasonable
and necessary to protect the legitimate interests and substantial investment of
Manager and that any violation of these restrictions would result in immediate
irreparable injury to Manager. If the period of time or geographical area
specified in subparagraph 10(b) and 10(c) should be adjudged unreasonable in any
proceeding, then the period of time or geographic area shall be reduced by the
elimination or reduction of such portion thereof so that such restrictions may
be enforced for such time or area as is adjudged to be reasonable. P.C. and
Manager acknowledge that, in the event of a violation of any such restrictions,
Manager shall be entitled to preliminary and permanent injunctive relief as well
as an equitable accounting of all earnings, profits and other
-11-
benefits arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies to which Manager may be entitled. In
the event of a violation, the period referred to in subparagraph 10(b) shall be
extended by a period of time equal to that period beginning with the
commencement of any such violation and ending when such violation shall have
been finally terminated in good faith.
(e) Additional Covenants. P.C. shall secure covenants similar to those
specified with respect to P.C. in this Paragraph 10 (subject to geographic
limitations consistent with the Professional's activities for P.C.) from: (i)
each Professional employed by or contracting with P.C., and from (ii) each
shareholder and all future shareholders. Such covenants shall provide that
Manager shall be a third party beneficiary of each such covenant and may enforce
such covenants. P.C. shall provide to Manager proof of compliance with this
subsection upon Manager's request. P.C. agrees that it shall take all actions
necessary to enforce such covenants. P.C. covenants and agrees that it shall
operate in the manner necessary to constitute a "group practice," as such term
is defined in 42 U.S.C. ss.1395nn(h)(4)(A), and that all referrals within and
among members of the group shall comport with the requirements of 42 U.S.C
ss.1395 and other applicable laws and implementing regulations.
(f) Survival. The provision of this Paragraph 10 shall survive the
expiration or termination of this Agreement.
11. Power of Attorney. P.C. hereby appoints Manager, for the term hereof
(including all renewal terms) and thereafter until all amounts due to Manager
have been paid, to be its true and lawful attorney-in-fact, for the following
purposes:
(a) to collect accounts receivable owing to P.C. in P.C.'s name and on its
behalf;
(b) to receive payments from Blue Cross, Blue Shield, insurance companies,
health care plans, Medicare, Medicaid and all other third party payors in P.C.'s
name and on its behalf for deposit in the Bank Accounts;
(c) to take possession of, endorse in the name of P.C. (and/or in the name
of an individual Professional) such payment intended for the payment of a
Professional's bills and deposit in the Bank Accounts any notes, checks, money
orders, cash and other instruments received in payment of accounts receivable;
(d) to initiate the institution of legal proceedings in P.C.'s name to
collect any account and monies owed to P.C., to enforce the rights of P.C. under
any contract or in connection with the rendering of any service and to contest
adjustments and decisions by government agencies (or fiscal intermediaries) and
third-party payors;
(e) to negotiate payments to P.C. under this Agreement to the extent
otherwise permitted by law;
-12-
(f) to perfect a security interest in the Secured Assets of P.C.; and
(g) to do any other act, make any payment or execute any document on behalf
of P.C. to cure any default by P.C. of this Agreement; provided, such act by
Manager must comply with any applicable law.
12. Termination and Breach.
(a) General Breach by P.C. In the event that P.C. should be in default in
the performance of any material provision of this Agreement, and such default is
not cured within thirty (30) days after receipt of written notice of such
default from Manager, Manager, at its option, may terminate this Agreement by
delivering written notice to P.C. at any time after expiration of such thirty
(30) day period.
(b) Failure to Maintain Malpractice Insurance or Licenses or Participation
Agreements. If P.C. should materially breach any of its obligations pursuant to
Paragraph 6 or its obligation to maintain, or cause to be maintained, the
medical licenses or participation agreements of all physicians employed by it,
or under contract to it, or to dismiss those who do not maintain their medical
licenses and participation agreements under the same terms and conditions in
Paragraph 6 pertaining to the maintenance of malpractice insurance, and if such
breach is not cured within ten (10) days after receipt by P.C. of written
notification of such breach from Manager, Manager may either cure the breach
itself, where possible, at the expense of P.C., or terminate this Agreement upon
written notice to P.C.
(c) Bankruptcy of Manager. In the event Manager files any voluntary
petition in bankruptcy or any bankruptcy proceeding is filed against Manager
which in either case remains undismissed for a period of 360 days, P.C., at its
option, may terminate this Agreement by delivering written notice to Manager at
any time after such 360 day period and prior to the dismissal of such
proceeding.
(d) Effect of Termination. After the termination of this Agreement, Manager
shall continue to collect the accounts receivable which are on the books of P.C.
as of the date of termination and shall be entitled to receive as its fee for
services rendered prior to termination the amount of the Gross Collected
Revenues with respect to such accounts receivable (whenever collected) less the
amount of then unpaid Permitted Expenses incurred prior to termination.
13. Indemnification.
(a) P.C. P.C. shall indemnify and hold Manager, its officers, directors,
stockholders, employees, agents, parents and subsidiaries harmless from and
against all claims, demands, costs, expenses, liabilities and losses (including
attorneys' and other professional fees) caused or asserted to have been caused
by or as a result of the performance of Medical Services or ancillary services
or any other acts or omissions by P.C. and/or its shareholders,
-13-
agents, employees or subcontractors (other than Manager).
(b) Manager. Manager shall indemnify and hold P.C., its officers,
directors, shareholders, and employees harmless from and against all claims,
demands, costs, expenses, liabilities and losses (including attorneys' and other
professional fees) which may result against P.C. as a consequence of Manager's
gross negligence or willful misconduct in connection with Manager's performance
of this Agreement.
(c) Survival. The provisions of this Paragraph 13 shall survive the
expiration or termination of this Agreement.
14. Legislative Limitations. Notwithstanding any other provisions of this
Agreement, if the governmental agencies (or their representatives) that
administer Medicare or Medicaid, or any other payor, or any other federal, state
or local government or agency, passes, issues or promulgates any law, rule,
regulation, standard or interpretation at any time while this Agreement is in
effect which prohibits, restricts, limits or in any way materially changes the
method or amounts of reimbursement or payment for services rendered under this
Agreement, or which otherwise materially affects either party's rights or
obligations hereunder, either party may give the other party notice of intent to
amend this Agreement to the satisfaction of the noticing party, to reflect the
prohibition, restriction, limitation or change, provided, however, that no such
amendment shall alter the basic economic status of the parties pursuant to this
Agreement. If this Agreement is not so amended in writing within sixty (60) days
after such notice is given, the parties agree to submit the issue of such an
amendment to arbitration in accordance with subparagraph 15(k); provided,
however, that if at the election of either party, a formal appeal is filed with
the relevant governmental agency, or a suit is filed in a court of competent
jurisdiction, so as to stay the implementation of any such law, rule,
regulation, standard or interpretation, during the period of such stay, the
right to amend as set forth above shall also be stayed.
15. Miscellaneous.
(a) Indulgences, Etc. The failure or delay on the part of any party to
exercise any right, remedy, power or privilege under this Agreement shall not
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver shall be effective unless it is in writing and
is signed by the party asserted to have granted such waiver.
(b) Controlling Law. This Agreement and all provisions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(c) Notices. All notices, requests, demands and other communications
-14-
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered (personally, by
carrier service such as Federal Express, or by other messenger) or upon actual
receipt of registered or certified mail, postage prepaid, return receipt
requested, addressed as set forth below:
(i) If to Manager:
U.S. PHYSICIANS, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
Attention: President
(ii) If to P.C.:
U.S. Medical Services of Delaware, P.A.
000 Xxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Attention: Vice President
In addition, notice by mail should be by air mail if posted outside of the
continental United States.
Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this subparagraph 15(c).
(d) Binding Nature of Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns. Notwithstanding the
foregoing, P.C. may not assign or transfer its rights or obligations under this
Agreement without the prior written consent of Manager. Manager may assign or
transfer all or any portion of its rights or obligations under this Agreement
without the consent of P.C.
(e) Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
(f) Severability and Reformation. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other provision may be invalid or unenforceable in whole or in part. If or
to the extent this Agreement is reasonably deemed to violate applicable law, the
parties agree to negotiate in good faith to amend the
-15-
Agreement to the extent possible, consistent with its purposes, to conform to
law.
(g) Entire Agreement. This Agreement contains the entire understanding
among the parties with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written, except as herein contained.
This Agreement may not be modified or amended other than by an agreement in
writing signed by two officers of each party.
(h) Paragraph Headings. The paragraph headings in this Agreement are for
convenience only, form no part of this Agreement and shall not affect its
interpretation.
(i) Gender, Etc. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context indicates is appropriate.
(j) Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that, if the final day of any time period falls on a
Saturday, Sunday or holiday, then the final day shall be deemed to be the next
day which is not a Saturday, Sunday or holiday.
(k) Arbitration. Any dispute (including a claimed breach of the terms
hereof) arising out of or in connection with this Agreement, other than a
claimed breach of Paragraph 10 of this Agreement to which this subparagraph
15(k) shall not be applicable, shall be resolved by arbitration conducted by the
American Arbitration Association in Philadelphia, Pennsylvania, in accordance
with its rules then in existence. The arbitrators shall not contravene or vary
in any respect any of the terms or provisions of this Agreement except as
provided in Paragraph 14. The award of the arbitrators shall be final and
binding upon the parties hereto, their heirs, administrators, executors,
successors and assigns, and judgment upon such award may be entered in any court
having jurisdiction thereof.
(l) Force Majeure. Neither party shall be liable or deemed to be in default
for any delay or failure to perform under this Agreement resulting, directly or
indirectly, from acts of God, civil or military authority, acts of public enemy,
war, accidents, fires, explosions, earthquakes, floods, strikes or other work
interruptions by either party's employees or any other similar cause beyond the
reasonable control of the non-performing party.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
U.S. PHYSICIANS, INC. U.S. MEDICAL SERVICES OF
DELAWARE, P.A.
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------- -----------------------------
Xxxxxx X. Xxxxx, President Xxxxxx X. Xxxxx, President
-16-
