EXHIBIT 10.13
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
NOVAMED MANAGEMENT OF KANSAS CITY, INC.
a Missouri corporation
AND
HUNKELER EYE CENTERS, P.C.
a Missouri professional corporation
EFFECTIVE June 1, 1999
TABLE OF CONTENTS
Page No.
ARTICLE I
DEFINITIONS...................................................................................... 3
1.1 Adjustments............................................................................. 3
1.2 Affiliate............................................................................... 3
1.3 Ancillary Revenue....................................................................... 3
1.4 Budget.................................................................................. 3
1.5 Business Manager........................................................................ 3
1.6 Business Manager Consent................................................................ 3
1.7 Business Manager Expense................................................................ 4
1.8 Capitation/Case Rate Revenues........................................................... 4
1.9 Confidential Information................................................................ 5
1.10 Depository Account...................................................................... 5
1.11 Designated Allied Health Professionals.................................................. 5
1.12 Dispensary Business..................................................................... 5
1.13 Dispensary Business Budgeted Office Expense. ........................................... 5
1.14 Dispensary Business Budgeted Practice Expense........................................... 6
1.15 Dispensary Business Budgeted Revenue.................................................... 6
1.16 Dispensary Business Management Fee. .................................................... 6
1.17 Dispensary Business Monthly Fee......................................................... 6
1.18 Dispensary Business Monthly Office Expense.............................................. 6
1.19 Dispensary Business Monthly Practice Expense............................................ 6
1.20 Dispensary Business Office Expense...................................................... 6
1.21 Dispensary Business Revenue............................................................. 6
1.22 EyeCare Midwest......................................................................... 6
1.23 EyeCare Midwest MSA..................................................................... 6
1.24 GAAP.................................................................................... 6
1.25 Managed Care Contract................................................................... 6
1.26 Management Fee.......................................................................... 7
1.27 Management Services..................................................................... 7
1.28 Management Services Agreement........................................................... 7
1.29 Medical Advisory Board.................................................................. 7
1.30 Medical Services........................................................................ 7
1.31 Monthly Office Expense.................................................................. 7
1.32 Monthly Practice Expense................................................................ 7
1.33 Office.................................................................................. 7
1.34 Office Expense.......................................................................... 7
1.35 Optometrist............................................................................. 10
1.36 Original Transaction Agreements......................................................... 10
1.37 Physician............................................................................... 10
1.38 Physician Discretionary Expenses........................................................ 10
1.39 Physician-Employee...................................................................... 10
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Page No.
1.40 Physician-Shareholder.................................................................... 10
1.41 Policy Board............................................................................. 10
1.42 Practice................................................................................. 11
1.43 Practice Account......................................................................... 11
1.44 Practice Consent......................................................................... 11
1.45 Practice Expense......................................................................... 11
1.46 Practice Territory....................................................................... 11
1.47 Predecessor Professional Corporation..................................................... 11
1.48 Preexisting Obligation Payments.......................................................... 11
1.49 Principal Services....................................................................... 11
1.50 Principal Services Budgeted Office Expense. ............................................. 12
1.51 Principal Services Budgeted Practice Expense............................................. 12
1.52 Principal Services Budgeted Revenue...................................................... 12
1.53 Principal Services Management Fee........................................................ 12
1.54 Principal Services Monthly Fee........................................................... 12
1.55 Principal Services Monthly Office Expense................................................ 12
1.56 Principal Services Monthly Practice Expense.............................................. 12
1.57 Principal Services Office Expense........................................................ 12
1.58 Principal Services Revenue............................................................... 12
1.59 Professional Services Revenue............................................................ 12
1.60 Regional Practices....................................................................... 12
1.61 Representatives.......................................................................... 12
1.62 Xxxxx Act................................................................................ 12
1.63 Subcontractor Costs...................................................................... 13
1.64 Term..................................................................................... 13
ARTICLE II
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER..................................................... 13
2.1 Appointment.............................................................................. 13
2.2 Authority................................................................................ 13
2.3 Patient Referrals........................................................................ 13
2.4 Internal Practice Matters................................................................ 14
2.5 Practice of Medicine..................................................................... 14
ARTICLE III
RESPONSIBILITIES OF THE POLICY BOARD
................................................................................................. 14
3.1 Formation and Operation of the Policy Board.............................................. 14
3.2 Duties and Responsibilities of the Policy Board.......................................... 15
3.3 Medical Decisions........................................................................ 16
ARTICLE IV
COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER................................................ 17
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Page No.
4.1 Office and Equipment..................................................................... 17
4.2 Medical Supplies......................................................................... 18
4.3 Support Services......................................................................... 18
4.4 Quality Assurance, Risk Management, and Utilization Review............................... 18
4.5 Licenses and Permits..................................................................... 18
4.6 Personnel................................................................................ 19
4.7 Contract Negotiations.................................................................... 19
4.8 Billing and Collection................................................................... 19
4.9 Priority of Payments. ................................................................... 22
4.10 Fiscal Matters........................................................................... 23
4.11 Reports and Records...................................................................... 25
4.12 Recruitment of Physicians and Optometrists............................................... 25
4.13 Confidential and Proprietary Information................................................. 25
4.14 Insurance................................................................................ 26
4.15 Facility................................................................................. 27
4.16 No Warranty.............................................................................. 27
ARTICLE V
COVENANTS AND RESPONSIBILITY OF PRACTICE.......................................................... 28
5.1 Organization and Operation............................................................... 28
5.2 Practice Personnel....................................................................... 29
5.3 Professional Standards................................................................... 30
5.4 Medical Services......................................................................... 30
5.5 Peer Review/Quality Assurance............................................................ 31
5.6 Confidential and Proprietary Information................................................. 31
5.7 Noncompetition........................................................................... 32
5.8 Name, Trademark.......................................................................... 34
5.9 Medical Advisory Board................................................................... 34
5.10 Indemnification of Business Manager...................................................... 34
5.11 Indemnification of Practice.............................................................. 35
ARTICLE VI
FINANCIAL ARRANGEMENT............................................................................. 35
6.1 Definitions.............................................................................. 35
6.2 Management Fee........................................................................... 38
6.3 Reasonable Value......................................................................... 38
6.4 Payment of Management Fee................................................................ 38
6.5 Accounts Receivable...................................................................... 38
6.6 Disputes Regarding Fees.................................................................. 39
ARTICLE VII
TERM AND TERMINATION.............................................................................. 40
7.1 Initial and Renewal Term................................................................. 40
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Page No.
7.2 Termination.............................................................................. 40
7.3 Effects of Termination................................................................... 42
7.4 Repurchase Obligation.................................................................... 42
7.5 Repurchase Option........................................................................ 44
7.6 Closing of Repurchase.................................................................... 45
7.7 Rights and Remedies...................................................................... 45
7.8 Interpretation........................................................................... 46
ARTICLE VIII
MEDIATION AND ARBITRATION......................................................................... 46
ARTICLE IX
MISCELLANEOUS..................................................................................... 47
9.1 Administrative Services Only............................................................. 47
9.2 Status of Contractor..................................................................... 47
9.3 Notices.................................................................................. 47
9.4 Governing Law............................................................................ 49
9.5 Assignment............................................................................... 49
9.6 Waiver of Breach......................................................................... 49
9.7 Enforcement.............................................................................. 49
9.8 Gender and Number........................................................................ 50
9.9 Additional Assurances.................................................................... 50
9.10 Consents, Approvals, and Exercise of Discretion.......................................... 50
9.11 Force Majeure............................................................................ 50
9.12 Severability............................................................................. 50
9.13 Divisions and Headings................................................................... 50
9.14 Amendments and Management Services Agreement Execution................................... 51
9.15 Entire Management Services Agreement..................................................... 51
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AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT ("Management
Services Agreement") is made and entered into effective as of June 1, 1999 (the
"Effective Date"), by and between NovaMed Management of Kansas City, Inc., a
Missouri corporation ("Business Manager"), and Hunkeler Eye Centers, P.C., a
Missouri professional corporation ("Practice").
RECITALS
This Management Services Agreement is made with reference to the following
facts:
A. Practice is a validly existing Missouri professional corporation,
formed for and engaged in the conduct of a medical practice, and the provision
of medical services to the general public in and around the Kansas City
metropolitan area through individual physicians who are licensed to practice
medicine in the States of Missouri and Kansas and who are employed or otherwise
retained by Practice.
B. As of the Effective Date, Practice shall also be engaged in the
business of selling prescription and non-prescription eyewear, contact lenses
and other related optical products (the "Dispensary Business").
C. Business Manager is a validly existing Missouri corporation which is
in the business of providing physician practice management services to medical
practices.
D. In order to allow Practice to focus its energies, expertise and time
on the practice of medicine and on the delivery of medical services to patients,
and to delegate the business functions of its medical practice to persons with
business expertise, since February 28, 1997 (the "Original Effective Date"),
Business Manager has provided administrative, financial and management services
to Practice pursuant to a Management Services Agreement dated February 28, 1997,
as amended from time to time (the "Original HEC MSA").
E. EyeCare Midwest, LLC ("EyeCare Midwest") is a validly existing
Missouri limited liability company, formed for and engaged in the conduct of a
medical and optometric practice, and the provision of medical and optometric
services to the general public in and around the Kansas City metropolitan area
through individual physicians and optometrists who are licensed to practice
medicine and optometry, respectively, in the State of Missouri and who are
employed or otherwise retained by EyeCare Midwest.
F. Since July 25, 1998, Business Manager has provided administrative,
financial and management services to EyeCare Midwest pursuant to a Management
Services Agreement dated July 25, 0000 (xxx "XxxXxxx Xxxxxxx XXX").
G. In order to facilitate, among other things: (i) a focus on growth in
refractive surgery; (ii) more effective marketing; (iii) more efficient
leveraging of the existing infrastructure; (iv) enhanced recruiting and hiring
of physicians and other personnel; (v) further integration of subspecialists;
(vi) opportunities for intra-market acquisitions; (vii) joint managed care
contracting efforts; and (viii) such other objectives as may be determined by
the parties, Practice, Business Manager and EyeCare Midwest have decided to: (i)
make certain physician owners/employees of EyeCare Midwest shareholders and
employees of Practice, rather than owners and employees of EyeCare Midwest, by
EyeCare Midwest redeeming the ownership interests of such physician owners for
certain medical assets of EyeCare Midwest, which medical assets shall in turn be
used to purchase stock of Practice, and by terminating the employment agreements
of such physician owners with EyeCare Midwest and having such physicians execute
new employment agreements with Practice of even date herewith, resulting in such
physicians practicing medicine through Practice rather than EyeCare Midwest;
(ii) terminate the EyeCare Midwest MSA; (iii) have Practice and EyeCare Midwest
enter into an independent contractor agreement whereby the optometrists
remaining in EyeCare Midwest will provide services exclusively for and on behalf
of Practice; (iv) have Practice take over the office locations of EyeCare
Midwest so that from the Effective Date forward, such locations shall be Offices
of Practice; and (v) amend and restate the Original HEC MSA as set forth herein
to reflect the foregoing.
H. Practice desires to continue to engage Business Manager to provide all
management, administrative and business services as are necessary or appropriate
for the day-to-day administration of the nonmedical aspects of Practice's
medical practice, and to engage Business Manager to provide all management,
administrative and business services as are necessary or appropriate for the
day-to-day administration of the nonmedical aspects of the Dispensary Business,
including the provision of all non-medical assets necessary or appropriate for
the operation of Practice's medical practice and Dispensary Business, and
Business Manager desires to continue to provide such services upon the terms and
conditions hereinafter set forth.
I. Practice and Business Manager have determined a fair market value for
the services to be rendered by Business Manager and, based on this fair market
value, have developed a formula for compensating Business Manager that will
allow the parties to establish and continue a relationship permitting each party
to devote its skills and expertise to the appropriate responsibilities and
functions.
J. Business Manager is willing to commit significant resources to
Practice based upon the representation and warranty of Practice that the
shareholders of Practice as of the Effective Date intend to continue to practice
medicine for Practice in the Practice Territory (as hereinafter defined) during
the term of this Management Services Agreement pursuant to employment agreements
between Practice and each Physician-Shareholder (the "Employment Agreements").
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NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used in this Management Services Agreement, the following terms shall
have the meanings set forth below.
1.1 Adjustments. The term "Adjustments" shall mean any adjustments on an
-----------
accrual basis in accordance with GAAP for uncollectible accounts, Medicare,
Medicaid and other payor contractual adjustments, discounts, worker's
compensation adjustments, professional courtesies and other reductions in
collectible revenue. On a continual basis, Business Manager and Practice agree
that Principal Services Revenue and Dispensary Business Revenue will be adjusted
to cause amounts from such revenues to be stated at their net realizable value
in accordance with GAAP.
1.2 Affiliate. The term "Affiliate" shall mean any person, firm or entity
---------
which directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, any other person (including
members of such person's family), firm or entity.
1.3 Ancillary Revenue. The term "Ancillary Revenue" shall mean all other
-----------------
revenue of Practice, Physicians and Optometrists actually recorded each month
(net of Adjustments) which is not Professional Services Revenue or Dispensary
Business Revenue and shall include, without limitation, any revenues of Practice
or its Physicians and Optometrists which are derived from professionally related
activities such as expert witness fees, and any royalties, honoraria or the like
from authored documents or speeches.
1.4 Budget. The term "Budget" shall mean an operating budget and capital
------
expenditure budget for each fiscal year for each of the Dispensary Business and
the Principal Services, as prepared by Business Manager and adopted by Practice
in accordance with Section 4.10 hereof. The mid-year Budget shall be attached
hereto and incorporated herein as Exhibit 1.4. Each succeeding Budget
-----------
subsequently adopted pursuant to Section 4.10 hereof shall also be incorporated
herein.
1.5 Business Manager. The term "Business Manager" shall mean NovaMed
----------------
Management of Kansas City, Inc., a Missouri corporation, or any permitted
successor or assign under Section 9.5 hereof.
1.6 Business Manager Consent. The term "Business Manager Consent" shall
------------------------
mean the consent granted by any of Business Manager's representatives to the
Policy Board. When any provision of this Management Services Agreement requires
Business Manager Consent, such consent shall not be unreasonably withheld or
delayed and shall be binding on Business Manager.
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1.7 Business Manager Expense. The term "Business Manager Expense" shall
------------------------
mean any expense or cost incurred by Business Manager which does not relate
directly to the provision of services to Practice. Such expenses or costs shall
include, without limitation:
(a) all salaries, benefits and other direct costs (including payroll
and other withholding taxes) of executive officers and management personnel of
Business Manager or employees of Business Manager who devote substantially all
of their time and effort to the operations of Business Manager in the aggregate
rather than the operations of any particular practice affiliated with Business
Manager;
(b) the expense of using, leasing, maintaining or repairing the
corporate offices of Business Manager;
(c) the cost of capital to finance the general business obligations of
Business Manager, and any costs associated with raising such capital; and
(d) the costs of any consultants or advisors who provide services for
Business Manager in connection with its business operations, such as accounting,
financial and legal services, other than those services which constitute an
Office Expense pursuant to Section 1.34 hereof. Except as otherwise
contemplated in this Agreement, no Business Manager Expense shall be allocated
to or against Practice pursuant to Article 2 or otherwise without the express
written consent of the Practice.
1.8 Capitation/Case Rate Revenues. The term "Capitation/Case Rate
-----------------------------
Revenues" shall mean all revenues from managed care organizations, third party
payors or employers in which payments are based on a per member, case rate or
other similar basis (i.e., all payments which are not based on a fee-for-service
payment methodology or discounted fee-for-service reimbursement methodology) for
the medical needs of a subscribing patient. Capitation/Case Rate revenues shall
include any associated plan payments received, such as patient co-payments,
incentive bonuses or incentive fund penalties. All Capitation/Case Rate
Revenues shall be allocated in good faith on an actuarial basis as follows:
(a) Dispensary Business Capitation. The portion, if any, of payments
------------------------------
designated for Dispensary Business goods sold by Practice; Dispensary Business
Capitation shall be Dispensary Business Revenue;
(b) Professional Services Capitation. The portion of payments
--------------------------------
designated for physician services currently performed by Practice; Professional
Services Capitation shall be Professional Services Revenues; and
(c) Subcontractor Capitation Revenues. The portion of payments
---------------------------------
designated for physicians, optometrists or other medical or optometric services
that will be Subcontractor Costs (e.g., reinsurance, hospitalization, surgical
facility fees, etc.), including incentive bonuses or penalties, and an estimate
for incurred but not reported claims. The Policy Board shall
4
determine how Subcontractor Capitation Revenues are accounted for under this
Management Services Agreement.
Subject to the approval of the Policy Board, Business Manager shall develop and
implement an appropriate allocation methodology for each Capitation/Case Rate
Revenues contract.
1.9 Confidential Information. The term "Confidential Information" shall
------------------------
mean any and all financial, technical, commercial or other information of
Business Manager or Practice, as appropriate (whether written or oral),
including, without limitation, all information, notes, studies, patient lists
and records, reports, analyses, financial statements, compilations, studies,
forms, business or management methods, marketing data, fee schedules, peer
review information, credentialing information, quality assurance and utilization
review information, interpretations, information technology systems and
programs, projections, forecasts or trade secrets of Business Manager or of
Practice, as applicable, whether or not such Confidential Information is
disclosed or otherwise made available to one party by the other party pursuant
to this Management Services Agreement. Confidential Information shall also
include the terms and provisions of this Management Services Agreement and any
transactions consummated or documents executed by the parties pursuant to this
Management Services Agreement. Confidential Information does not include any
information that (i) is or becomes generally available to and known by the
public (other than as a result of an unpermitted disclosure directly or
indirectly by the receiving party or its affiliates, advisors or
Representatives); (ii) is or becomes available to the receiving party on a
nonconfidential basis from a source other than the furnishing party or its
affiliates, advisors or Representatives, provided that such source is not and
was not bound by a confidentiality agreement with or other obligation of secrecy
to the furnishing party of which the receiving party has knowledge at the time
of such disclosure; or (iii) has already been developed, or is hereafter
independently acquired or developed, by the receiving party without violating
any confidentiality agreement with or other obligation of secrecy to the
furnishing party.
1.10 Depository Account. The term "Depository Account" shall mean that
------------------
bank account selected by Business Manager, retained in Business Manager's name
and over which Business Manager has sole control, and which is referred to in
Section 4.8 hereof.
1.11 Designated Allied Health Professionals. The term "Designated Allied
--------------------------------------
Health Professionals" shall mean those medical professionals other than
Physicians and Optometrists whose services must be rendered "incident to" a
Physician's services in order to be billable under the Medicare program.
1.12 Dispensary Business. The term "Dispensary Business" shall have the
-------------------
meaning set forth in the Recitals hereto; provided, however, that the sale of
contact lenses shall be a part of Professional Services Revenues and not
Dispensary Business.
1.13 Dispensary Business Budgeted Office Expense. The term "Dispensary
-------------------------------------------
Business Budgeted Office Expense" shall have the meaning set forth in Section
6.1 hereof.
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1.14 Dispensary Business Budgeted Practice Expense. The term "Dispensary
---------------------------------------------
Business Budgeted Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.15 Dispensary Business Budgeted Revenue. The term "Dispensary Business
------------------------------------
Budgeted Revenue" shall have the meaning set forth in Section 6.1 hereof.
1.16 Dispensary Business Management Fee. The term "Dispensary Business
----------------------------------
Management Fee" shall have the meaning set forth in Section 6.1 hereof.
1.17 Dispensary Business Monthly Fee. The term "Dispensary Business
-------------------------------
Monthly Fee" shall have the meaning set forth in Section 6.1 hereof.
1.18 Dispensary Business Monthly Office Expense. The term "Dispensary
------------------------------------------
Business Monthly Office Expense" shall have the meaning set forth in Section 6.1
hereof.
1.19 Dispensary Business Monthly Practice Expense. The term "Dispensary
--------------------------------------------
Business Monthly Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.20 Dispensary Business Office Expense. The term "Dispensary Business
----------------------------------
Monthly Office Expense" shall have the meaning set forth in Section 6.1 hereof.
1.21 Dispensary Business Revenue. The term "Dispensary Business Revenue"
---------------------------
shall mean all revenues of the Dispensary Business of the Practice, including
revenues generated by independent contractors, recorded on an accrual basis
under GAAP (net of Adjustments); provided, however, that Dispensary Business
Revenue shall not include any revenues related to the sale of contact lenses.
1.22 EyeCare Midwest. The term "EyeCare Midwest" shall have the meaning
---------------
attributed thereto in the recitals of this Management Services Agreement.
1.23 EyeCare Midwest MSA. The term "EyeCare Midwest MSA" shall mean the
-------------------
management services agreement dated as of July 25, 1998 by and between EyeCare
Midwest and Business Manager, and which shall be terminated as of the Effective
Date.
1.24 GAAP. The term "GAAP" shall mean generally accepted accounting
----
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants,
statements and pronouncements of the Financial Accounting Standards Board, or
other statements, practices and procedures as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of the determination.
1.25 Managed Care Contract. The term "Managed Care Contract" shall include
---------------------
any Capitation/Case Rate Revenues contract, or any contracts based on a fee-for-
service payment methodology or discounted fee-for-service reimbursement
methodology and other agreements with third party payors, alternative delivery
systems or other purchasers of group health care services.
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1.26 Management Fee. The term "Management Fee" shall mean the amount
--------------
determined pursuant to Section 6.1 hereof.
1.27 Management Services. The term "Management Services" shall mean the
-------------------
business, administrative and management services to be provided to Practice by
Business Manager under this Agreement including, without limitation, the
provision of equipment, supplies, support services, nonphysician personnel,
office space, management, administration, financial recordkeeping and reporting,
information systems and all other business office services necessary for the
nonmedical operations of Practice.
1.28 Management Services Agreement. The term "Management Services
-----------------------------
Agreement" shall mean this Amended and Restated Management Services Agreement by
and between Practice and Business Manager and any amendments hereto.
1.29 Medical Advisory Board. The term "Medical Advisory Board" shall have
----------------------
the meaning set forth in Section 5.9 hereof.
1.30 Medical Services. The term "Medical Services" shall mean the practice
----------------
of ophthalmology, optometry and other related eye care services, including,
without limitation, clinical research services, as provided by Practice through
Physicians and Optometrists, as the case may be.
1.31 Monthly Office Expense. The term "Monthly Office Expense" shall have
----------------------
the meaning set forth in Section 6.1 hereof.
1.32 Monthly Practice Expense. The term "Monthly Practice Expense" shall
------------------------
have the meaning set forth in Section 6.1 hereof.
1.33 Office. The term "Office" shall mean any office spaces, clinics,
------
facilities or satellite facilities that Business Manager owns, leases or
otherwise procures for the exclusive use of Practice, including, without
limitation, any office space, clinic, facility or satellite facility that, prior
to the Effective Date, was used by EyeCare Midwest.
1.34 Office Expense. The term "Office Expense" shall mean all expenses
--------------
incurred by Business Manager or Practice, in accordance with GAAP, in the
provision of services to Practice and the operation of the Offices. Except as
specifically enumerated below, Office Expense shall not include any state or
federal income tax liability of Practice or Physician-Shareholders, or any other
expense that is a Practice Expense or a Business Manager Expense. Without
limitation, Office Expense shall include:
(a) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all employees of Business Manager who are either
located at, devote substantially all of their time and effort to, or for which
time is allocated specifically for a function to support, Practice;
7
(b) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all Optometrists and Physician-Employees,
including those costs associated with procuring Optometrists through an
independent contractor agreement with EyeCare Midwest, but excluding the
salaries, benefits and other direct costs (including payroll and other
withholding taxes) of all Physician-Shareholders; provided, however, that in the
event any Physician-Shareholder shall fail, for any reason, to work full time in
the performance of his or her duties as described in such Physician-
Shareholder's Employment Agreement for a period exceeding two (2) consecutive
months, whether or not such failure (i) gives rise to termination rights
pursuant to such Employment Agreement or (ii) occurs prior to or after the
termination of the Initial Term (as such term is defined in Section 4.1 of such
Employment Agreement) then the expenses described in this Section 1.34(b) shall
thereafter be categorized as a Practice Expense, but only to the extent of the
services of any Physician-Employees and/or Optometrists that are necessary to
replace the revenues and productivity lost by such Physician-Shareholder's
failure to work on a full-time basis, as determined by the Policy Board;
(c) except as otherwise provided in Section 5.4, the direct or
reasonably allocated costs of providing locum tenens coverage with respect to
----- ------
any Optometrists or Physician-Employees as may be necessary pursuant to Section
5.4 hereof, which costs shall include, without limitation, the salaries,
benefits and other direct costs of any Physician-Employees and Optometrists
retained by Practice for such purposes;
(d) the direct or reasonably allocated reasonable costs of any
employee or consultant that provides services at the direction of Business
Manager, with Practice Consent, for improved performance of Practice, such as
management, xxxxxxxx and collections, business office consultation, training,
and accounting and legal services;
(e) the direct or reasonably allocated reasonable costs and out-of-
pocket expenses of Business Manager or Practice associated with the recruitment
of Office personnel, Physician-Employees and Optometrists of Practice;
(f) all reasonable and customary business insurance expenses of
Practice, Physicians, Optometrists, Designated Allied Health Professionals and
the Office, including, without limitation, professional and general liability
insurance;
(g) without duplication of expenses included pursuant to any other
subparagraph of this Section 1.34, the expense of using, leasing, maintaining,
repairing, purchasing or otherwise procuring the Office and related equipment
(including any leasehold improvements), including, without limitation, any
depreciation expense, any personal property taxes assessed against assets
utilized for the benefit of Practice, and any and all expenses relating to the
equipment listed on Exhibit 1.34(g) attached hereto and incorporated herein, but
---------------
excluding any Preexisting Obligation Payments;
8
(h) without duplication of expenses included pursuant to any other
subparagraph of this Section 1.34, the cost of capital, whether as actual
interest on indebtedness incurred on behalf of Practice or as reasonable imputed
interest on capital advanced by Business Manager to finance or refinance
obligations of Practice, purchase medical or nonmedical equipment, renovate the
Office, or finance new ventures of Practice, but excluding any Preexisting
Obligation Payments;
(i) the Management Fee;
(j) the direct or reasonably allocated costs relating to sales or
marketing activities or materials, including, without limitation, brochures,
pamphlets, displays, direct mail, promotional materials, patient screening,
network directories, signs, video and audio tapes, equipment, media, development
costs and consulting services;
(k) the direct or reasonably allocated costs of obtaining, maintaining
and supporting Managed Care Contracts;
(l) the direct or reasonably allocated costs relating to any third
party service agreements for the general day-to-day operations of Office and
Practice, which services shall include, without limitation, maintenance, patient
transportation, janitorial, answering services, landscaping, snow removal and
uniform rental;
(m) with Practice Consent, the direct or reasonably allocated travel
expenses of Business Manager associated with attending meetings, conferences or
seminars primarily benefitting Practice;
(n) the cost of medical supplies (including, without limitation,
drugs, pharmaceuticals, products, substances or medical devices), office
supplies, inventory (including, without limitation, inventory for the Dispensary
Business) and utilities;
(o) direct costs, not to exceed budgeted allowances, for professional
dues, subscriptions, continuing medical education expenses and travel costs for
continuing medical education or other business travel of Practice employees;
(p) all direct or reasonably allocated costs relating to the operation
of the Offices, including without limitation, expenses relating to utilities;
and
(q) a licensing and access fee for each Windows terminal to cover
expenses relating to capital equipment and maintenance, system installation and
training, telecommunications and wide area networking, installation and support
of software provided by Business Manager, and support and system administration;
provided, however, that capital equipment and support fees will be adjusted
accordingly to the extent PCS and/or notebooks are utilized in lieu of Windows
terminals; provided further that Business Manager shall have the discretion to
-------- -------
adjust this fee annually provided that such adjustments are consistently applied
by Business Manager on a company-wide basis.
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1.35 Optometrist. The term "Optometrist" shall mean each individually
-----------
licensed doctor of optometry who is employed or otherwise retained by or
associated with Practice, each of whom shall meet at all times the
qualifications described in Sections 5.2 and 5.3 hereof.
1.36 Original Transaction Agreements. The term "Original Transaction
-------------------------------
Agreements" shall mean collectively (i) the Agreement and Plan of Reorganization
dated July 25, 1998 (the "Reorganization Agreement") by and among NovaMed
Holdings Inc.. which has since been merged into and replaced by NovaMed Eyecare,
Inc. ("NovaMed Parent"), Business Manager, Xxxxx & Moyes EyeCare Midwest, P.C.,
a Missouri professional corporation, f/k/a EyeCare Midwest, P.C. ("ECM-PC") and
the Shareholders of ECM-PC; (ii) the Asset Purchase Agreement dated July 25,
1998 (the "Eye Care Professionals Purchase Agreement") by and among NovaMed
Parent, Business Manager, Eye Care Professionals, P.C. ("Eye Care
Professionals"), and the Shareholder of Eye Care Professionals; (iii) the Asset
Purchase Agreement dated July 25, 1998 (the "Xxxxxxx EyeCare Purchase
Agreement") by and among NovaMed Parent, Business Manager, Xxxxxxx-EyeCare
Midwest Optical, L.L.C. ("Xxxxxxx EyeCare"), and the members of Xxxxxxx EyeCare
(the Reorganization Agreement, the Eye Care Professionals Purchase Agreement and
the Xxxxxxx EyeCare Purchase Agreement shall be referred to collectively herein
as the "ECM Transaction Agreements"); and (iv) the Stock Purchase Agreement
dated February 28, 1997 by and among NovaMed Parent and the then shareholders of
Business Manager (the "Stock Purchase Agreement").
1.37 Physician. The term "Physician" shall mean each individual licensed
---------
to practice medicine in the States of Missouri and/or Kansas who is employed or
otherwise retained by or associated with Practice, each of whom shall meet at
all times the qualifications described in Sections 5.2 and 5.3 hereof.
1.38 Physician Discretionary Expenses. The term "Physician Discretionary
--------------------------------
Expenses" shall mean any expenses or debt obligations of Practice or Physicians
which are not included in the Budget or approved by Business Manager and shall
include, without limitation, the following: accounting, consulting or legal
expenses incurred by Practice without coordinating such engagement through
Business Manager; professional dues, subscriptions, continuing medical education
expenses and travel costs for continuing medical education in excess of budgeted
allowances for such items and any equipment obtained by Practice without the
approval of the Policy Board as set forth in Section 4.1(d) hereof; and other
discretionary business expenses incurred directly by Physicians or Practice.
1.39 Physician-Employee. The term "Physician-Employee" shall mean any
------------------
Physician employed by Practice, but shall not include Physician-Shareholders.
1.40 Physician-Shareholder. The term "Physician-Shareholder" shall mean
---------------------
any Physician who is employed by, and an owner of, Practice.
1.41 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 the Regional Practices.
10
1.42 Practice. The term "Practice" is defined in the introductory
--------
paragraph of this Management Services Agreement.
1.43 Practice Account. The term "Practice Account" shall mean that bank
----------------
account selected by Practice, maintained in Practice's name and over which
Practice has sole control, and which is referred to in Section 4.8 hereof.
1.44 Practice Consent. The term "Practice Consent" shall mean the consent
----------------
granted by any of Practice's authorized Representatives who is not an officer or
employee of Business Manager. When any provision of this Management Services
Agreement requires Practice Consent, such consent shall not be unreasonably
withheld or delayed and shall be binding on Practice.
1.45 Practice Expense. The term "Practice Expense" shall mean an expense
----------------
incurred by Business Manager or Practice and for which Practice, and not
Business Manager, is financially liable. Practice Expense shall include, without
limitation, such items as Preexisting Obligation Payments, Physician
Discretionary Expenses, salaries, benefits and other direct costs of all
Physician-Shareholders (including, without limitation, any severance payments or
other obligations due and owing from Practice to any terminated Physician-
Shareholders), any costs of providing locum tenens coverage designated as a
----- ------
Practice Expense pursuant to Section 5.4 hereof, and any other expenses incurred
by Practice and Physician-Shareholders which are not in the Budget or are in
excess of budgeted allowances.
1.46 Practice Territory. The term "Practice Territory" shall mean the
------------------
counties of Xxxxxxx, Xxxx and Platte in Missouri, and Xxxxxxx, Wyandotte and
Leavenworth in Kansas.
1.47 Predecessor Professional Corporation. The term "Predecessor
------------------------------------
Professional Corporation" shall mean Hunkeler Eye Centers, P.C., the entity, the
shares of which were exchanged pursuant to the Stock Purchase Agreement, that
was the predecessor in interest to Practice.
1.48 Preexisting Obligation Payments. The term "Preexisting Obligation
-------------------------------
Payments" shall mean (i) the expense for principal and interest amortization of
debt obligations of Practice or any Physician-Shareholders that were not assumed
by Business Manager under the Original Transaction Agreements which existed
prior to the execution of this Management Services Agreement and (ii) lease
payments and other costs relating to any outstanding debt, obligations or
liabilities of Practice or any Physician-Shareholder that were not assumed by
Business Manager under the Original Transaction Agreements which existed prior
to the execution of this Management Services Agreement, and which include,
without limitation, the items set forth on Exhibit 1.48 attached hereto and
------------
incorporated herein.
1.49 Principal Services. The term "Principal Services" shall mean all
------------------
services performed by or on behalf of Practice which generate Professional
Services Revenues or Ancillary Revenues.
11
1.50 Principal Services Budgeted Office Expense. The term "Principal
------------------------------------------
Services Budgeted Office Expense" shall have the meaning set forth in Section
6.1 hereof.
1.51 Principal Services Budgeted Practice Expense. The term "Principal
--------------------------------------------
Services Budgeted Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.52 Principal Services Budgeted Revenue. The term "Principal Services
-----------------------------------
Budgeted Revenue" shall have the meaning set forth in Section 6.1 hereof.
1.53 Principal Services Management Fee. The term "Principal Services
---------------------------------
Management Fee" shall have the meaning set forth in Section 6.1 hereof.
1.54 Principal Services Monthly Fee. The term "Principal Services Monthly
------------------------------
Fee" shall have the meaning set forth in Section 6.1 hereof.
1.55 Principal Services Monthly Office Expense. The term "Principal
-----------------------------------------
Services Monthly Office Expense" shall have the meaning set forth in Section 6.1
hereof.
1.56 Principal Services Monthly Practice Expense. The term "Principal
-------------------------------------------
Services Monthly Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.57 Principal Services Office Expense. The term "Principal Services
---------------------------------
Office Expense" shall have the meaning set forth in Section 6.1 hereof.
1.58 Principal Services Revenue. The term "Principal Services Revenue"
--------------------------
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
1.59 Professional Services Revenue. The term "Professional Services
-----------------------------
Revenue" shall mean the sum of: (i) all professional fees actually recorded
each month on an accrual basis under GAAP (net of Adjustments) as a result of
Medical Services and related health care services rendered by Physicians,
Optometrists and Designated Allied Health Professionals, whether rendered in an
outpatient or inpatient setting, which fees shall include any revenues related
to the sale of contact lenses, as well as customary professional fees for the
fitting of contact lenses; (ii) all fees relating to the performance of clinical
research services; and (iii) Professional Services Capitation allocated to
Professional Services Revenue.
1.60 Regional Practices. The term "Regional Practices" is defined in
------------------
Section 3.1(a) hereof.
1.61 Representatives. The term "Representatives" shall mean a party's
---------------
officers, directors, managers, employees, or other agents or representatives.
1.62 Xxxxx Act. The term "Xxxxx Act" shall refer to Section 1877 of the
---------
Social Security Act.
12
1.63 Subcontractor Costs. The term "Subcontractor Costs" shall mean the
-------------------
amounts payable to third parties for providing goods or medical services for
Capitation/Case Rate Revenues contracts.
1.64 Term. The term "Term" shall mean the initial term and any renewal
----
terms of this Management Services Agreement as described in Section 7.1 hereof.
ARTICLE II
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
2.1 Appointment. Practice hereby appoints Business Manager as its sole
-----------
and exclusive agent for the management and administration of the business
functions and business affairs of the medical practice, including the optical
dispensaries of, and the clinical research services performed by, Practice, and
Business Manager hereby accepts such appointment, subject at all times to the
terms and conditions of this Management Services Agreement.
2.2 Authority. Consistent with the provisions of this Management Services
---------
Agreement, Business Manager shall have the responsibility and commensurate
authority to provide Management Services to Practice. Subject to the terms and
conditions of this Management Services Agreement, Practice expressly authorizes
Business Manager to provide the Management Services in any manner Business
Manager deems appropriate to meet the day-to-day requirements of the business
functions of Practice. In connection with Business Manager's provision of
Management Services, Practice also expressly authorizes Business Manager to
negotiate and execute on behalf of Practice any and all contracts related to the
provision of such Management Services; provided, however that, subject to
Section 4.7 hereof, Business Manager shall have no authority to negotiate and
execute on behalf of Practice contracts that relate specifically to the
provision of Medical Services. The parties acknowledge and agree that Practice,
through its Physicians, shall be responsible for and shall have complete
authority, responsibility, supervision and control over the provision of all
Medical Services and other professional health care services performed for
patients, and that all diagnoses, treatments, procedures and other professional
health care services shall be provided and performed exclusively by or under the
supervision of Physicians in such manner as such Physicians, in their sole
discretion, deem appropriate. Business Manager shall have and exercise
absolutely no control or supervision over the provision of Medical Services.
Except as provided in Section 4.7 hereof, with respect to any agreement relating
specifically to Medical Services, and subject to the approval of the Policy
Board pursuant to Section 3.2(e), Practice shall, to the extent commercially
practicable, give Business Manager and the Policy Board thirty (30) days' prior
notice of Practice's intent to execute any such agreement obligating Practice to
perform Medical Services or otherwise creating a binding legal obligation on
Practice to perform Medical Services.
2.3 Patient Referrals. Business Manager and Practice agree that the
-----------------
benefits afforded either party hereunder are not payment for, and are not in any
way contingent upon the referral, admission or any other arrangement for, the
provision of any item or service offered by Business Manager or Practice.
13
2.4 Internal Practice Matters. Except as otherwise provided herein,
-------------------------
matters involving the internal governance, control or finances of Practice,
including specifically the allocation of professional income among Physician-
Shareholders, Physician-Employees and Optometrists of Practice, and tax and
investment planning, shall remain the sole responsibility of Practice,
Physician-Shareholders, Physician-Employees and Optometrists.
2.5 Practice of Medicine. The parties acknowledge that Business Manager
--------------------
is not authorized or qualified to engage in any activity that may be construed
or deemed to constitute the practice of medicine. To the extent that any act or
service required to be performed by Business Manager hereunder should be
construed by a court of competent jurisdiction or by the Board of Medical
Examiners of the States of Missouri and/or Kansas to constitute the practice of
medicine, Business Manager's requirement to perform that act or service shall be
deemed waived and unenforceable.
ARTICLE III
RESPONSIBILITIES OF THE POLICY BOARD
3.1 Formation and Operation of the Policy Board.
-------------------------------------------
(a) Structure of Policy Board. Practice hereby acknowledges that it
-------------------------
is or may become one of a group of ophthalmology practices located in the Kansas
City metropolitan area which is affiliated with Business Manager (Practice and
such other practices shall be collectively referred to herein as "Regional
Practices"); provided, that as of the Effective Date, EyeCare Midwest shall no
longer be a Regional Practice. The Regional Practices and Business Manager have
established a Policy Board which is responsible for overseeing the overall
operations of the nonmedical aspects of each Regional Practice's facilities and,
subject to Section 3.3 hereof, certain medical issues. The Policy Board shall
consist of four (4) members, each of whom shall serve a one-year term. Business
Manager shall designate, in its sole discretion, two (2) members of the Policy
Board, and the Regional Practices shall collectively designate two (2) members
of the Policy Board. The Policy Board members designated by the Regional
Practices shall be Physician-Shareholders of a Regional Practice. Except as
otherwise expressly provided herein, the act of a majority of the members of the
Policy Board shall be the act of the Policy Board. Either Business Manager or
the Regional Practices may request, upon thirty (30) days' written notice to
such other party, the expansion of the Policy Board from four (4) members to six
(6) members, with Business Manager having three (3) representatives and the
Regional Practices collectively having three (3) representatives. In such an
event, each of Business Manager and the Regional Practices shall appoint an
additional representative to the Policy Board.
(b) Appointment of Members. As of the Effective Date, the Policy
----------------------
Board consists of the members set forth on Exhibit 3.1 attached hereto and
-----------
incorporated herein. Annually and at least thirty (30) days prior to the
commencement of each fiscal year of Business Manager, each of Business Manager
and the Regional Practices (collectively) shall deliver to the board of
directors of Business Manager a list of two (2) designees to the Policy Board to
serve as members of the Policy Board for the upcoming fiscal year. In the event
that either Business Manager or the
14
Regional Practices fail to deliver the list of designees by the required date,
then such party's representatives on the Policy Board shall remain the same for
the upcoming fiscal year. Any vacancies created, whether by death, incapacity or
resignation of a designee, shall be filled by the party which appointed such
designee by no later than fifteen (15) business days after the date of receipt
by all of the Regional Practices of notice from Business Manager that such
vacancy exists and must be filled. If the applicable party shall fail to
designate a replacement member to the Policy Board within the required time
period, then the other party shall have the right to designate the replacement
member and such replacement member shall serve on the Policy Board until his or
her successor is duly appointed pursuant to this Section 3.1(b). In any case in
which the Regional Practices shall be required to designate a member or members
to the Policy Board, a previously appointed designee of the Regional Practices
shall convene a meeting or collect the written votes of the Representatives of
the Regional Practices to select such designee or designees. Each Regional
Practice shall be entitled to one vote per designee to be appointed by the
Regional Practice and those designees receiving a plurality of the votes shall
serve as the representatives of the Regional Practices on the Policy Board. Each
of Business Manager and the Regional Practices shall have the discretion, at any
time and upon ten (10) days notice to such other party, to remove any of its
designated representatives from the Policy Board and replace such representative
with a new designee.
(c) Actions of the Policy Board. The Policy Board meetings shall be
---------------------------
held as mutually agreed, but at least semiannually, in Kansas City, Missouri.
Meetings may be called by any two (2) members of the Policy Board upon notice to
Business Manager. Notice of each such meeting, stating the place, date and hour
of the meeting, shall then be delivered by Business Manager to each member of
the Policy Board not less than seventy-two (72) hours prior to such meeting;
provided, however, that such notice may be delivered in a shorter time frame if
the circumstances surrounding such meeting reasonably dictate such shorter
notice. Meetings shall be open to any Physician-Shareholder and any officer,
director or employee (as designated by Business Manager) of Business Manager.
Members of the Policy Board may participate in a meeting by means of conference
telephone. Attendance at any meeting in person or by proxy, or participation in
a meeting by means of conference telephone, shall constitute a waiver of notice
thereof. Any action required to be taken at a meeting of the Policy Board may
be taken without a meeting and without a vote if a consent in writing, setting
forth the action to be taken, is signed by all of the members of the Policy
Board, unless such action is medical in nature, in which case such consent need
be signed only by all of the Physician members of the Policy Board.
3.2 Duties and Responsibilities of the Policy Board. The Policy Board
-----------------------------------------------
shall have the following duties, obligations and authority:
(a) Capital Improvements and Expansion. Subject to the items
----------------------------------
specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, any renovation and expansion plans and capital expenditures with
respect to the Office, or the priority of such capital expenditures, shall be
reviewed and approved by the Policy Board and shall be based upon economic
feasibility, physician support, productivity and then-current market conditions.
15
(b) Marketing and Advertising. The Policy Board shall explore
-------------------------
potential joint marketing and other advertising of the services performed at the
Regional Practices' facilities.
(c) Collection Policies. As a part of the annual operating budget, in
-------------------
consultation with Practice and Business Manager, the Policy Board shall review
and approve the collection policies for the Dispensary Business of, and for all
Medical Services and ancillary services provided by, Practice.
(d) Provider and Payor Relationships. Subject to Sections 4.7 and 4.8
--------------------------------
hereof, decisions regarding the establishment or maintenance of relationships
with institutional health care providers and third party payors shall be
approved by the Policy Board in consultation with Practice and Business Manager.
The Policy Board shall review and approve such discounted fee schedules,
including capitated fee arrangements, and shall approve allocations of
Capitation/Case Rate Revenues.
(e) Strategic Planning. The Policy Board shall recommend long-term
------------------
strategic planning objectives for Practice; provided, however, that the Policy
Board shall not engage in recommending any horizontal marketing allocations
between practices.
(f) Physician and Optometrist Hiring. Subject to the items
--------------------------------
specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, the Policy Board shall recommend to Practice the number and type
of Physicians and Optometrists required for the efficient operation of
Practice's facilities. Practice shall have the right to accept or reject any
recommendation of the Policy Board on this matter and Practice shall retain the
number and type of Physicians and Optometrists as it shall deem necessary in its
sole discretion. The Policy Board may review and suggest variations to the
restrictive covenants in any Employment Agreement.
(g) Fee Dispute Resolution. Upon written submission by Practice of a
----------------------
dispute concerning Management Fees, the Policy Board shall consider, develop and
attempt to implement a resolution of such dispute.
(h) Employee Relations. Upon submission by Practice or any Physician
------------------
or Optometrist of a written complaint or concern regarding any employee of
Business Manager performing services for Practice hereunder, the Policy Board
shall consider, develop and attempt to implement a resolution of such complaint
or concern.
(i) Grievance Referrals. The Policy Board shall consider and make
-------------------
recommendations to Practice regarding any disputes pertaining to matters not
specifically addressed in this Management Services Agreement as referred to it
by Practice.
3.3 Medical Decisions. Notwithstanding anything to the contrary contained
-----------------
in Section 3.2 above, all medical decisions addressed by the Policy Board will
be made solely by Physician members of the Policy Board.
16
ARTICLE IV
COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide all Management Services
which are necessary or appropriate for the day-to-day administration of the
nonmedical aspects of Practice's operations (including the Dispensary Business),
including, without limitation, those services set forth in this Article 4 in
accordance with all laws, rules, regulations and guidelines applicable to the
provision of Management Services.
4.1 Office and Equipment.
--------------------
(a) Subject to Section 4.1(b) hereof, as necessary or appropriate, and
after taking into consideration the professional concerns of Practice, Business
Manager shall lease, acquire or otherwise procure an Office in a location or
locations reasonably acceptable to Practice and shall permit Practice to use the
Office. Any Office procured by Business Manager for use by Practice shall be
procured at commercially reasonable rates.
(b) In the event Practice is the lessee of the Office under a lease
with an unrelated and nonaffiliated lessor, Business Manager may require
Practice to assign such lease to Business Manager upon receipt of consent from
the lessor, and, in such event, Business Manager shall assume Practice's
obligations thereunder from and after the date of such assignment. Practice
shall use its best efforts to assist in obtaining the lessor's consent to the
assignment. Upon request, Practice shall execute any instruments and shall take
any acts that Business Manager deems necessary to accomplish the assignment of
the lease. Any expenses incurred in effectuating the assignment shall be an
Office Expense.
(c) Business Manager shall provide all nonmedical equipment, fixtures,
office supplies, information systems, furniture and furnishings reasonably
deemed necessary by Business Manager for the operation of the Office and for the
provision of Medical Services and the operation of the Dispensary Business,
including all replacements and upgrades thereof at the discretion of Business
Manager. Without limiting the foregoing, with respect to information systems,
Practice acknowledges and agrees that Business Manager will have the discretion
to determine the timing and extent of the upgrade and/or replacement of
Practice's information systems from time to time during the Term; provided, that
if the cost thereof exceeds the amount set forth in the then current Budget,
Business Manager shall obtain Practice Consent, which consent may not be
unreasonably withheld.
(d) Business Manager shall provide or cause to be provided (including
financing arrangements with respect thereto) all medical equipment reasonably
required by Practice.
(e) Business Manager shall be responsible for all necessary repair and
maintenance of the Office as an Office Expense, consistent with Business
Manager's responsibilities under the terms of any lease or other use
arrangement. Business Manager shall also be responsible for all necessary
repair, maintenance and replacement of all equipment relating to the Office,
except for any such repairs, maintenance and replacement necessitated by the
17
negligence or willful misconduct of Practice, its Physicians or other personnel
employed by Practice, in which event any such repair or replacement shall be a
Practice Expense and not an Office Expense.
(f) Assets acquired by Business Manager pursuant to the ECM
Transaction Agreements which are located at the Creekwood Medical Plaza office
or the Liberty, Missouri office shall not be relocated by Business Manager
without Practice Consent.
4.2 Medical Supplies. Business Manager shall order, procure, purchase and
----------------
provide on behalf of, and as agent for, Practice all necessary and reasonably
desirable medical supplies and optical dispensary supplies and inventory unless
otherwise prohibited by federal and/or state law, and shall appropriately
respond to any reasonable inquiries or requests by Physicians for the need to
order or repair such supplies. Business Manager shall ensure that the Office is
adequately stocked at all times with medical supplies that are reasonably
necessary or appropriate for the operation of Practice and required for the
provision of Medical Services and optical dispensary supplies and inventory that
are reasonably necessary or appropriate for the operation of the Dispensary
Business. The ultimate oversight, supervision and ownership of all medical
supplies is and shall remain the sole responsibility of Practice. As used in
this Section 4.2, the term "medical supplies" shall mean all drugs,
pharmaceuticals, products, substances, items or devices whose purchase,
possession, maintenance, administration, prescription or security requires the
authorization or order of a licensed health care provider or requires a permit,
registration, certification or other governmental authorization held by a
licensed health care provider as specified under any federal and/or state law.
4.3 Support Services. Business Manager shall provide or arrange for all
----------------
printing, stationery, telephone, facsimile, office supplies, forms, postage,
duplication or photocopying services, and other support services as are
reasonably necessary or appropriate for the operation of the Office and the
provision of Medical Services and the operation of the Dispensary Business
therein.
4.4 Quality Assurance, Risk Management, and Utilization Review. Business
----------------------------------------------------------
Manager shall assist Practice in Practice's establishment and implementation of
procedures to ensure the consistency, quality, appropriateness and medical
necessity of Medical Services provided by Practice, and shall provide
administrative support for Practice's overall quality assurance, risk management
and utilization review programs. Business Manager shall use its commercially
reasonable efforts to perform these tasks in a manner to ensure the
confidentiality of, and the privileged status afforded to, these programs and
procedures to the fullest extent allowable under state and federal law.
4.5 Licenses and Permits. Business Manager shall, on behalf of and in the
--------------------
name of Practice, coordinate all development and planning processes, and assist
in the application for, and use reasonable efforts to assist Practice in
obtaining and maintaining, all federal, state and local licenses, certifications
and regulatory permits required for, or in connection with, the operation of
Practice, the equipment located at the Office, and any laboratory and optical
dispensary of
18
Practice, other than those relating to the provision of Medical Services or the
administration of drugs by Physicians.
4.6 Personnel. Except as specifically provided in Section 5.2(b) hereof,
---------
Business Manager shall, consistent with the Budget, employ or otherwise retain
and shall be responsible for selecting, hiring, training, supervising and
terminating, all nonphysician personnel as Business Manager reasonably deems
necessary and appropriate for Business Manager's performance of its duties and
obligations under this Management Services Agreement. Business Manager shall
have sole responsibility for determining the salaries, providing employee
benefits, and for withholding any sums for income tax, unemployment insurance,
worker's compensation coverage, social security or any other withholding
required by applicable law or governmental requirement.
4.7 Contract Negotiations. Business Manager shall advise Practice with
---------------------
respect to and negotiate, either directly or on Practice's behalf, as
appropriate, all contractual arrangements with third parties as are reasonably
necessary and appropriate for Practice's provision of Medical Services and for
Practice's operation of the Dispensary Business, including, without limitation,
Managed Care Contracts. Practice hereby constitutes and appoints Business
Manager as Practice's agent for the purpose of negotiating and executing on
behalf of Practice and its Physicians any Managed Care Contract approved by the
Policy Board, as well as any modifications, extensions and renewals of such
Managed Care Contracts. Practice also designates Business Manager as Practice's
agent for the further purpose of giving and receiving notices required or
permitted to be given and received under such Managed Care Contracts. Any
notice received by Business Manager on behalf of Practice shall be transmitted
to Practice as soon as practicable. Business Manager may engage such
consultants as Business Manager deems necessary and appropriate to pursue and
negotiate Managed Care Contracts for Practice, and Practice authorizes Business
Manager to negotiate, for approval by the Policy Board, agreements for
Subcontractor Costs. Notwithstanding the foregoing, upon approval of the Policy
Board of any Managed Care Contract, Business Manager shall deliver a copy of
such contract to Practice (or a description of the principal terms and
conditions thereof) for its review and approval. Practice may accept or reject
any Managed Care Contract by delivering notice to Business Manager within five
(5) days of its receipt of such contract (or a description thereof). Practice's
failure to respond within such five-day period shall be deemed an acceptance of
the Managed Care Contract for all purposes.
4.8 Billing and Collection. On behalf of and for the account of Practice,
----------------------
Business Manager shall (i) establish and maintain credit, billing and collection
policies and procedures, (ii) timely xxxx and collect all professional and other
fees for all billable Medical Services provided by Practice, Physicians or
Optometrists and for all goods sold by Practice in connection with the
Dispensary Business, all for application solely in accordance with the Budget,
and (iii) perform all cash management services on behalf of Practice which
Business Manager shall deem commercially reasonable. Business Manager shall
advise and consult with Practice regarding the fees for Medical Services and
ancillary services provided by Practice; it being understood, however, that
Practice shall establish the fees to be charged for Medical Services and that
Business Manager shall have no authority whatsoever with respect to the
establishment of such fees. In connection with the billing, collection and cash
management services to be provided hereunder, and throughout the Term (and
thereafter as provided in Section 7.3 hereof), Practice hereby grants
19
to Business Manager an exclusive special power of attorney and appoints Business
Manager as Practice's exclusive true and lawful agent and attorney-in-fact, and
Business Manager hereby accepts such special power of attorney and appointment,
for the following purposes:
(a) To xxxx Practice's patients, in Practice's name and on Practice's
behalf, for all billable Medical Services provided or arranged by Practice to
patients and for all goods sold by Practice in connection with the Dispensary
Business, unless such billing would cause Practice to be in violation of the
Xxxxx Act, any state referral ban or any other applicable federal, state or
local law or regulation;
(b) To xxxx, in Practice's name and on Practice's behalf, all claims
for payment, reimbursement or indemnification from Blue Cross/Blue Shield,
insurance companies, Medicare, Medicaid and all other third-party payors or
fiscal intermediaries for all covered billable Medical Services provided or
arranged by Practice to patients and for all goods sold by Practice in
connection with the Dispensary Business, unless such billing would cause
Practice to be in violation of the Xxxxx Act, any state referral ban or any
other applicable federal, state or local law or regulation;
(c) Subject to applicable law, and excluding receivables for Medicare
and Medicaid services, to collect and receive, as the agent of Practice, in
Business Manager's name and for Business Manager's account all accounts
receivable of Practice purchased by Business Manager, including, without
limitation, Purchased Receivables (as defined in Section 6.5 hereof), and to
deposit such collections into the Depository Account;
(d) Subject to subparagraph (e) below, to collect and receive, in
Practice's name and on Practice's behalf, all accounts receivable generated by
such xxxxxxxx and claims for reimbursement that have not been purchased by
Business Manager, and to administer such accounts at its reasonable discretion
on Practice's behalf, which administration shall include, without limitation,
(i) extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) with Practice Consent, discharging or releasing the obligors of
any such accounts; (iii) with Practice Consent, suing, assigning or selling at a
discount such accounts to collection agencies; or (iv) with Practice Consent,
taking other measures to require the payment of any such accounts.
(e) To collect all government program receivables after such amounts
have been received and deposited into the Practice Account. Once deposited in
the Practice Account, Practice hereby authorizes the government receivables to
be automatically swept into the Depository Account as provided in Section
4.8(f), below. Practice shall cause the institution at which it maintains the
aforementioned Practice Account to provide Business Manager with copies of all
bank statements prepared with respect to such account.
20
(f) To deposit all amounts collected into the Depository Account which
shall be in the name of Business Manager, but in which Business Manager will
account for such funds on a separate and distinct basis from any other funds
deposited into such account by other Regional Practices. Moreover, subject to
Business Manager's authority to discharge its responsibilities under this
Agreement, Practice shall retain all rights in and to such deposited funds
irrespective of their deposit into the Depository Account; provided, however,
that Practice shall have no rights in or to funds in the Depository Account that
have been collected and received pursuant to Section 4.8(c). The parties hereto
acknowledge and agree that Business Manager is performing cash management
services on behalf of Practice by collecting all such amounts in the Depository
Account and making any distributions, withdrawals and payments therefrom as
required in this Management Services Agreement. The parties further acknowledge
and agree that in performing such services for Practice, Business Manager is
acting as Practice's agent pursuant to the power of attorney set forth in this
Section 4.8, and, except as expressly provided herein, all rights to such funds
shall remain with Practice. Practice covenants, and shall cause each Physician
and Optometrist to covenant, to forward any payments, notes, checks, money
orders, insurance payments and any other instruments received for Medical
Services provided and goods sold in connection with the Dispensary Business on
or after the Original Effective Date by or on behalf of Practice or any of the
Physicians or Optometrists to Business Manager for deposit in the Depository
Account, or to directly deposit any such payments into the Depository Account.
Business Manager shall have the right, at any time and from time to time, to
withdraw funds from the Practice Account and all owners of the Practice Account
shall execute a revocable standing transfer order (the "Transfer Order") under
which the bank maintaining the Practice Account shall daily transfer the entire
balance of the Practice Account to the Depository Account. Practice and
Business Manager hereby agree to execute from time to time such documents and
instructions as shall be required by the bank maintaining the Practice Account
to effect the foregoing provisions and to extend or amend such documents and
instructions as reasonably required to effect the intent of this Section 4.8.
Any action or threatened action by Practice that materially interferes with or
could materially interfere with the operation of this Section 4.8, including but
not limited to, (A) any failure to deposit into, or to allow or permit Business
Manager to withdraw any funds from, the Practice Account; (B) any withdrawal of
any funds from the Practice Account not authorized by the express terms of this
Management Services Agreement or any other written agreement executed by each of
the parties; or (C) any revocation of or attempt to revoke the Transfer Order
(otherwise than upon expiration or termination of this Management Services
Agreement), will constitute a breach of this Agreement and will entitle Business
Manager, in addition to any other remedies it may have at law or in equity, to
seek a court ordered assignment of the rights provided to Business Manager
pursuant to this Section 4.8 and to distribute account debtor letters to
nongovernmental Payors instructing them to make payment directly to and in the
name of Business Manager for services rendered by Practice. In the manner set
forth in Section 4.9 hereof, Business Manager shall disburse such deposited
funds to creditors and other persons on behalf of Practice, maintaining records
of such receipt and disbursement of funds.
21
(g) To take possession of, and endorse in the name of Practice, solely
for deposit into the Practice Account or into the Depository Account, as
provided in this Section 4.8, any notes, checks, money orders, insurance
payments and any other instruments received as payment for Medical Services,
ancillary services and for goods sold in connection with the Dispensary
Business.
(h) To sign checks, drafts, bank notes or other instruments on behalf
of Practice, and to make withdrawals from the Depository Account for payments
specified in this Management Services Agreement or as requested from time to
time by Practice.
Throughout the Term (and as provided in Section 7.3 hereof), Practice hereby
grants to Business Manager an exclusive special power of attorney for the
purposes stated herein and appoints Business Manager as Practice's exclusive
true and lawful agent and attorney-in-fact, and Business Manager hereby accepts
such special power of attorney and appointment, to deposit into the Depository
Account as and when received all funds, fees and revenues generated from
Practice's provision of Medical Services and ancillary services on or after the
Original Effective Date and collected by Business Manager and for all goods sold
by Practice in connection with the Dispensary Business on or after the Original
Effective Date and collected by the Business Manager, and to make withdrawals
from Depository Account solely for payments specified in this Management
Services Agreement, including any Preexisting Obligation Payments directly
affecting property used in or relating to the Office, and/or as requested from
time to time by Practice. Upon request of Business Manager, Practice shall
execute and deliver to the financial institution where the Depository Account is
maintained, such additional documents or instruments as may be necessary to
evidence or effect the special and limited power of attorney granted to Business
Manager by Practice pursuant to this Section 4.8. The special and limited power
of attorney granted herein shall be coupled with an interest and shall be
irrevocable during the term hereof, except with Business Manager Consent. The
irrevocable power of attorney shall expire on the later of the termination of
this Management Services Agreement, the collection, sale or release of all
accounts receivable purchased by Business Manager, or the payment of all
Management Fees due to Business Manager as of such date pursuant to Section 6.2
hereof. If Business Manager assigns this Management Services Agreement in
accordance with its terms, then Practice shall execute a power of attorney in
favor of the assignee and in the form of Exhibit 4.8 attached hereto.
-----------
4.9 Priority of Payments. As of the Original Effective Date, all revenue
--------------------
of Practice derived from Medical Services and ancillary services provided on and
after the Original Effective Date and from sales of goods in connection with the
Dispensary Business on and after the Original Effective Date (collectively,
"Post-Original Effective Date Revenues") shall be deposited into the Depository
Account (or, in the alternative, identified or segregated in such a manner as to
permit the Post-Original Effective Date Revenues to be deposited into the
Depository Account when and as directed by Business Manager) for distribution in
accordance with this Section 4.9; provided, however, that revenues to be used to
pay Practice Expenses shall be deposited into a separate account in the name of
Practice. From and after the Original Effective Date, each month Business
Manager shall apply, or retain on behalf of Practice, funds that are in the
Depository Account (or another applicable account) in the following order of
priority:
22
(a) to Business Manager, in satisfaction of Office Expense, except the
Management Fee;
(b) as directed by Practice, in satisfaction of Monthly Practice
Expense; and
(c) to Business Manager, in satisfaction of the Management Fee.
4.10 Fiscal Matters.
--------------
(a) Annual Budget.
-------------
(i) Mid-Year Budget. A mid-year Budget shall be agreed upon
---------------
by the parties before the execution of this Management Services Agreement
and shall be attached hereto and made a part hereof.
(ii) Process for Succeeding Budgets. Annually and at least
------------------------------
forty-five (45) days prior to the commencement of each fiscal year of
Business Manager, Business Manager, in consultation with the Policy Board,
shall prepare and deliver to Practice for its approval a proposed Budget,
setting forth an estimate of Practice's revenues and expenses for the
upcoming fiscal year (including, without limitation, the Dispensary
Business Budgeted Practice Expense, the Principal Services Budgeted
Practice Expense, the Dispensary Business Monthly Fee and the Principal
Services Monthly Fee). Practice shall review the proposed Budget and
either approve the proposed Budget or request any changes within fifteen
(15) days after receiving the proposed Budget. The Budget shall be adopted
upon mutual agreement of Business Manager and Practice after reasonable
review and comment and may be revised or modified only in consultation with
Business Manager. Once approved by both Business Manager and Practice,
each succeeding Budget shall be attached hereto and made a part hereof.
(iii) Deadlock. In the event the parties are unable to agree on
--------
a Budget by the beginning of the fiscal year (a "Deadlock"), then until an
agreement is reached, the Budget for the prior year shall be deemed to be
adopted as the Budget for the current year. Notwithstanding the foregoing,
the Policy Board, in its judgment, may impose reductions on a consistent
basis to each of Budgeted Practice Expense and the Monthly Fee in the event
that the Policy Board makes a determination that general economic
conditions and/or regulatory developments adversely affecting the Medical
Services provided by Practice render the present levels of the Budgeted
Practice Expense and the Monthly Fee impractical. For purposes of
illustration only, and without limitation, such general economic conditions
and/or regulatory developments could include proposed or actual cuts in
Medicare/Medicaid reimbursement for procedures that are a material
component of the Medical Services performed by Practice. Following
resolution of any Deadlock, Budgeted Practice Expense and the Monthly Fee
(and the corresponding Monthly Practice Expense and Management Fee as
calculated in Article 6 hereof) shall be recomputed retroactive to the
beginning of the fiscal year based upon the parameters agreed to in the new
Budget, and appropriate adjustments in payments owing to Practice and/or
Business Manager, as
23
the case may be, resulting from such recomputation shall be made promptly.
Notwithstanding the foregoing, if after six months the parties are still
unable to agree on a Budget, then the dispute shall be submitted to
arbitration in accordance with Article 8 hereof; provided, however, that
the scope of such arbitration shall be limited to the parties resolving the
dispute relating to the Budget and shall not address or rule in any manner
on matters relating to any alleged breaches by either party hereto or any
potential remedies therefor. Until the arbitrator renders a judgment or the
dispute is otherwise resolved, the adjustments described in this Section
4.10(a)(iii) shall continue to apply. Notwithstanding anything to the
contrary contained herein, nothing in this Section 4.10(a)(iii) shall
affect the payment of Office Expense, which shall be paid in full in
accordance with the provisions of this Management Services Agreement. For
purposes of Section 4.10(a)(iii) and (iv), "Budgeted Practice Expense" and
"Monthly Fee" shall refer to either Principal Services or Dispensary
Business, as appropriate.
(iv) Modifications to Budget. The Budget may be modified at
-----------------------
any time by mutual agreement of Practice and Business Manager, which
modifications may include, without limitation, modifications to the Monthly
Fee and Budgeted Practice Expense in the event that additional Physicians
or Optometrists become affiliated with Practice during the calendar year.
(b) Accounting and Financial Records. Business Manager shall
--------------------------------
establish and administer adequate accounting procedures, controls and systems
for the development, preparation and safekeeping of administrative and financial
records in connection with the performance of its duties and responsibilities
hereunder, all of which shall be prepared and maintained in accordance with GAAP
and applicable laws and regulations. Business Manager shall provide Practice
with the following:
(i) Monthly Reports. As soon as practicable, and in any
---------------
event no later than fifteen (15) days after the end of each calendar month,
Business Manager shall furnish to Practice a monthly statement reflecting
the computation for the Dispensary Business Monthly Practice Expense,
Principal Services Monthly Practice Expense, the Dispensary Business
Management Fee and the Principal Services Management Fee. Within forty-five
(45) days after the end of each month, Business Manager shall provide
Practice with a monthly statement reflecting the accounting activity for
Practice prepared in accordance with GAAP.
(ii) Annual Financial Statements. As soon as practicable, and
---------------------------
in any event no later than one hundred twenty (120) days after the end of
each calendar year, Business Manager shall furnish to Practice audited
financial statements of Business Manager, consisting of a balance sheet and
related statements of income, changes in members' equity and cash flow, all
of which (taken as a whole) shall reflect the financial status of Business
Manager as of the end of such calendar year, and shall be prepared in
accordance with GAAP consistently applied.
24
(c) Review of Expenditures. A Representative of Practice shall have
----------------------
the right to review all expenditures related to the operation of Practice, but
Practice shall not have the power to prohibit or invalidate any expenditure that
is consistent with the Budget.
(d) Tax Matters. Business Manager and Practice acknowledge and agree
-----------
that, to the extent that any of the services to be provided by Business Manager
hereunder may be subject to any state sales and use taxes, Business Manager may
have a legal obligation to collect such taxes from Practice and to remit same to
the appropriate tax collection authorities. Practice agrees to pay, as an
Office Expense and in addition to the payment of the Management Fee, the
applicable state sales and use taxes in respect of the portion of the Management
Fees attributable to such services.
4.11 Reports and Records.
-------------------
(a) Medical Records. Business Manager shall advise and assist
---------------
Practice as to the establishment, monitoring and maintenance of procedures and
policies for the timely creation, preparation, filing and retrieval of all
medical records generated by Practice in connection with Practice's provision of
Medical Services; and, subject to applicable law, shall ensure that medical
records are promptly available to Physicians and any other appropriate persons.
All such medical records shall be retained and maintained in accordance with all
applicable state and federal laws. All medical records are, and will remain, the
property and Confidential Information of Practice and its patients.
(b) Other Reports and Records. Business Manager shall create, prepare
-------------------------
and file such additional reports and records as are reasonably necessary or
appropriate for Practice's provision of Medical Services, and shall be prepared
to analyze and interpret such reports and records upon the request of Practice.
4.12 Recruitment of Physicians and Optometrists. Upon Practice's request,
------------------------------------------
Business Manager shall perform all administrative services reasonably necessary
or appropriate to recruit potential Physicians and Optometrists to become
employees or independent contractors of Practice. Business Manager shall provide
Practice with model agreements to document Practice's employment, retention or
other service arrangements with such individuals. It is and will remain the
sole and complete responsibility of Practice to interview, select, contract
with, supervise, control and terminate all Physicians and Optometrists
performing Medical Services or other professional services, and Business Manager
shall have no authority whatsoever with respect to such activities.
4.13 Confidential and Proprietary Information.
----------------------------------------
(a) Business Manager will not disclose any Confidential Information of
Practice to other persons without Practice Consent. Business Manager will not,
directly or indirectly, use such Confidential Information in a manner
detrimental to Practice, and Business Manager will keep such Confidential
Information confidential and will ensure that its affiliates and advisors who
have access to such Confidential Information comply with these nondisclosure
obligations.
25
Notwithstanding the foregoing, Business Manager may disclose Confidential
Information to those of its Representatives who need to know Confidential
Information for the purposes of this Management Services Agreement, it being
understood and agreed to by Business Manager that such Representatives will be
informed of the confidential nature of the Confidential Information, will agree
to be bound by this Section 4.13, and will be directed by Business Manager not
to disclose to any other person any Confidential Information. Business Manager
shall be responsible for any breach of this Section 4.13 by its affiliates,
advisors or Representatives. If Business Manager is required (by
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or similar legal processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Practice
or its affiliates, advisors or Representatives, Business Manager will (i)
provide Practice with prompt prior notice thereof and copies, if possible, and,
if not, a description, of the request and the Confidential Information requested
or required to be produced so that Practice may seek an appropriate protective
order or other protections to enforce the provisions of this Section 4.13, or,
alternatively, waive compliance with the provisions of this Section 4.13, and
(ii) consult with Practice as to whether Practice should attempt to resist or
narrow such request. If Business Manager is compelled to disclose or produce
Confidential Information concerning Practice or, in the alternative, be liable
for contempt or suffer other censure or penalty, Business Manager may disclose
or produce such Confidential Information without liability hereunder; provided,
however, that Business Manager shall give Practice notice of the Confidential
Information to be so disclosed or produced, and a copy of the request therefor,
as far in advance of its disclosure or production as is reasonably practicable
and shall use its commercially reasonable efforts to obtain, to the greatest
extent practicable, an order or other reliable assurance that confidential
treatment will be accorded to such Confidential Information so required to be
disclosed or produced.
(b) Notwithstanding clause (a) above, Business Manager may share,
subject to the restrictions of this Section 4.13(b), with other professional
corporations, associations, medical practices or health care delivery entities,
the statistics of Practice, including utilization review data, quality assurance
data, cost data, outcomes data or other Practice data. Business Manager may
disclose such statistics to other medical groups with whom Business Manager has
a management relationship, to managed care providers or other third party payors
for the purpose of obtaining or maintaining third party payor contracts, or to
financial analysts and underwriters. In addition, Business Manager may disclose
all Practice-related information necessary or desirable in connection with any
public or private offering of any security of Business Manager, but no such data
will disclose or divulge patient identifying information.
4.14 Insurance.
---------
(a) Business Manager's Insurance. Throughout the Term, Business
----------------------------
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof and in a manner
consistent with good business practice, appropriate workers' compensation
coverage for Business Manager's employed personnel provided to Practice pursuant
to this Management Services Agreement, and professional, casualty and
comprehensive general and vicarious liability insurance covering Business
Manager, the Office, Business Manager's personnel and all of Business Manager's
equipment in such amounts, on such basis and
26
upon such terms and conditions as Business Manager deems appropriate. Upon the
request of Practice, Business Manager shall provide Practice with a certificate
evidencing such insurance coverage and Business Manager shall use commercially
reasonable efforts to list Practice as an additional insured. Business Manager
may also carry, as an Office Expense, key person life and disability insurance
on any Physician in amounts determined reasonable and sufficient by Business
Manager, but only upon the express written permission of Practice. Business
Manager shall be the owner and beneficiary of any such insurance; provided,
however, that benefits paid under any such policies relating to any Physician
shall be Professional Services Revenue, and relating to any Optometrist shall be
Dispensary Business Revenue.
(b) Professional and General Liability Insurance of Practice.
--------------------------------------------------------
Business Manager shall obtain and maintain, on behalf of Practice and as an
Office Expense, professional and comprehensive general liability insurance
covering Practice and each of Physicians and Optometrists. The comprehensive
general liability coverage shall be in the minimum amount of One Million Dollars
($1,000,000) for each occurrence and Two Million Dollars ($2,000,000) annual
aggregate; and professional liability coverage shall be in the minimum amount of
One Million Dollars ($1,000,000) for each occurrence and Three Million Dollars
($3,000,000) annual aggregate, or any other higher minimum coverage requirements
established by law. The insurance policy or policies shall provide for at least
(30) days' advance written notice to Business Manager and Practice from the
insurer as to any alteration of coverage, cancellation or proposed cancellation
for any cause. Business Manager shall cause to be issued to Practice a
certificate of such insurer or insurers reflecting such coverage and either
party hereunder shall provide notice to the other party promptly upon receipt of
any notice canceling or proposing to cancel the insurance coverage of Practice,
or any Physician or Optometrist for any reason. Upon the termination of this
Management Services Agreement for any reason, Practice shall obtain and maintain
as a Practice Expense "tail" professional liability coverage, in the amounts
specified in this Section 4.14(b) for an extended reporting period of ten years,
and Practice shall be responsible for paying all premiums for "tail" insurance
coverage.
(c) Health Insurance. Business Manager shall, to the extent such
----------------
coverage is available from Business Manager's current insurance carrier, make
available to, and accessible by, Physicians and Optometrists health benefits
under any health benefit program maintained by Business Manager. If any
Physician or Optometrist elects such coverage, subject to Section 1.34(b)
hereof, the cost of such coverage shall be deemed an Office Expense for any
Optometrist or Physician-Employee, and a Practice Expense for any Physician-
Shareholder.
4.15 Facility. Business Manager will explore potentially establishing an
--------
outpatient ambulatory surgery center in the Kansas City metropolitan area north
of the Missouri River, and, subject to Business Manager's strategic planning
directives, business plan and general business conditions, Business Manager will
make a good faith effort to assess and finalize whether to pursue a plan to
establish such a facility in such area by June 30, 2000.
4.16 No Warranty. Practice acknowledges that Business Manager has not made
-----------
and will not make any express or implied warranties or representations that the
services provided by Business Manager will result in any particular amount or
level of revenue or income to Practice.
27
ARTICLE V
COVENANTS AND RESPONSIBILITY OF PRACTICE
5.1 Organization and Operation. Practice, as a continuing condition of
--------------------------
Business Manager's obligations under this Management Services Agreement, shall
at all times during the Term be and remain legally organized and operated to
provide Medical Services in a manner consistent with all state and federal laws.
(a) Employment of Physicians.
------------------------
(i) Practice shall operate and maintain within the Practice
Territory a full-time practice of medicine specializing in the provision of
Medical Services, and shall maintain and enforce employment agreements in
the form of Exhibit 5.1 (the "Employment Agreements") with Physician-
-----------
Shareholders, including, without limitation, the Physician-Shareholders
identified in Exhibit 5.1A; provided, however, that the Employment
------------ -------- -------
Agreements with any Physician-Shareholders not employed by Practice as of
the Effective Date (i.e. any Physician-Shareholders other than the
Physician-Shareholders identified in Exhibit 5.1A) shall not be required to
------------
contain any liquidated damages or noncompetition buyouts unless Practice
determines otherwise; provided further that such liquidated damages
-------- -------
provisions shall not be required in any Employment Agreements with the
Physician-Shareholders identified in Exhibit 5.1A for periods from and
------------
after the Initial Term (as defined in each such Physician-Shareholder's
Employment Agreement) it being understood that the provision shall in no
way alter the noncompetition provisions set forth in any Physician-
Shareholder Employment Agreement. Except as permitted by Section 3.1 of
the Employment Agreements, Practice shall not amend the Employment
Agreements in any material manner or waive any material rights of Practice
thereunder without the prior written approval of Business Manager.
Recognizing that Business Manager would not have entered into this
Management Services Agreement but for Practice's covenant to maintain
Employment Agreements with Physician-Shareholders, and subject to
subparagraphs (ii) and (iii) below, Practice shall pay to Business Manager,
in addition to the Management Fee, any damages, compensation, payment or
settlement received by Practice from a Physician-Shareholder who terminates
his or her Employment Agreement without Physician Cause (as defined in the
Employment Agreement) or whose Employment Agreement is terminated by
Practice for Practice Cause (as defined in the Employment Agreement) or for
any other material breaches of the Employment Agreements (such damages
being collectively referred to herein as the "Business Manager Damages").
Business Manager agrees that payment to Business Manager of the liquidated
damages collected by Practice in accordance with the terms of the
Employment Agreement shall satisfy in full any Business Manager Damages but
shall not constitute a buyout or release of the noncompetition and
nonsolicitation covenants of the Employment Agreement unless the Physician-
Shareholder in fact purchases a release from such covenants as contemplated
therein; provided, further, that such purchase shall be allocated in the
manner set forth in Section 5.1(a)(iii) below.
28
(ii) Notwithstanding the provisions of Section 5.1(a)(i) above,
or any other provision to the contrary contained herein, Practice shall
have a period of not less than forty-five (45) days following the
occurrence of any event described in Section 5.1(a)(i) above that entitles
Business Manager to receive Business Manager Damages to take such actions
to cure the breach of any Employment Agreement by a Physician-Shareholder
(which actions to cure may, without limitation, include retention of
additional Physicians to replace the levels of revenue and income
previously generated by the Physician-Shareholder causing such breach);
provided, however, that the determination of whether or not such breach has
been cured shall be made by Business Manager in its good faith discretion,
and provided further, that Practice shall in no event be permitted to cure
any breach that results from a breach by a Physician-Shareholder of any
noncompetition provision contained in his or her Employment Agreement.
(iii) In connection with Practice's obligations pursuant to
Section 5.1(a)(i) hereof, to the extent Business Manager Damages consist of
any payments made by a Physician-Shareholder pursuant to Section 6.5 of the
Employment Agreement to procure release from the noncompetition covenants
set forth in Article 6 of such Physician-Shareholder's Employment
Agreement, then Practice shall only be required to pay Business Manager
fifty percent (50%) of such release payment, with Practice retaining the
balance. The foregoing retention rights of Practice are limited to the
release payments pursuant to Section 6.5 of the Employment Agreement and
shall not apply to any other Business Manager Damages payable by Practice
to Business Manager pursuant to Section 5.1(a)(i) hereof.
(b) Corporate Governance. Throughout the Term of this Management
--------------------
Services Agreement, Practice shall maintain and enforce written buy-sell
agreements with the Physician-Shareholders specified in Exhibit 5.1A, and shall
------------
cause all new shareholders of Practice to execute such agreements prior to
becoming a shareholder of Practice. As a condition precedent to the execution
of this Management Services Agreement, the Physician-Shareholders have amended
their existing buy-sell agreement, or executed a new buy-sell agreement, which
addresses the concepts set forth on Exhibit 5.1B to the satisfaction of Business
------------
Manager and its counsel. Practice will also maintain its articles of
incorporation and bylaws in accordance with applicable law, including, without
limitation, any laws governing the transferability of shares from disqualified
owners to qualified owners. Throughout the Term of this Management Services
Agreement, Practice shall not, without the prior written consent of Business
Manager, amend such documents or waive any rights with respect to such
transferability in any manner.
5.2 Practice Personnel.
------------------
(a) Physician Personnel and Optometrists. Practice shall retain the
------------------------------------
number of Physicians and Optometrists as is reasonably necessary and appropriate
in the sole discretion of Practice for the provision of Medical Services. Each
Physician shall hold and maintain a valid and unrestricted license to practice
medicine in the States of Missouri and/or Kansas, and shall be competent, in the
reasonable opinion of Practice, in the practice of ophthalmology. Each
Optometrist shall hold and maintain a valid and unrestricted license to practice
optometry in the
29
States of Missouri and/or Kansas, and shall be competent, in the reasonable
opinion of Practice, in such practice. Practice shall enter into and maintain
with each such retained Physician and Optometrist a written employment agreement
substantially in the form of either Exhibit 5.1 for Physician-Shareholders or
-----------
Exhibit 5.2A-1 for Physician-Employees and Exhibit 5.2A-2 for employed
-------------- --------------
Optometrists, or a written independent contractor agreement substantially in the
form of Exhibit 5.2B for Physicians, Optometrists, or other persons or entities
-------------
that provide, or employ individuals who provide, Medical Services as independent
contractors. Practice will neither commit nor permit to remain outstanding any
breach of such employment agreement or independent contractor agreement that
would allow any Physician, Optometrist, or other entity to terminate for cause.
Regardless of whether the compensation is a Practice Expense or Office Expense,
Practice shall be responsible for paying the compensation and benefits, as
applicable, for all Physicians, Optometrists, and any other physician personnel
or other contracted or affiliated physicians, and for withholding any sums for
income tax, unemployment insurance, social security or any other withholding
required by applicable law. If requested, Business Manager shall, on behalf and
at the direction of Practice, administer the compensation with respect to such
individuals in accordance with the written agreement between Practice and each
Physician or Optometrist. Business Manager shall neither control nor direct any
Physician, Optometrist or other entity in the performance of Medical Services
for patients.
(b) Nonphysician Personnel. Business Manager shall retain all
----------------------
nonphysician personnel necessary for the operation of Practice and such
nonphysician personnel shall be under Business Manager's control, supervision
and direction in the performance of their duties, except for (i) Designated
Allied Health Professionals, who shall perform their duties under the
supervision and control of Physicians, consistent with the requirements
necessary to meet the "incident to" provisions of the Medicare program, and (ii)
opticians and others providing services in Practice's optical dispensary, who
shall perform their duties under the supervision and control of Physicians and
Optometrists.
5.3 Professional Standards. As a continuing condition of Business
----------------------
Manager's obligations hereunder, each Physician, Optometrist and any other
physician personnel retained by Practice to provide Medical Services must comply
with, be controlled and governed by, and otherwise provide Medical Services in
accordance with, all applicable federal, state and municipal laws, rules,
regulations, ordinances and orders, and the ethical standards and standards of
care of the medical community wherein the principal office of each Physician or
Optometrist is located. In addition, each Physician and any other physician
personnel retained by Practice to provide Medical Services must obtain and
retain appropriate admitting privileges at local area hospitals or health care
facilities which are reasonably adequate for Physician to perform Medical
Services. Procurement of temporary staff privileges pending the completion of
the medical staff approval process shall satisfy this provision, provided
Physician actively pursues full admitting privileges and actually receives full
admitting privileges within a reasonable time.
5.4 Medical Services. Practice shall use reasonable efforts to ensure that
----------------
Physicians and Optometrists are available to provide Medical Services to
patients. In the event that Physicians or Optometrists are not available to
provide the relevant Medical Services coverage, Practice shall engage and retain
locum tenens coverage. Physicians and Optometrists retained on a locum tenens
----- ------ ----- ------
30
basis shall meet all of the requirements of Section 5.3 hereof and the cost of
providing locum tenens coverage shall be an Office Expense unless such locum
----- ------ -----
tenens coverage is attributable to a Physician-Shareholder exceeding the maximum
------
amount of vacation, and personal and educational leave days allowable under such
Physician-Shareholder's Employment Agreement, in which case the cost of such
coverage attributable to such Physician-Shareholder shall be a Practice Expense.
With the assistance of Business Manager, Practice, Physicians and Optometrists
shall be responsible for scheduling the relevant coverage of all medical and
eye-related procedures. Practice shall use its best efforts to develop and
promote Practice.
5.5 Peer Review/Quality Assurance. Practice shall adopt a peer
-----------------------------
review/quality assurance program to monitor and evaluate the quality and cost-
effectiveness of Medical Services provided by Physicians and Optometrists of
Practice, the cost of which shall be an Office Expense. Upon request of
Practice, Business Manager shall provide administrative assistance to Practice
in performing its peer review/quality assurance activities, but only if such
assistance can be provided in a manner consistent with maintaining the
confidentiality and privileged status of the processes and actions of the peer
review/quality assurance process of Practice.
5.6 Confidential and Proprietary Information. Practice will not disclose
----------------------------------------
any Confidential Information of Business Manager without Business Manager's
express written authorization. Such Confidential Information will not be used
in any way directly or indirectly detrimental to Business Manager, and Practice
will keep such Confidential Information confidential and will ensure that its
affiliates and advisors who have access to such Confidential Information comply
with these nondisclosure obligations. Notwithstanding the foregoing, Practice
may disclose Confidential Information to those of its Representatives who need
to know Confidential Information for the purposes of this Management Services
Agreement, it being understood and agreed to by Practice that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section 5.6, and will be directed by
Practice not to disclose to any other person any Confidential Information.
Practice shall be responsible for any breach of this Section 5.6 by its
affiliates, advisors or Representatives. If Practice is required (by
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its affiliates, advisors or Representatives, Practice will (i)
provide Business Manager with prompt prior notice thereof and copies, if
possible, and, if not, a description, of the request and the Confidential
Information requested or required to be produced so that Business Manager may
seek an appropriate protective order or other protections to enforce the
provisions of this Section 5.6, or, alternatively, waive compliance with the
provisions of this Section 5.6 and (ii) consult with Business Manager as to the
advisability of Business Manager's taking of legally available steps to resist
or narrow such request. Practice further agrees that if, in the absence of a
protective order or the receipt of a waiver hereunder, Practice is nonetheless,
in the written opinion of its legal counsel, compelled to disclose or produce
Confidential Information concerning Business Manager to any tribunal or to stand
liable for contempt or suffer other censure or penalty, Practice may disclose or
produce such Confidential Information to such tribunal legally authorized to
request and receive such Confidential Information without liability hereunder;
provided, however, that Practice shall give Business Manager notice of the
Confidential Information to be so disclosed or produced, and a
31
copy of the request therefor, as far in advance of its disclosure or production
as is practicable and shall use its best efforts to obtain, to the greatest
extent practicable, an order or other reliable assurance that confidential
treatment will be accorded to such Confidential Information so required to be
disclosed or produced.
5.7 Noncompetition. Practice hereby recognizes and acknowledges that
--------------
Business Manager has incurred and will continue to incur substantial costs in,
and devote substantial resources to, providing the equipment (including, without
limitation, lasers, mirokeratomes and/or other equipment used to perform vision
correction procedures), support services, personnel, management, administration,
and other items and services that are the subject matter of this Management
Services Agreement, including, without limitation, devoting significant
resources to developing Practice's laser vision correction practice, and that in
the process of providing services under this Management Services Agreement,
Practice will be privy to financial and Confidential Information of Business
Manager and other Regional Practices, to which Practice would not otherwise be
exposed. The parties also recognize that the services to be provided by
Business Manager will be feasible only if Practice operates an active practice
to which Physicians associated with Practice devote their full professional time
and attention. Practice agrees and acknowledges that the noncompetition
covenants described hereunder are necessary for the protection of Business
Manager, and that Business Manager would not have entered into this Management
Services Agreement without the following covenants:
(a) During the Term of this Management Services Agreement and except
for the performance of Medical Services and ancillary services at Offices
contemplated by, or subject to, this Management Services Agreement or as
expressly agreed to by Business Manager in writing, Practice shall not
establish, operate or provide Medical Services at any other medical office,
clinic or other health care facility. During the Term of this Management
Services Agreement and except for the operation of the Dispensary Business at
Offices contemplated by, or subject to, this Management Services Agreement or as
expressly agreed to by Business Manager in writing, Practice shall not
establish, operate or engage in a Dispensary Business at any other office or
facility. During the Term of this Management Services Agreement, Practice shall
not acquire, by purchase, lease or otherwise, any medical or non-medical
equipment, including, without limitation, lasers, microkeratomes and/or other
equipment used to perform vision correction procedures, except from or through
Business Manager or with the express written consent of Business Manager.
(b) Except as specifically agreed to by Business Manager in writing,
Practice commits and agrees that during the Term of this Management Services
Agreement and, if this Agreement terminates other than for expiration of the
Term or by Practice for cause under Section 7.2(b), for a period of five (5)
years from the termination date of this Management Services Agreement, Practice
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, contract with, or otherwise be associated with, lend funds to, lend its
name to, or maintain any interest whatsoever in any enterprise (i) having to do
with the provision, distribution, promotion or advertising of any type of
management or administrative services or products to third parties in
competition with Business Manager; and/or (ii) offering any type of service or
product in the
32
Practice Territory to third parties similar to those offered by Business Manager
to Practice. Notwithstanding the above restriction, nothing herein shall
prohibit Practice or any of its holders from providing management and
administrative services to its or their own medical practices after the
termination of this Management Services Agreement.
(c) The written Employment Agreements described in Section 5.1 hereof
shall contain covenants of Physician-Shareholders whereby they agree: (i) not to
compete with Practice within the Practice Territory for one (1) year after
termination of the employment agreement, except in the event Physician
terminates such agreement for Physician Cause or certain buyout rights are
exercised and (ii) not to acquire, by purchase, lease or otherwise, any medical
or non-medical equipment, including, without limitation, lasers, microkeratomes
and/or other equipment, used to perform vision correction procedures, during the
term of the applicable Employment Agreement and for one (1) year after
termination of the applicable Employment Agreement, except from or through
Business Manager, or with the express written consent of Business Manager.
(d) Unless waived by Business Manager, and except as done in
connection with the Original Transaction Agreements, Practice shall obtain and
enforce formal written agreements with Physician-Employees, Optometrists and
other entities in the form of Exhibit 5.2A or Exhibit 5.2B, as applicable,
------------ ------------
pursuant to which the Physician-Employees, Optometrists, and other entities
agree: (i) not to compete with Practice within the Practice Territory for one
(1) year after termination of the written agreements, except in the event the
Physician-Employee, Optometrist, or other entity terminates such agreement for
Physician Cause or otherwise "for cause," as defined in the applicable written
agreement, and (ii) not to acquire, by purchase, lease or otherwise, any medical
or non-medical equipment, including, without limitation, lasers, microkeratomes
and/or other equipment, used to perform vision correction procedures, during the
term of the applicable Employment Agreement and for one (1) year after
termination of the applicable Employment Agreement, except from or through
Business Manager, or with the express written consent of Business Manager.
(e) Practice understands and acknowledges that the provisions in
Section 5.6 hereof and this Section 5.7 are designed to preserve the goodwill of
Business Manager and the goodwill of the individual Physicians and Optometrists
of Practice. Accordingly, if Practice breaches any obligation of Section 5.6
hereof or this Section 5.7, in addition to any other remedies available under
this Management Services Agreement at law or in equity, Business Manager shall
be entitled to enforce this Management Services Agreement by injunctive relief
and by specific performance of this Management Services Agreement, such relief
to be without the necessity of posting a bond, cash or otherwise. Additionally,
nothing in this paragraph shall limit Business Manager's right to recover any
other damages to which it is entitled as a result of Practice's breach. If any
provision of the covenants herein is held by a court of competent jurisdiction
to be unenforceable due to an excessive time period, geographic area or
restricted activity, the covenant shall be reformed to comply with such time
period, geographic area or restricted activity that would be held enforceable.
5.8 Name, Trademark. Practice represents and warrants that Practice
---------------
conducts its professional practice under the name of, and only under the name of
"Hunkeler Eye Centers,
33
P.C.," and any registered d/b/a's, and that such name is the name of Practice
under state law. Practice covenants and promises that, without the prior written
consent of Business Manager, Practice will not:
(a) take any action or omit to take any action that would result in
the change or loss of the name;
(b) license, sell, give or otherwise transfer the name, or the right
to use the name, to any medical practice, physician, professional corporation or
any other entity; or
(c) cease conducting the professional practice of Practice under the
name.
5.9 Medical Advisory Board. The board of directors of Business Manager
----------------------
has appointed a medical advisory board (the "Medical Advisory Board") to provide
a general forum for review and analysis of medical and clinical issues affecting
the Regional Practices and all other medical practices with which Business
Manager has entered into a Management Services Agreement or similar agreement.
The Medical Advisory Board consists of at least three Doctors of Ophthalmology,
one of whom is designated as the "Medical Director," and may include, at the
discretion of the board of directors of Business Manager, one or more Doctors of
Optometry, Registered Nurses or other health care professionals. The Vice
President Clinical Operations of Business Manager, and/or such other designee as
Business Manager shall select, attends meetings of the Medical Advisory Board on
a consulting basis. Members of the Medical Advisory Board serve for one-year
terms and are appointed or re-appointed for such term during the first meeting
of the board of directors of Business Manager held for each calendar year. The
board of directors of Business Manager may name additional members, remove any
member, or fill any vacancy created by the resignation, death or disability of
any member, of the Medical Advisory Board during any duly called meeting of such
board of directors. Notwithstanding anything to the contrary contained herein,
the Medical Advisory Board will serve in a solely advisory capacity and the
ultimate authority over medical decisions affecting Practice shall reside with
Practice's Physician-Shareholders.
5.1 Indemnification of Business Manager. Practice shall hold Business
-----------------------------------
Manager, its Affiliates, Representatives, successors and assigns and each of
them harmless from and against any and all losses, damages, fines, costs,
claims, judgments, proceedings, expenses or liabilities (including, without
limitation, reasonable attorneys' fees, paralegal fees, and costs and expenses
thereof) arising out of, or attributable to, or which result from, any claim of
a third party with respect to, (a) the operation of the Dispensary Business or
the performance of Medical Services (including, without limitation, malpractice
claims) or the performance of any intentional acts, negligent acts or omissions
by Practice and/or its members, employees and/or independent contractors (other
than Business Manager) and (b) any miscoding or other error in medical service
or optical dispensary documentation by Practice or its Physicians or
Optometrists resulting in false or inaccurate xxxxxxxx, to the extent that such
miscoding or error is prosecuted by any governmental entity or agency of
competent jurisdiction, or is due to the gross negligence, willful misconduct or
intentional act of the Practice or its Physicians or Optometrists. To the
extent there
34
is a penalty that is not due to the gross negligence, willful misconduct or
intentional act of Practice or its Physicians or Optometrists, such penalty
shall be treated as an Office Expense.
5.11 Indemnification of Practice. Business Manager shall hold Practice,
---------------------------
its Affiliates, Representatives, successors and assigns and each of them
harmless from and against any and all losses, damages, fines, costs, claims,
judgments, proceedings, expenses or liabilities (including, without limitation,
reasonable attorneys' fees, paralegal fees, and costs and expenses thereof)
arising out of, or attributable to, or which result from, any claim of a third
party with respect to, (a) the performance of Management Services or the
performance of any intentional acts, negligent acts or omissions by Business
Manager and/or its shareholders, officers, employees and/or independent
contractors (other than Practice), and (b) any miscoding or other error in
medical service documentation by Business Manager or its employees resulting in
false or inaccurate xxxxxxxx, to the extent that such miscoding or error is
prosecuted by any governmental entity or agency of competent jurisdiction or is
due to the gross negligence, willful misconduct or intentional act of Business
Manager or its employees. To the extent there is a penalty that is not due to
the gross negligence, willful misconduct or intentional act of Business Manager
or its employees, such penalty shall be treated as an Office Expense.
ARTICLE VI
FINANCIAL ARRANGEMENT
6.1 Definitions. For purposes of this Article 6, capitalized terms used
-----------
herein shall have the meanings ascribed as follows:
(a) Dispensary Business Budgeted Office Expense. The term "Dispensary
-------------------------------------------
Business Budgeted Office Expense" shall mean, for any month, the Dispensary
Business Office Expense (other than the Dispensary Business Management Fee)
established in the Budget for such month.
(b) Dispensary Business Budgeted Practice Expense. The term
---------------------------------------------
"Dispensary Business Budgeted Practice Expense" shall mean, for any month, the
Dispensary Business Practice Expense (as defined in the Budget) established in
the Budget for such month.
(c) Dispensary Business Budgeted Revenue. The term "Dispensary
------------------------------------
Business Budgeted Revenue" shall mean, for any month, the Dispensary Business
Revenue established in the Budget for such month.
(d) Dispensary Business Management Fee. The term "Dispensary Business
----------------------------------
Management Fee" shall be, for any month, the * except in the event that either
(i) * or (ii) * for such month, in which case the "Dispensary Business
Management Fee" for such month shall be *.
-------------
* Confidential portions omitted and filed separately with the commission.
35
*.
(e) Dispensary Business Monthly Fee. The term "Dispensary Business
-------------------------------
Monthly Fee" shall be for any month, the * for such month.
(f) Dispensary Business Monthly Office Expense. The term "Dispensary
------------------------------------------
Business Monthly Office Expense" for any month shall mean the amount of
Dispensary Business Budgeted Office Expense for such month, plus or minus any
difference between (i) the actual Dispensary Business Office Expense incurred by
or on behalf of Practice for such month, as measured in accordance with GAAP
(other than the Dispensary Business Management Fee), and (ii) Dispensary
Business Budgeted Office Expense for such month.
(g) Dispensary Business Monthly Practice Expense. The term
--------------------------------------------
"Dispensary Business Monthly Practice Expense" shall mean, for any month, the*
for such month, except in the event that either (i) * or (ii) *, in which case
the term "Dispensary Business Monthly Practice Expense" for such month shall
mean *.
(h) Dispensary Business Office Expense. The term "Dispensary Business
----------------------------------
Office Expense" shall mean all Office Expenses, operating and non-operating,
which constitute direct expenses to produce Dispensary Business Revenue, as
determined consistent with the Budget; provided that any disagreement over
whether an expense constitutes a direct expense to produce Dispensary Business
Revenue shall be resolved by the Policy Board; provided, further, that expenses
related to the sale of contact lenses shall not be included in Dispensary
Business Office Expense.
(i) Management Fee. The term "Management Fee" shall mean, for any
--------------
month, the sum of the Dispensary Business Management Fee for such month and the
Principal Services Management Fee for such month.
(j) Monthly Office Expense. The term "Monthly Office Expense" shall
----------------------
mean, for any month, the sum of the Dispensary Business Monthly Office Expense
for such month and the Principal Services Monthly Office Expense for such month.
-----------------
* Confidential portions omitted and filed separately with the commission.
36
(k) Monthly Practice Expense. The term "Monthly Practice Expense"
------------------------
shall mean, for any month, the sum of the Dispensary Business Monthly Practice
Expense for such month and the Principal Services Monthly Practice Expense for
such month.
(l) Principal Services Budgeted Office Expense. The term "Principal
------------------------------------------
Services Budgeted Office Expense" shall mean, for any month, the Principal
Services Office Expense (other than the Principal Services Management Fee)
established in the Budget for such month.
(m) Principal Services Budgeted Practice Expense. The term "Principal
--------------------------------------------
Services Budgeted Practice Expense" shall mean, for any month, the Principal
Services Practice Expense (as defined in the Budget) established in the Budget
for such month.
(n) Principal Services Budgeted Revenue. The term "Principal Services
-----------------------------------
Budgeted Revenue" shall mean, for any month, the amount of Principal Services
Revenue established in the Budget for such month.
(o) Principal Services Management Fee. The term "Principal Services
---------------------------------
Management Fee" shall be, for any month, the *, except in the event that
either (i) * or (ii) *, in which case the "Principal Services Management
Fee" for such month shall be *.
(p) Principal Services Monthly Fee. The term "Principal Services
------------------------------
Monthly Fee" shall mean, for any month, the * for such month.
(q) Principal Services Monthly Office Expense. The term "Principal
-----------------------------------------
Services Monthly Office Expense" shall mean, for any month, the amount of
Principal Services Budgeted Office Expense for such month, plus or minus any
difference between (i) the actual Principal Services Office Expense incurred by
or on behalf of Practice for such month, as measured in accordance with GAAP
(other than the Principal Services Management Fee), and (ii) Principal Services
Budgeted Office Expense for such month.
(r) Principal Services Monthly Practice Expense. The term "Principal
-------------------------------------------
Services Monthly Practice Expense" shall mean, for any month, the * for such
month, except in the event that either (i) * or (ii) *, in which case the
term "Principal Services Monthly Practice Expense" for such month shall mean *
-------------
* Confidential portions omitted and filed separately with the commission.
37
*.
(s) Principal Services Office Expense. The term "Principal Services
---------------------------------
Office Expense" for any month shall mean all Office Expenses for such month,
including expenses related to the sale of contact lenses, other than Dispensary
Business Office Expenses for such month.
6.2 Management Fee. Practice and Business Manager agree to the
--------------
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. In the priority established by Section 4.9
hereof, Business Manager will be paid the following:
(a) the amount of all Office Expense (other than the Dispensary
Business Management Fee and the Principal Services Management Fee) for the
previous month, paid on behalf of Practice; and
(b) the Management Fee for the previous month.
6.3 Reasonable Value. Payment of the Management Fee is not intended to be
----------------
and shall not be interpreted or applied as permitting Business Manager to share
in Practice's fees for Medical Services or any other services, but is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the equipment, contract analysis and support, other support
services, purchasing, personnel, office space, management, administration,
strategic management and other items and services furnished by Business Manager
pursuant to this Management Services Agreement, after giving effect to the
nature and volume of the services required and the risks assumed by Business
Manager. The parties agree that it is appropriate to calculate and apply
separate fees for the management of the Dispensary Business and Principal
Services, due to (i) the amount of Business Manager Expense incurred by
Business Manager in connection with the management of the operations of the
Dispensary Business, (ii) the fair market value of the management services
provided by Business Manager with respect to each of the Dispensary Business and
financial services and (iii) the nature and volume of the services required and
the risks assumed by Business Manager with respect to each of the Dispensary
Business and Principal Services.
6.4 Payment of Management Fee. To facilitate the payment of the
-------------------------
Management Fee as provided in Section 6.2 hereof, and subject to the priority of
payment methodology set forth in Section 4.9 hereof, Practice hereby expressly
authorizes Business Manager to make withdrawals of the Management Fee from the
Depository Account as such fee becomes due and payable during the Term and
thereafter as provided in Section 7.3 hereof.
6.5 Accounts Receivable. Unless otherwise prohibited by law, to assure
-------------------
that Practice receives the entire amount of professional fees for its services
and to assist Practice in maintaining reasonable cash flow for the payment of
Office Expense, Practice hereby agrees to sell, and
--------------
* Confidential portions omitted and filed separately with the commission.
38
Business Manager hereby agrees to purchase, with respect to any month during the
Term and with recourse to Practice for the amount of the purchase, accounts
receivable of Practice (the "Purchased Receivables") (i) in an amount equal to
the difference, if any, between (A) the sum of the Monthly Office Expense and
the Monthly Practice Expense paid or accrued by Business Manager for such month
and (B) the amount of cash collections deposited into the Depository Account
during such month and used to pay all or any portion of the Office Expenses and
the Monthly Practice Expense, by transferring such amount into the Depository
Account, and (ii) in an amount equal to the difference, if any, between the
Management Fee and the amount of cash collections deposited into the Depository
Account during such month and used to pay all or any portion of the Management
Fee, in satisfaction of Practice's obligation to pay Business Manager the
Management Fee. The consideration paid to Business Manager for the purchase
shall be an amount equal to the Principal Services Revenue and Dispensary
Business Revenue with respect to the Purchased Receivables, computed in
accordance with GAAP on an accrual basis net of Adjustments. Although it is the
intention of the parties that Business Manager purchase and thereby become the
owner of the Purchased Receivables of Practice, in the event such purchase shall
be ineffective for any reason, to secure the payment and performance of
Practice's obligations hereunder, Practice is hereby concurrently and
irrevocably granting, giving, assigning and pledging to Business Manager all of
Practice's assets and accounts receivable. This Management Services Agreement
shall constitute a security agreement with respect to Practice's assets and
accounts receivable and may be filed under the Uniform Commercial Code in each
state in which Practice does business. Practice shall cooperate with Business
Manager and execute all agreements or documents, including any security
agreements and financing statements, in connection with the granting of such
security interest to Business Manager or at Business Manager's option, its
lenders, that such persons deem necessary or appropriate. All collections with
respect to the Purchased Receivables by Business Manager shall be received by
Business Manager as the agent of Practice and shall be endorsed to Business
Manager and deposited in a bank account at a bank designated by Business
Manager. To the extent Practice comes into possession of any payments in respect
of the Purchased Receivables, Practice shall direct such payments to Business
Manager for deposit in bank accounts designated by Business Manager. Without
limiting the foregoing, to ensure that a reasonable cash flow is maintained for
the payment of Office Expenses hereunder, Practice shall not, except as
expressly contemplated herein, sell, assign, transfer, pledge, mortgage or in
any way encumber, the accounts receivable of Practice without the express
written consent of Business Manager.
6.6 Disputes Regarding Fees.
-----------------------
(a) It is the parties' intent that any disputes regarding Business
Manager's calculation of or accounting for fees under Section 4.10(b) and under
this Article 6 shall be resolved to the extent possible by good faith
negotiations. To that end, the parties agree that if Practice in good faith
believes that Business Manager has failed to accurately make such calculations
or conduct such accounting, and that as a result of such failure, Practice is
entitled to a set-off or reduction in its Management Fees, Practice shall give
Business Manager notice of the perceived failure and request in the notice a
set-off or reduction in Management Fees. Business Manager and Practice shall
then negotiate the dispute in good faith, and if an agreement is reached, the
parties shall implement the resolution without further action.
39
(i) If the parties cannot reach a resolution within thirty
(30) days, and the amount at issue is $25,000 or less, then the dispute
shall be submitted to the Policy Board. The Policy Board shall then
consider, develop and implement a resolution of such dispute which shall be
final and binding upon Practice and Business Manager.
(ii) If the amount in dispute is greater than $25,000, and
Business Manager and Practice fail to resolve the dispute, then such
dispute shall be submitted by either party to binding arbitration as
described by Article 9 of the Purchase Agreement. The parties hereto
expressly acknowledge and agree that any arbitration regarding a dispute
under this Section (b)(ii) shall be limited solely to the determination of
the amount of fees due and owing either party, and shall not address or
rule in any manner on matters relating to any alleged breaches by either
party hereto or any potential remedies therefor.
(b) In the event Business Manager fails to perform any of its
material obligations in accordance with and as required under Sections 4.1(a),
(c) and (e), 4.2, 4.3, 4.8(a), (b), (d) and (f), 4.9 and 4.10(b), and Business
Manager fails to perform such material obligations within thirty (30) days after
its receipt of written notice from Practice specifying any such deficiency in
detail (or shall fail to diligently pursue efforts to cure to the extent such
obligation cannot be reasonably performed within such thirty day period), then
Practice shall be entitled to retain a third party to perform such obligation,
and setoff the reasonable out-of-pocket costs relating thereto against the
Management Fee payable to Business Manager pursuant to this Article 6 hereof. In
the event Practice retains a third party to perform such obligation, Business
Manager shall have the continuing right to resume performance of such
obligation, and upon doing so, Practice shall terminate its relationship with
such third party.
ARTICLE VII
TERM AND TERMINATION
7.1 Initial and Renewal Term. The Term of this Management Services
------------------------
Agreement will be for an initial period of forty (40) years after the Original
Effective Date, and shall be automatically renewed for successive five (5) year
periods thereafter, provided that neither Business Manager nor Practice shall
have given notice of termination of this Management Services Agreement at least
one hundred twenty (120) days before the end of the initial term or any renewal
term, or unless otherwise terminated as provided in Section 7.2 hereof.
7.2 Termination.
-----------
(a) Termination By Business Manager. Business Manager may terminate
-------------------------------
this Management Services Agreement upon the occurrence of any one of the
following events which shall be deemed to be "for cause:"
(i) The suspension, restriction, revocation or cancellation,
within a one-year period, for a period of greater than one hundred eighty
(180) days, of any three (3) or more Physicians' licenses to practice
medicine in the States of Missouri and/or Kansas;
40
(ii) Practice's loss or suspension of its Medicare or Medicaid
provider number, and/or Practice's restriction from treating patients of
the Medicare or Medicaid programs for a period of six (6) months;
(iii) The dissolution of Practice (other than in connection with
a reorganization of Practice), or the filing by Practice of a petition in
voluntary bankruptcy, an assignment for the benefit of creditors, or other
action taken voluntarily under any state or federal statute for the
protection of debtors;
(iv) The filing against Practice of an involuntary petition
under any bankruptcy statute, or the appointment of a custodian, receiver,
trustee or assignee for the benefit of creditors, and such condition shall
continue undischarged or undismissed for sixty (60) days; and
(v) Practice materially defaults in the performance of any of
its material duties or obligations hereunder, and shall fail to cure such
default within sixty (60) days after Practice receives notice from Business
Manager specifying the nature of such default.
(b) Termination By Practice. Practice may terminate this Management
-----------------------
Services Agreement upon any of the following occurrences which shall be deemed
to be "for cause":
(i) In the event that a court of competent jurisdiction makes
a final determination that Business Manager has materially breached a
fiduciary duty owed to Practice, Practice may terminate this Management
Services Agreement upon ten (10) days' notice to Business Manager; or
(ii) With ten (10) days' notice to Business Manager, in the
event Business Manager (A) intentionally and in bad faith misappropriates
Practice's funds, or (B) misapplies Practice's funds and fails to correct
such misapplication within thirty (30) days of receipt of notice from
Practice describing with particularity the misapplication.
(c) Termination by Agreement. In the event Practice and Business
------------------------
Manager shall mutually agree in writing, this Management Services Agreement may
be terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event
------------------------------------------------
there shall be a change in the Medicare or Medicaid statutes, state or federal
statutes, case law, regulations or general instructions, the interpretation of
any of the foregoing, the adoption of new federal or state legislation, or a
change in any third-party reimbursement system, any of which are reasonably
likely to materially and adversely affect the manner in which either party may
perform or be compensated for its services under this Management Services
Agreement or which shall make this Management Services Agreement unlawful, the
parties shall immediately enter into good faith negotiations regarding a new
service arrangement or basis for compensation for the services furnished
pursuant to this Management Services Agreement that complies with the law,
regulation or policy and that approximates as closely as possible the economic
position of the parties prior
41
to the change. If good faith negotiations cannot resolve the matter, it shall be
submitted to arbitration in accordance with Article 8 of this Management
Services Agreement; provided, however, that the scope of such arbitration shall
be limited to conforming with the purpose and intent of this Section 7.2(d) and
the arbitrator will have no authority to suspend or terminate this Management
Services Agreement. If a court of competent jurisdiction compels or requires a
party hereto to refrain from performing its duties and obligations hereunder, or
a party's performance hereunder shall be directly violative of a court order
directed at such party, then, to the extent necessary to comply with such court
order, this Management Services Agreement shall be deemed suspended. In no event
shall such suspension be construed to relieve either party's obligation under
this Section 7.2(d) and the parties will immediately commence good faith
negotiations regarding a new service arrangement or compensation structure that
is in compliance with any such court order, which arrangement or structure will
allocate the economic aspects of the relationship between the parties in a
manner as nearly as possible as that intended by this Management Services
Agreement.
7.3 Effects of Termination. Upon termination of this Management Services
----------------------
Agreement, as heretofore provided, neither party shall have any further
obligations hereunder except for (i) obligations accruing prior to the date of
termination, including, without limitation, payment of the Management Fees,
Office Expense and Practice Expense relating to services provided prior to the
termination of this Management Services Agreement, (ii) obligations, promises or
covenants set forth herein that are expressly set forth herein to extend beyond
the Term under the circumstances giving rise to such termination, including,
without limitation, indemnity, confidentiality and noncompetition provisions and
Section 7.7, which provisions shall survive the expiration or termination of
this Management Services Agreement by Business Manager for cause, and (iii) the
applicable obligations of Practice and Business Manager described in Section 7.4
or 7.5 hereof. In effectuating the provisions of this Section 7.3, Practice
specifically acknowledges and agrees that Business Manager shall continue to
collect and receive on behalf of Practice all cash collections from accounts
receivable in existence at the time this Management Services Agreement is
terminated, it being understood that such cash collections will be applied in
accordance with Section 4.9 hereof, and will represent, in part, compensation to
Business Manager for management services already rendered and compensation on
accounts receivable purchased by Business Manager. Upon the expiration or
termination of this Management Services Agreement for any reason or cause
whatsoever, Business Manager shall surrender to Practice all books and records
pertaining to Practice's medical practice.
7.4 Repurchase Obligation. Upon termination of this Management Services
---------------------
Agreement by Business Manager for cause or by Practice without cause, Business
Manager shall have the right, but not the obligation, to require Practice to
comply with the terms and conditions of this Section 7.4. In the event Business
Manager exercises such right by delivering notice to Practice within sixty (60)
days of such termination, then Practice shall be required to:
(a) Purchase from Business Manager at the greater of book or fair
market value the intangible assets, deferred charges and all other amounts on
the books of Business Manager relating to the Management Services Agreement as
adjusted, through the last day of the month
42
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
Practice, each selecting a duly qualified appraiser, who in turn will agree on a
third appraiser. This agreed-upon appraiser shall perform the appraisal which
shall be binding on both parties. In the event either party fails to select an
appraiser within fifteen (15) days of the selection of an appraiser by the other
party, the appraiser selected by the other party shall make the selection of the
third-party appraiser;
(c) Purchase at the greater of book or fair market value all
improvements, additions, or leasehold improvements that have been made by
Business Manager at any Office and that relate solely to the performance of
Business Manager's obligations under this Management Services Agreement;
(d) Assume all debt and all contracts, payables and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased hereunder as an Office by Business Manager;
and
(e) Purchase from Business Manager: (i) at book value all of the
equipment listed in the ECM Transaction Agreements or the exhibits thereto and
(ii) at the greater of book or fair market value all of the equipment which (A)
was owned by the Predecessor Professional Corporation (but not any subsidiary
thereof) immediately prior to the effective date of the Stock Purchase Agreement
and (B) was owned by Business Manager immediately following the consummation of
the Stock Purchase Agreement, including all replacements and additions thereto
made by Business Manager pursuant to the performance of its obligations under
this Management Services Agreement, and all other assets, including inventory
and supplies, and tangibles and intangibles, set forth on the books of Business
Manager as adjusted through the last day of the month most recently ended prior
to the date of such termination in accordance with GAAP to reflect operations of
the Office, depreciation, amortization and other adjustments of assets shown on
the books of Business Manager.
In the event Business Manager exercises its rights pursuant to this Section 7.4,
Practice shall have the obligation to purchase all, and not less than all, of
the items listed in subparagraphs (a) through (e) above. In no event, however,
shall this Section 7.4 be construed as enabling Practice to repurchase any
assets owned by any subsidiaries of Predecessor Professional Corporation or used
in connection with the operation of the ambulatory surgery centers owned and
operated by subsidiaries of Predecessor Professional Corporation prior to the
effective date of the Stock Purchase Agreement (the "ASC Assets "). The ASC
Assets are expressly excluded from the assets enumerated in subparagraphs (a)
through (e) above, and Practice shall have no right to repurchase the ASC Assets
under this Section 7.4, unless Business Manager shall so elect in writing, in
which case Practice shall be required to repurchase the ASC Assets at the
greater of
43
the then book or fair market value. For purposes of this Article 7, "fair market
value" of a particular item shall be an amount mutually agreed upon by Practice
and Business Manager. If Practice and Business Manager are unable to reach
agreement on such value after ten (10) days of deliberations, then such fair
market value shall be determined by an independent, duly qualified appraiser
mutually agreed upon by Practice and Business Manager. If Practice and Business
Manager cannot agree upon an appraiser within ten (10) days, then each party
shall select a duly qualified appraiser, who in turn will select a third
appraiser. This agreed-upon appraiser shall perform the appraisal which shall be
binding upon both parties. All expenses of such appraisal shall be borne fifty
percent (50%) by Business Manager and fifty percent (50%) by Practice.
7.5 Repurchase Option. Upon termination of this Management Services
-----------------
Agreement by Practice for cause pursuant to Section 7.2(b) hereof, by Business
Manager without cause or upon expiration of the Term, Practice shall have the
right, but not the obligation, to:
(a) Purchase from Business Manager at book value the intangible
assets, deferred charges and all other amounts on the books of Business Manager
relating to the Management Services Agreement as adjusted, through the last day
of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of the intangible
assets, deferred charges or covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
or then book value thereof. In the event of any repurchase of real property, the
appraised value shall be determined in accordance with the appraisal mechanism
described in Section 7.4 hereof;
(c) Purchase at 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 by Business Manager; and
(e) Purchase from Business Manager: (i) at book value all of the
equipment listed in the ECM Transaction Agreements or the exhibits thereto, and
(ii) at the greater of book or fair market value all of the equipment which (A)
was owned by the Predecessor Professional Corporation (but not any subsidiary
thereof) immediately prior to the effective date of the Stock Purchase Agreement
and (B) was owned by Business Manager immediately following the Consummation of
the Stock Purchase Agreement, including all replacements and additions thereto
made by Business Manager pursuant to the performance of its obligations under
this Management Services Agreement, and all other tangible assets, including
inventory and supplies, set forth on the books of Business Manager as adjusted
through the last day of the month most recently ended prior to the date of such
termination in accordance with GAAP to reflect operations of the Office,
44
depreciation, amortization and other adjustments of assets shown on the books of
Business Manager.
In the event Practice exercises its rights pursuant to this Section 7.5,
Practice shall have the obligation to purchase all, and not less than all, of
the items listed in subparagraphs (a) through (e). In no event, however, shall
this Section 7.5 be construed as enabling Practice to repurchase the ASC Assets.
The ASC Assets are expressly excluded from the assets enumerated in
subparagraphs (a) through (e) above and Practice shall have no right to
repurchase the ASC Assets under this Section 7.5 unless Business Manager shall
so elect in writing, in which case Practice shall be required to repurchase the
ASC Assets at fair market value. In lieu of paying cash for the items described
in this Section 7.5 or under Section 7.4, Practice shall have the option of
using Stock (as defined in the Original Transaction Agreements) contributed by
the Physician-Shareholders to Practice to transfer to Business Manager that
number of shares of Stock (as such term is defined in the Original Transaction
Agreements) which, based on the then fair market value of such shares
(determined in accordance with a consistent application of the valuation
procedure established under Section 4.2(g) of the Employment Agreements), equals
the cash amount required pursuant to this Section 7.5. or under Section 7.4.
7.6 Closing of Repurchase. Except as expressly provided in Section 7.5
---------------------
hereof, Practice shall pay cash for the repurchased assets. The amount of the
purchase price shall be reduced by the amount of debt and liabilities of
Business Manager, if any, assumed by Practice. Practice and, if required by
law, any Physician associated with Practice, shall execute such documents as may
be required, (i) for Practice to assume the liabilities set forth in Section
7.4(d) or 7.5(d) hereof, as applicable, and (ii) for Practice to indemnify or
remove Business Manager from any liability with respect to such repurchased
asset with respect to any property leased or subleased by Business Manager.
Business Manager shall execute such documents as may be required to convey the
assets, free and clear of all liens (except for those liens assumed by
Practice). The closing date for the repurchase shall be determined by mutual
agreement of Practice and Business Manager but shall in no event occur later
than one hundred eighty (180) days from the date of notice of termination. The
termination of this Management Services Agreement shall become effective upon
the closing of the sale of the assets under Section 7.4 or 7.5 hereof, as the
case may be, and all parties shall be released from any restrictive covenants
provided for in Section 5.7 hereof on such closing date. From and after any
termination, each party shall provide the other party with reasonable access to
the books and records then owned by it to permit such requesting party to
satisfy reporting and contractual obligations that may be required of it.
7.7 Rights and Remedies. In the event of a material breach of this
-------------------
Management Services Agreement by either party hereunder, the nonbreaching party
shall have, in addition to any other rights and remedies contained in this
Management Services Agreement, all rights and remedies available to such party
at law or equity. Without limiting the generality of the foregoing, the parties
acknowledge and agree that Business Manager entered into this Management
Services Agreement with the understanding that the Term of this Management
Services Agreement would be forty years. In the event of a material breach
hereunder by Practice, the parties acknowledge and agree that the actual damages
to be suffered by Business Manager will be difficult to ascertain.
45
Practice recognizes that, in the event Practice shall fail to perform, observe
or discharge any of its duties, obligations or liabilities under this Management
Services Agreement, any remedy at law may prove to be inadequate relief to
Business Manager. Therefore, Practice agrees that, if Business Manager so elects
and in addition to any other remedies available at law or equity, Business
Manager shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages, to specific
performance of any provision hereof. In addition to all other remedies of
Business Manager for any material breach hereunder by Practice, and without
limiting any and all rights set forth herein, Business Manager may set-off any
and all amounts which are due or which Business Manager reasonably believes will
become due and owing to Business Manager under this Agreement and against any
and all amounts which are held in escrow pursuant to the terms and conditions of
an Escrow Agreement by and among Business Manager, Practice, certain Physician-
Shareholders of Practice, and Xxxxxx Trust and Savings Bank dated as of March 3,
1997, and an Amended and Restated Escrow Agreement by and among Business
Manager, Practice, certain Physician-Shareholders of Practice and EyeCare
Midwest LLC, and Xxxxxx Trust and Savings Bank dated as of the Effective Date.
7.8 Interpretation. The purpose and intent of this Article 7 is to
--------------
establish the limited instances in which a party may terminate this Management
Services Agreement. Unless the parties mutually agree to terminate this
Management Services Agreement, neither party shall be entitled to terminate this
Management Services Agreement prior to the expiration of the Term unless a
party's breach gives rise to a termination "for cause" pursuant to Section
7.2(a) or (b) hereof, as the case may be. Nothing in this Management Services
Agreement (including Section 7.4 hereof) shall be construed as permitting
Practice to terminate this Management Services Agreement without cause.
ARTICLE VII
MEDIATION AND ARBITRATION
The parties hereto shall negotiate in good faith to resolve any
controversy, dispute, claim or disagreement arising out of or relating to this
Management Services Agreement or the breach of this Management Services
Agreement. Any such dispute, controversy, disagreement or claim (including,
without limitation, tort claims, requests for provisional remedies or other
interim relief, and issues as to arbitrability of any matter) arising from any
provision in this Management Services Agreement which specifically provides for
arbitration as a potential remedy, that cannot be settled through negotiation
shall be settled (a) first, by the parties trying in good faith to settle the
dispute by mediation under the Commercial Mediation Rules of the American
Arbitration Association ("AAA") (such mediation session to be held in Kansas
City, Missouri and to commence within fifteen (15) days after the appointment of
the mediator by the AAA), and (b) if the dispute, controversy, disagreement or
claim cannot be settled by mediation, then by arbitration administered by the
AAA under its Commercial Arbitration Rules (such arbitration to be held in
Kansas City, Missouri before a single arbitrator mutually agreed upon by the
parties hereto and to commence with fifteen (15) days after the appointment of
the arbitrator by the AAA), and judgment on the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. The parties
acknowledge that all other disputes arising under this Management Services
46
Agreement, including, without limitation, any allegations of breach by either
party, shall not be subject to arbitration.
ARTICLE IX
MISCELLANEOUS
9.1 Administrative Services Only. Nothing in this Management Services
----------------------------
Agreement is intended or shall be construed to allow Business Manager to
exercise control or direction over the manner or method by which Practice and
its Physicians and Optometrists perform Medical Services or other professional
health care services. The rendition of all Medical Services, including, but not
limited to, the prescription or administration of medicine and drugs shall be
the sole responsibility of Practice and its Physicians and Optometrists, and
Business Manager shall not interfere in any manner or to any extent therewith.
Nothing contained herein shall be construed to permit Business Manager to engage
in the practice of medicine, it being the sole intention of the parties hereto
that the services to be rendered to Practice by Business Manager are solely for
the purpose of providing nonmedical management and administrative services to
Practice to enable Practice to devote its full time and energies to the
professional conduct of its medical practice and provision of Medical Services
to its patients and not to administration or practice management. Practice,
through the Physicians and Optometrists, shall be responsible for and shall have
complete authority, responsibility, supervision and control over the opticians
and other employees of Business Manager providing services in connection with
the Dispensary Business, consistent with the requirements necessary to satisfy
the "in-office ancillary services exception" to the Xxxxx Act.
9.2 Status of Contractor. It is expressly acknowledged that the parties
--------------------
hereto are "independent contractors," and nothing in this Management Services
Agreement is intended and nothing shall be construed to allow either party to
exercise control or direction over the manner or method by which the other party
performs the services that are the subject matter of this Management Services
Agreement; provided that the services to be provided hereunder shall be
furnished in a manner consistent with the standards governing such services and
the provisions of this Management Services Agreement. Each party understands
and agrees that (i) neither party will withhold on behalf of the other party any
sums for income tax, unemployment insurance, social security or any other
withholding pursuant to any law or requirement of any governmental body or make
available any of the benefits afforded to its employees, (ii) all of such
payments, withholdings and benefits, if any, are the sole responsibility of the
party incurring the liability, and (iii) each party will indemnify and hold the
other harmless from any and all loss or liability arising with respect to such
payments, withholdings and benefits, if any.
9.3 Notices. Any notice, demand or communication required, permitted or
-------
desired to be given hereunder shall be in writing and shall be served on the
parties at the following respective addresses:
Practice:
47
Hunkeler Eye Centers, P.C.
0000 Xxxxxxxxxx
Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Physician members of Policy Board
with a copy to:
Xxxxxxx & Xxxx X.X.
0000 Xxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Esq.
Business Manager:
NovaMed Management of Kansas City,
Inc.
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
Xxxx X. Xxxxxxxx, Xx.
with a copy to:
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted or desired to be given hereunder shall be sent
either (a) by hand delivery, in which case notice shall be deemed received when
actually delivered, (b) by prepaid certified or registered first class mail,
return receipt requested, in which case notice shall be deemed received five
calendar days after deposit, postage prepaid in the United States Mail, (c) by
facsimile if also delivered by hand, or deposited in the United States Mail,
postage prepaid, registered or certified mail, on or before two (2) business
days after its delivery by facsimile, in which case notice shall be deemed
received one (1) business day after the facsimile transmission, or (d) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after prepaid deposit with such courier.
48
9.4 Governing Law. This Management Services Agreement shall be governed
-------------
by the laws of the State of Missouri applicable to agreements to be performed
wholly within the State of Missouri. Missouri law was chosen by the parties
after negotiation to govern interpretation of this Management Services
Agreement.
9.5 Assignment. Except as may be herein specifically provided to the
----------
contrary, this Management Services Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective legal representatives,
successors and permitted assigns.
(a) Practice may not assign this Management Services Agreement without
the prior written consent of Business Manager, which consent may be withheld in
Business Manager's discretion. The sale, transfer, pledge or assignment of any
of the voting interests of Practice held by any Physician-Shareholder or the
issuance by Practice of voting interests to any other person, or any combination
of such transactions within a period of one (1) year, such that the existing
Physician-Shareholders in Practice immediately prior to such transactions or the
beginning of the one-year period, as applicable, fail to maintain a majority of
the voting interests in Practice shall be deemed an attempted assignment by
Practice, and shall be null and void unless consented to in writing by Business
Manager prior to any such transfer or issuance. Any breach of this provision,
whether or not void or voidable, shall constitute a material breach of this
Management Services Agreement, and in the event of such breach, Business Manager
may terminate this Management Services Agreement upon thirty (30) days' notice
to Practice. The parties agree Business Manager or any transferee shall have
the right to (i) assign its rights and obligations hereunder to any third party
and (ii) collaterally assign its interest in this Management Services Agreement
and its other rights hereunder to any financial institution or other third party
without the consent of Practice.
(b) Business Manager or permitted assignee shall have the right to
assign its rights, duties and obligations hereunder without the consent of
Practice;
(i) to any Affiliate of Business Manager or, NovaMed Parent,
including without limitation any direct or indirect majority owned subsidiary of
NovaMed Parent;
(ii) in connection with and in contemplation of a
reorganization, merger, consolidation or sale of all or substantially all of the
capital stock or assets of NovaMed Parent (or any other transaction
substantially similar in effect); and
(iii) as a collateral assignment of its rights (but not its
duties) to any financial institution or other entity.
9.6 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.
9.7 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
49
recover the costs and expenses of such action so incurred, including, without
limitation, reasonable attorneys' fees.
9.8 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.
9.9 Additional Assurances. Except as may be specifically provided herein
---------------------
to the contrary, the provisions of this Management Services Agreement shall be
self-operative and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute such
additional instruments and take such additional acts as are reasonable, and as
the requesting party may reasonably deem necessary, to effectuate this
Management Services Agreement.
9.10 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.
9.11 Force Majeure. Neither party shall be liable or deemed to be in
-------------
default for any delay or failure in performance under this Management Services
Agreement or other interruption of service deemed to result, directly or
indirectly, from acts of God, civil or military authority, acts of public enemy,
war, accidents, explosions, earthquakes, floods, failure of transportation,
strikes or other work interruptions by either party's employees, or any other
similar cause beyond the reasonable control of either party unless such delay or
failure in performance is expressly addressed elsewhere in this Management
Services Agreement.
9.12 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, 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.
9.13 Divisions and Headings. The divisions of this Management Services
----------------------
Agreement into articles, sections and subsections, and the use of captions and
headings in connection
50
therewith is solely for convenience and shall not affect in any way the meaning
or interpretation of this Management Services Agreement.
9.14 Amendments and Management Services Agreement Execution. This
------------------------------------------------------
Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of Practice and Business Manager by their
respective duly authorized officers and Representatives. Each multiple copy
shall be deemed an original, but all multiple copies together shall constitute
one and the same instrument.
9.15 Entire Management Services Agreement. With respect to the subject
------------------------------------
matter of this Management Services Agreement, this Management Services Agreement
amends and restates, and supersedes all previous contracts, including, without
limitation, the Original HEC MSA (which this Management Services Agreement
amends and restates) and the EyeCare Midwest MSA, and constitutes the entire
agreement between the parties. Notwithstanding the foregoing, execution of this
Management Services Agreement will not impair or otherwise limit the ability of
either party to enforce the provisions of the Original HEC MSA or the EyeCare
Midwest MSA with respect to obligations accruing under the Original HEC MSA or
the EyeCare Midwest MSA prior to the Effective Date of this Management Services
Agreement, including, without limitation, payment of fees and expenses relating
to services provided prior to the Effective Date of this Management Services
Agreement, except to the extent determined not to be payable in connection with
the execution of this Management Services Agreement. Neither party shall be
entitled to benefits other than those specified herein. Except as otherwise
provided herein, no prior oral statements or contemporaneous negotiations or
understandings or prior written material not specifically incorporated herein
shall be of any force and effect, and no changes in or additions to this
Management Services Agreement shall be recognized unless incorporated herein by
amendment as provided herein, such amendment to become effective on the date
stipulated in such amendment. The parties specifically acknowledge that, in
entering into and executing this Management Services Agreement, the parties rely
solely upon the representations and agreements contained in this Management
Services Agreement and no others.
51
IN WITNESS WHEREOF, Practice and Business Manager have caused this
Management Services Agreement to be executed by their duly authorized
representatives, all as of the day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
SPECIFICALLY ENFORCED BY THE PARTIES.
PRACTICE:
HUNKELER EYE CENTERS, P.C.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
-----------------------------------
Title: President
----------------------------------
BUSINESS MANAGER:
NOVAMED MANAGEMENT OF KANSAS CITY, INC.,
a Missouri corporation
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxx,
President
Business Manager shall have the right to utilize NovaMed EyeCare
Management, L.L.C. ("NovaMed Management") to provide Management Services
pursuant to this Agreement. NovaMed Management shall assist Business Manager in
rendering Management Services under this Agreement and, to the extent Business
Manager does not have the ability to provide such Management Services, NovaMed
Management shall provide and, to the extent necessary, guarantee the performance
of, any and all obligations of Business Manager.
NOVAMED EYECARE MANAGEMENT, LLC, a Delaware
limited liability company
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxx,
President
EXHIBIT 1.4
MID-YEAR BUDGET
See Attached
Hunkeler Eye Centers, P.C.
_______________________________________________________________________________
1999 MSA Budget
Description Jan Feb Mar Apr May Jun
--------------------------------- ----------------- ----------------- -----------------
Principal Services
Revenue
-------
Principal Services revenue * * * * * *
ASC facility revenue * * * * * *
Optical revenue - glasses * * * * * *
Optical revenue - contacts * * * * * *
Optometric revenue * * * * * *
Other revenue * * * * * *
Contractual adjustments * * * * * *
* * * * * *
* * * * * *
Other Revenue * * * * * *
Principal Services Budgeted Revenue * * * * * *
Expenses
--------
Salaries and Wages:
Center Staff Salaries: * * * * * *
----------------------
Administration * * * * * *
Technician * * * * * *
Nurses * * * * * *
Other salaries * * * * * *
Overtime pay * * * * * *
* * * * * *
Payroll Taxes & Benefits
------------------------
Vacation & leave pay * * * * * *
Bonuses * * * * * *
Incentive compensation * * * * * *
FICA Tax * * * * * *
SUI * * * * * *
FUI * * * * * *
Other payroll taxes * * * * * *
Labor allocation * * * * * *
401k Match * * * * * *
Life & Disability ins. * * * * * *
Employee Health ins. * * * * * *
Benefits %
Total Salaries & Wages * * * * * *
MD/OD Compensation * * * * * *
* * * * * *
Pharmaceuticals and supplies: * * * * * *
Principal Services supplies * * * * * *
ASC - general * * * * * *
ASC - refractive * * * * * *
Pillar point fees * * * * * *
Optical COS - glasses * * * * * *
Optical COS - contacts * * * * * *
Optometric supplies * * * * * *
Total Pharmac. & Supplies * * * * * *
* Confidential portions omitted and filed separately with the commission.
Description Jul Aug Sep Oct Nov Dec Total 1998 %
---------------------------------------------------------------------------------------------- -------------------
Principal Services
Revenue
-------
Principal Services revenue * * * * * * * * * * *
ASC facility revenue * * * * * * * * * * *
Optical revenue - glasses * * * * * * * * * * *
Optical revenue - contacts * * * * * * * * * * *
Optometric revenue * * * * * * * * * * *
Other revenue * * * * * * * * * *
Contractual adjustments * * * * * * * * * *
* * * * * * * * * *
* * * * * * * * * *
Other Revenue * * * * * * * * * *
Principal Services Budgeted Revenue * * * * * * * * * * *
Expenses
--------
Salaries and Wages:
Center Staff Salaries: * * * * * * * * * *
----------------------
Administration * * * * * * * * * *
Technician * * * * * * * * * *
Nurses * * * * * * * * * *
Other salaries * * * * * * * * * *
Overtime pay * * * * * * * * * * #VALUE!
* * * * * * * * * *
Payroll Taxes & Benefits
------------------------
Vacation & leave pay * * * * * * * * * *
Bonuses * * * * * * * * * *
Incentive compensation * * * * * * * * * *
FICA Tax * * * * * * * * * *
SUI * * * * * * * * * *
FUI * * * * * * * * * *
Other payroll taxes * * * * * * * * * *
Labor allocation * * * * * * * * * *
401k Match * * * * * * * * * *
Life & Disability ins. * * * * * * * * * *
Employee Health ins. * * * * * * * * * *
#VALUE!
Benefits % #VALUE!
Total Salaries & Wages * * * * * * * * * * *
MD/OD Compensation * * * * * * * * * * *
* * * * * * * * * * *
Pharmaceuticals and supplies: * * * * * * * * * * *
Principal Services supplies * * * * * * * * * * *
ASC - general * * * * * * * * * * *
ASC - refractive * * * * * * * * * * *
Pillar point fees * * * * * * * * * * *
Optical COS - glasses * * * * * * * * * * *
Optical COS - contacts * * * * * * * * * * *
Optometric supplies * * * * * * * * * * *
Total Pharmac. & Supplies * * * * * * * * * * *
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Principal Services * * * * * * * * *
G&A expenses: * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Office & Administrative: * * * * * * * * *
Office Supplies * * * * * * * * *
Office supplies * * * * * * * * *
Software/computer expense * * * * * * * * *
Food service * * * * * * * * *
Bank charges * * * * * * * * *
Credit card fees * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Postage & freight * * * * * * * * *
Employee & patient programs * * * * * * * * *
Continuing education (1) * * * * * * * * *
Dues and subscriptions * * * * * * * * *
Telephone * * * * * * * * *
Utilities * * * * * * * * *
Printing * * * * * * * * *
Misc. office expense * * * * * * * * *
Total Office & Admin. Expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Marketing: * * * * * * * * *
Advertising * * * * * * * * *
Marketing-Other * * * * * * * * *
Total Marketing * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Professional and Service Fees: * * * * * * * * *
Legal * * * * * * * * *
Accounting * * * * * * * * *
Other prof. consulting * * * * * * * * *
Collection fees * * * * * * * * *
Answering service * * * * * * * * *
Linens & uniforms * * * * * * * * *
Other services * * * * * * * * *
Temporary services * * * * * * * * *
Total Professional Fees * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Rental Expense: * * * * * * * * *
Building rent * * * * * * * * *
Other office rent & parking * * * * * * * * *
Equipment leases * * * * * * * * *
Optical equipment rent * * * * * * * * *
Total Rent Expense * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Repairs & Maintenance: * * * * * * * * *
Building maintenance * * * * * * * * *
Repairs-equipment * * * * * * * * *
Non-capitalized tools * * * * * * * * *
Total Repairs & Maint. * * * * * * * * *
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Principal Services * * * * * * * *
G&A expenses: * * * * * * * *
* * * * * * * *
* * * * * * * *
Office & Administrative: * * * * * * * *
Office Supplies * * * * * * * *
Office supplies * * * * * * * *
Software/computer expense * * * * * * * *
Food service * * * * * * * *
Bank charges * * * * * * * *
Credit card fees * * * * * * * *
* * * * * * * *
* * * * * * * *
Postage & freight * * * * * * * *
Employee & patient programs * * * * * * * *
Continuing education (1) * * * * * * * *
Dues and subscriptions * * * * * * * *
Telephone * * * * * * * *
Utilities * * * * * * * *
Printing * * * * * * * *
Misc. office expense * * * * * * * *
Total Office & Admin. Expenses * * * * * * * *
* * * * * * * *
* * * * * * * *
Marketing: * * * * * * * *
Advertising * * * * * * * *
Marketing-Other * * * * * * * *
Total Marketing * * * * * * * *
* * * * * * * *
* * * * * * * *
Professional and Service Fees: * * * * * * * *
Legal * * * * * * * *
Accounting * * * * * * * *
Other prof. consulting * * * * * * * *
Collection fees * * * * * * * *
Answering service * * * * * * * *
Linens & uniforms * * * * * * * *
Other services * * * * * * * *
Temporary services * * * * * * * *
Total Professional Fees * * * * * * * *
* * * * * * * *
* * * * * * * *
Rental Expense: * * * * * * * *
Building rent * * * * * * * *
Other office rent & parking * * * * * * * *
Equipment leases * * * * * * * *
Optical equipment rent * * * * * * * *
Total Rent Expense * * * * * * * *
* * * * * * * *
* * * * * * * *
Repairs & Maintenance: * * * * * * * *
Building maintenance * * * * * * * *
Repairs-equipment * * * * * * * *
Non-capitalized tools * * * * * * * *
Total Repairs & Maint. * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Principal Services * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Taxes and insurance: * * * * * * * * *
MalPrincipal Services * * * * * * * * *
Liability & casualty * * * * * * * * *
Workers' compensation ins. * * * * * * * * *
D&O * * * * * * * * *
Key Man Life * * * * * * * * *
Other insurance * * * * * * * * *
Property tax * * * * * * * * *
Sales & Use tax * * * * * * * * *
Property tax * * * * * * * * *
Other taxes * * * * * * * * *
Total Taxes & Ins. * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Other Expenses: * * * * * * * * *
Travel & entertainment (1) * * * * * * * * *
Recruitment & relocation * * * * * * * * *
Auto & Van * * * * * * * * *
Contracted patient transport. * * * * * * * * *
Donations and gifts * * * * * * * * *
Allocated IT/Computing costs * * * * * * * * *
Other * * * * * * * * *
Total Other Expense * * * * * * * * *
* * * * * * * * *
Total G&A expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Depreciation & Amortization: * * * * * * * * *
Building depreciation * * * * * * * * *
Equipment depreciation * * * * * * * * *
Goodwill amortization * * * * * * * * *
Other intangible amortization * * * * * * * * *
Amortization of deferred charges * * * * * * * * *
* * * * * * * * *
Total Depr. and Amortization * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Interest (income) and expense: * * * * * * * * *
Depository Interest * * * * * * * * *
Investment Income * * * * * * * * *
Bank Line Interest Expense * * * * * * * * *
Cap. Lease Interest Expense * * * * * * * * *
Other Interest Expense * * * * * * * * *
* * * * * * * * *
Total Interest (income)/expense * * * * * * * * *
Principal Services Budgeted Office Expense * * * * * * * * *
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Principal Services * * * * * * * *
* * * * * * * *
* * * * * * * *
Taxes and insurance: * * * * * * * *
MalPrincipal Services * * * * * * * *
Liability & casualty * * * * * * * *
Workers' compensation ins. * * * * * * * *
D&O * * * * * * * *
Key Man Life * * * * * * * *
Other insurance * * * * * * * *
Property tax * * * * * * * *
Sales & Use tax * * * * * * * *
Property tax * * * * * * * *
Other taxes * * * * * * * *
Total Taxes & Ins. * * * * * * * *
* * * * * * * *
* * * * * * * *
Other Expenses: * * * * * * * *
Travel & entertainment (1) * * * * * * * *
Recruitment & relocation * * * * * * * *
Auto & Van * * * * * * * *
Contracted patient transport. * * * * * * * *
Donations and gifts * * * * * * * *
Allocated IT/Computing costs * * * * * * * *
Other * * * * * * * *
Total Other Expense * * * * * * * *
* * * * * * * *
Total G&A expenses * * * * * * * *
* * * * * * * *
* * * * * * * *
Depreciation & Amortization: * * * * * * * *
Building depreciation * * * * * * * *
Equipment depreciation * * * * * * * *
Goodwill amortization * * * * * * * *
Other intangible amortization * * * * * * * *
Amortization of deferred charges * * * * * * * *
* * * * * * * *
Total Depr. and Amortization * * * * * * * *
* * * * * * * *
* * * * * * * *
Interest (income) and expense: * * * * * * * *
Depository Interest * * * * * * * *
Investment Income * * * * * * * *
Bank Line Interest Expense * * * * * * * *
Cap. Lease Interest Expense * * * * * * * *
Other Interest Expense * * * * * * * *
* * * * * * * *
Total Interest (income)/expense * * * * * * * *
Principal Services Budgeted Office Expense * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Principal Services * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Principal Services Budgeted * * * * * * * * *
Practice Expense * * * * * * * * *
* * * * * * * * *
Principal Services Monthly Fee * * * * * * * * *
* * * * * * * * *
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Principal Services * * * * * * * *
* * * * * * * *
* * * * * * * *
Principal Services Budgeted * * * * * * * *
Principal Expense * * * * * * * *
* * * * * * * *
Principal Services Monthly Fee * * * * * * * *
* * * * * * * *
* Confidential portions omitted and filed separately with the commission.
Hunkeler Eye Centers, P.C.
________________________________________________________________________________
1999 MSA Budget
Description Jan Feb Mar Apr May Jun
--------------------------------- -------------------------------------------------------
Non-Ophthalmic Business * * * * * *
* * * * * *
Revenue * * * * * *
------- * * * * * *
Practice revenue * * * * * *
ASC facility revenue * * * * * *
Optical revenue * * * * * *
Optometric revenue * * * * * *
Alliance revenue * * * * * *
Research & Consulting * * * * * *
Other revenue * * * * * *
* * * * * *
* * * * * *
Laboratory revenue * * * * * *
* * * * * *
Non-Ophthalmic Business Budgeted Revenue * * * * * *
* * * * * *
Expenses * * * * * *
-------- * * * * * *
Salaries and Wages: * * * * * *
Center Staff Salaries: * * * * * *
----------------------
Administration * * * * * *
Technician/Nurses * * * * * *
PSR/Front Desk * * * * * *
Other salaries * * * * * *
Overtime pay * * * * * *
* * * * * *
Payroll Taxes & Benefits * * * * * *
------------------------
Vacation & leave pay * * * * * *
Bonuses * * * * * *
Incentive compensation * * * * * *
FICA Tax * * * * * *
SUI * * * * * *
FUI * * * * * *
Other payroll taxes * * * * * *
Labor allocation * * * * * *
401k Match * * * * * *
Life & Disability ins. * * * * * *
Employee Health ins. * * * * * *
* * * * * *
Benefits % * * * * * *
Total Salaries & Wages * * * * * *
* * * * * *
MD/OD Compensation * * * * * *
* * * * * *
* * * * * *
Pharmaceuticals and supplies: * * * * * *
Medical Supplies * * * * * *
COS - Glasses * * * * * *
COS - Contacts * * * * * *
COS - adjustments * * * * * *
Laboratory fees * * * * * *
Discounts & allowances * * * * * *
Optical - Other * * * * * *
Total Pharmac. & Supplies * * * * * *
Description Jul Aug Sep Oct Nov Dec Total 1998 %
--------------------------------- ----------------------------------------------------- -------------------
Non-Ophthalmic Business * * * * * * * * * * *
* * * * * * * * * * *
Revenue * * * * * * * * * * *
------- * * * * * * * * * * *
Practice revenue * * * * * * * * * * *
ASC facility revenue * * * * * * * * * * *
Optical revenue * * * * * * * * * * *
Optometric revenue * * * * * * * * * * *
Alliance revenue * * * * * * * * * * *
Research & Consulting * * * * * * * * * * *
Other revenue * * * * * * * * * * *
* * * * * * * * * * *
* * * * * * * * * * *
Laboratory revenue * * * * * * * * * * *
* * * * * * * * * * *
Non-Ophthalmic Business Budgeted Revenue * * * * * * * * * * *
* * * * * * * * * * *
Expenses * * * * * * * * * * *
-------- * * * * * * * * * * *
Salaries and Wages: * * * * * * * * * * *
Center Staff Salaries: * * * * * * * * * * *
----------------------
Administration * * * * * * * * * * *
Technician/Nurses * * * * * * * * * * *
PSR/Front Desk * * * * * * * * * * *
Other salaries * * * * * * * * * * *
Overtime pay * * * * * * * * * * *
* * * * * * * * * * *
Payroll Taxes & Benefits * * * * * * * * * * *
------------------------
Vacation & leave pay * * * * * * * * * * *
Bonuses * * * * * * * * * * *
Incentive compensation * * * * * * * * * * *
FICA Tax * * * * * * * * * * *
SUI * * * * * * * * * * *
FUI * * * * * * * * * * *
Other payroll taxes * * * * * * * * * * *
Labor allocation * * * * * * * * * * *
401k Match * * * * * * * * * * *
Life & Disability ins. * * * * * * * * * * *
Employee Health ins. * * * * * * * * * * *
* * * * * * * * * * *
Benefits % * * * * * * * * * * *
Total Salaries & Wages * * * * * * * * * * *
* * * * * * * * * * *
MD/OD Compensation * * * * * * * * * * *
* * * * * * * * * * *
* * * * * * * * * * *
Pharmaceuticals and supplies: * * * * * * * * * * *
Medical Supplies * * * * * * * * * * *
COS - Glasses * * * * * * * * * * *
COS - Contacts * * * * * * * * * * *
COS - adjustments * * * * * * * * * * *
Laboratory fees * * * * * * * * * * *
Discounts & allowances * * * * * * * * * * *
Optical - Other * * * * * * * * * * *
Total Pharmac. & Supplies * * * * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
5
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Non-Ophthalmic Business * * * * * * * * *
G&A expenses: * * * * * * * * *
* * * * * * * * *
Office & Administrative: * * * * * * * * *
Office Supplies * * * * * * * * *
Office supplies * * * * * * * * *
Software/computer expense * * * * * * * * *
Food service * * * * * * * * *
Bank charges * * * * * * * * *
Credit card fees * * * * * * * * *
* * * * * * * * *
Postage & freight * * * * * * * * *
Employee & patient programs * * * * * * * * *
Continuing education * * * * * * * * *
Dues and subscriptions * * * * * * * * *
Telephone * * * * * * * * *
Utilities * * * * * * * * *
Printing * * * * * * * * *
Misc. office expense * * * * * * * * *
Total Office & Admin. Expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Marketing: * * * * * * * * *
Advertising * * * * * * * * *
Marketing - Other * * * * * * * * *
Total Marketing * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Professional and Service Fees: * * * * * * * * *
Legal * * * * * * * * *
Accounting * * * * * * * * *
Other prof. consulting * * * * * * * * *
Collection fees * * * * * * * * *
Answering service * * * * * * * * *
Linens & uniforms * * * * * * * * *
Other services * * * * * * * * *
Temporary services * * * * * * * * *
Total Professional Fees * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Rental Expense: * * * * * * * * *
Building rent * * * * * * * * *
Other office rent & parking * * * * * * * * *
Equipment leases * * * * * * * * *
Optical equipment rent * * * * * * * * *
Total Rent Expense * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Repairs & Maintenance: * * * * * * * * *
Building maintenance * * * * * * * * *
Repairs - equipment * * * * * * * * *
Non-capitalized tools * * * * * * * * *
Total Repairs & Maint. * * * * * * * * *
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Non-Ophthalmic Business * * * * * * * *
G&A expenses: * * * * * * * *
* * * * * * * *
Office & Administrative: * * * * * * * *
Office Supplies * * * * * * * *
Office supplies * * * * * * * *
Software/computer expense * * * * * * * *
Food service * * * * * * * *
Bank charges * * * * * * * *
Credit card fees * * * * * * * *
* * * * * * * *
Postage & freight * * * * * * * *
Employee & patient programs * * * * * * * *
Continuing education * * * * * * * *
Dues and subscriptions * * * * * * * *
Telephone * * * * * * * *
Utilities * * * * * * * *
Printing * * * * * * * *
Misc. office expense * * * * * * * *
Total Office & Admin. Expenses * * * * * * * *
* * * * * * * *
Marketing: * * * * * * * *
Advertising * * * * * * * *
Marketing - Other * * * * * * * *
Total Marketing * * * * * * * *
* * * * * * * *
* * * * * * * *
Professional and Service Fees: * * * * * * * *
Legal * * * * * * * *
Accounting * * * * * * * *
Other prof. consulting * * * * * * * *
Collection fees * * * * * * * *
Answering service * * * * * * * *
Linens & uniforms * * * * * * * *
Other services * * * * * * * *
Temporary services * * * * * * * *
Total Professional Fees * * * * * * * *
* * * * * * * *
* * * * * * * *
Rental Expense: * * * * * * * *
Building rent * * * * * * * *
Other office rent & parking * * * * * * * *
Equipment leases * * * * * * * *
Optical equipment rent * * * * * * * *
Total Rent Expense * * * * * * * *
* * * * * * * *
* * * * * * * *
Repairs & Maintenance: * * * * * * * *
Building maintenance * * * * * * * *
Repairs - equipment * * * * * * * *
Non-capitalized tools * * * * * * * *
Total Repairs & Maint. * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
6
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Non-Ophthalmic Business * * * * * * * * *
* * * * * * * * *
Taxes and Insurance: * * * * * * * * *
Malpractice * * * * * * * * *
Liability & casualty * * * * * * * * *
Workers' compensation ins. * * * * * * * * *
D&O * * * * * * * * *
Key Man Life * * * * * * * * *
Other insurance * * * * * * * * *
Property tax * * * * * * * * *
Sales & Use tax * * * * * * * * *
Property tax * * * * * * * * *
Other taxes * * * * * * * * *
Total Taxes & Ins. * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Other Expenses: * * * * * * * * *
Travel & entertainment * * * * * * * * *
Recruitment & relocation * * * * * * * * *
Auto & Van * * * * * * * * *
Contracted patient transport. * * * * * * * * *
Donations and gifts * * * * * * * * *
Allocated IT/Computing costs * * * * * * * * *
Other * * * * * * * * *
Total Other Expense * * * * * * * * *
* * * * * * * * *
Total G&A expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Depreciation & Amortization: * * * * * * * * *
Building depreciation * * * * * * * * *
Equipment depreciation * * * * * * * * *
Goodwill amortization * * * * * * * * *
Other intangible amortization * * * * * * * * *
Amortization of deferred charges * * * * * * * * *
* * * * * * * * *
Total Depr. and Amortization * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Interest (Income) and expense: * * * * * * * * *
Depository Interest * * * * * * * * *
Investment Income * * * * * * * * *
Bank Line Interest Expense * * * * * * * * *
Cap. Lease Interest Expense * * * * * * * * *
Other Interest Expense * * * * * * * * *
* * * * * * * * *
Total Interest (Income)/expense * * * * * * * * *
* * * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * * *
* * * * * * * * *
Office Expense * * * * * * * * *
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Non-Ophthalmic Business * * * * * * * *
* * * * * * * *
Taxes and Insurance: * * * * * * * *
Malpractice * * * * * * * *
Liability & casualty * * * * * * * *
Workers' compensation ins. * * * * * * * *
D&O * * * * * * * *
Key Man Life * * * * * * * *
Other insurance * * * * * * * *
Property tax * * * * * * * *
Sales & Use tax * * * * * * * *
Property tax * * * * * * * *
Other taxes * * * * * * * *
Total Taxes & Ins. * * * * * * * *
* * * * * * * *
* * * * * * * *
Other Expenses: * * * * * * * *
Travel & entertainment * * * * * * * *
Recruitment & relocation * * * * * * * *
Auto & Van * * * * * * * *
Contracted patient transport. * * * * * * * *
Donations and gifts * * * * * * * *
Allocated IT/Computing costs * * * * * * * *
Other * * * * * * * *
Total Other Expense * * * * * * * *
* * * * * * * *
Total G&A expenses * * * * * * * *
* * * * * * * *
* * * * * * * *
Depreciation & Amortization: * * * * * * * *
Building depreciation * * * * * * * *
Equipment depreciation * * * * * * * *
Goodwill amortization * * * * * * * *
Other intangible amortization * * * * * * * *
Amortization of deferred charges * * * * * * * *
* * * * * * * *
Total Depr. and Amortization * * * * * * * *
* * * * * * * *
* * * * * * * *
Interest (Income) and expense: * * * * * * * *
Depository Interest * * * * * * * *
Investment Income * * * * * * * *
Bank Line Interest Expense * * * * * * * *
Cap. Lease Interest Expense * * * * * * * *
Other Interest Expense * * * * * * * *
* * * * * * * *
Total Interest (Income)/expense * * * * * * * *
* * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * *
* * * * * * * *
Office Expense * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
7
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Non-Ophthalmic Business * * * * * * * * *
* * * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * * *
Practice Expense * * * * * * * * *
* * * * * * * * *
Non-Ophthalmic Business Monthly Fee * * * * * * * * *
Hunkeler Eye Centers, P.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Non-Ophthalmic Business * * * * * * * *
* * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * *
Practice Expense * * * * * * * *
* * * * * * * *
Non-Ophthalmic Business Monthly Fee * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
8
EXHIBIT 1.34(g)
EQUIPMENT
. Personal Property Leases (as defined in the Original Transaction Agreements).
EXHIBIT 1.48
PREEXISTING OBLIGATION PAYMENTS
. Any liabilities and obligations relating to severance and deferred
compensation obligations set forth in any employment agreement with any
Optometrist or Physician-Employee.
. any Excluded Liabilities (as defined in the Original Transaction Agreements).
EXHIBIT 3.1
MEMBERS OF POLICY BOARD
Regional Practice Representatives
---------------------------------
Xxxx Xxxxxxxx, M.D.
Xxxxxxx X. Xxxxx, M.D.
Business Manager Representatives
--------------------------------
E. Xxxxxxx Xxxxxxx
Xxxxxx X. Xxxxxxx
EXHIBIT 4.8
POWER OF ATTORNEY
See Attached
EXHIBIT 5.1
FORM OF EMPLOYMENT AGREEMENT (SHAREHOLDERS)
See Attached
EXHIBIT 5.1A
LIST OF PHYSICIAN-SHAREHOLDERS
The following are the Physician-Shareholders as of the Effective Date of
this Management Services Agreement:
Xxxxxxx X. Xxxxxxxxx, M.D.
Xxxxxxx X. Xxxxxxxxx, M.D.
Xxxxxx X. Xxxxxx, M.D.
Xxxxxxx X. Xxxxxxx, M.D.
Xxxx X. Xxxxxxxx, M.D.
Xxxxxxx X. Xxxx, M.D.
Xxxxx X. XxXxxxxx, M.D.
Xxxxxx X. Xxxxx, M.D.
Xxxxxx X. Xxxxx, M.D.
Xxxxxx X. Xxxxxxxxxxx, M.D.
Xxxxxxx X. Xxxxxx, M.D.
Xxxxxx X. Xxxx, M.D.
Xxxxxxx X. Xxxxx, M.D.
EXHIBIT 5.1B
FORM OF BUY-SELL AGREEMENT
The Buy-Sell Agreement referenced in Section 5.1(b) will address the following
concepts to the satisfaction of Business Manager and its counsel:
Applicable state statutes generally require that the shares of a
professional corporation held by a physician-shareholder be
transferred to a person qualified to render professional medical
services if (i) such shareholder dies, (ii) such shareholder becomes a
disqualified person, or (iii) the shares of a professional corporation
are transferred by operation of law or court decree to a disqualified
person. Illinois law requires that the articles of incorporation, by-
laws or a separate agreement provide for the purchase or redemption of
the shares of any shareholder upon death or disqualification.
Accordingly, the Buy-Sell Agreement must contain a provision providing
for (i) redemption, (ii) cross-purchase, or (iii) a combination
thereof, in the case of a shareholder's death or disqualification. In
addition, the transfer of shares to disqualified persons must be
specifically prohibited.
A provision must also be included which governs succession in the
case of death or disqualification of the last remaining shareholder of
the professional corporation. Business Manager and Practice will work
together to structure an arrangement mutually acceptable to both
parties.
Specifically, the Buy-Sell Agreement will incorporate the provisions set
forth in the form of agreement attached hereto as Schedule 1.
SCHEDULE 1
TO
EXHIBIT 5.1B
Definitions.
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"Act" means the [applicable state Medical Corporation Act or Professional
Corporation Act].
"NovaMed" means NovaMed EyeCare Management, LLC, a Delaware limited
liability company.
"NovaMed Agreement" means that certain ___________ Agreement dated as of
_________ __, 199_, by and among the Corporation, the Members and NovaMed.
["Partnership" means the limited partnership formed pursuant to that
certain Limited Partnership Agreement by and between __________ and __________,
dated ______________.] [If applicable]
"Selling Member" means a Member affected by a Triggering Event other than a
Final Triggering Event.
"Shares" means the shares of common stock of the Corporation, and any
shares of any other class of stock, presently authorized and issued or which the
Corporation may hereafter authorize and issue, including subscription and other
purchase rights relative to any such shares of stock and all securities and
obligations convertible into such shares of stock, in each case whether now or
hereafter issued.
"Transfer" means any sale, gift, bequest, distribution, disposition,
assignment, pledge or any other voluntary or involuntary transfer, disposition
or encumbrance, including any disposition by operation of law.
"Triggering Event" means any of the following events:
(a) the death of a Member;
(b) the disability of a Member (which is defined as a Member's
inability to engage in the practice of medicine for ninety (90) days
within any period of one hundred eighty (180) consecutive days);
(c) the disqualification of a Member from the practice of
medicine;
(d) the termination of a Member's employment or active
involvement with the Corporation for any reason; or
(e) the voluntary or involuntary transfer, transfer by operation
of law (including without limitation a transfer in connection with a
divorce or bankruptcy), or any other transfer or attempted transfer of
Shares or any right or interest therein in violation of this
Agreement.
Restriction on Transfer.
-----------------------
Each Member agrees not to make any Transfer of Shares that he or she now
owns or may hereafter own, outright or beneficially, except in accordance with
and as expressly permitted in this Agreement. Except as expressly permitted in
this Agreement, no Transfer of Shares may be made by any Member without the
prior written consent of the remaining Members, and no such Transfer shall be
effective unless and until the Transferee agrees in writing to be subject to and
bound by all of the terms, conditions and restrictions of this Agreement and the
NovaMed Agreement by signing a counterpart hereof and thereof. Any Transfer of
Shares not in strict compliance with this Agreement shall be null and void ab
--
initio.
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Additional Members.
------------------
The parties hereto acknowledge and agree that from time to time other
physicians may acquire Shares in the Corporation. Notwithstanding the
foregoing, the Corporation shall not issue any Shares to another person unless
such person agrees in writing to be subject to and bound by all of the terms,
conditions and restrictions of this Agreement and the NovaMed Agreement by
signing a counterpart hereof and thereof.
Licensing Requirement.
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Under no circumstances shall any Transfer or issuance of Shares of the
Corporation to an additional member be valid unless the proposed new or
additional member is a licensed physician in good standing under the laws of the
State of Missouri, except as otherwise permitted under the Act.
Final Triggering Event.
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(a) Application. Upon the occurrence of a Triggering Event affecting all
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Members simultaneously or affecting the last remaining Member(s) (each, a "Final
Triggering Event"), the following provisions shall apply and shall supersede any
other provision contained in this Agreement relating to cross-purchases or
redemptions of a Selling Member's Shares.
(b) Repurchase of Shares. Promptly upon the occurrence of a Final
--------------------
Triggering Event, but in any event not later than within three (3) days, the
Member(s) to whom such Final Triggering Event relates and any Selling Member
with respect to whom this Section __ supersedes the application of any other
provision of this Agreement pursuant to subsection (a) above, and/or such
Members' estates, transferees or other representatives (all such Members or such
Members' estates, transferees or other representatives, as the case may be,
hereinafter referred to as "Terminating Members") shall notify NovaMed's Medical
Director of the occurrence of such Final Triggering Event, and NovaMed's Medical
Director shall have the right to purchase Shares in
accordance with subsection (c) below or to designate a New Member of accordance
with the provisions of the NovaMed Agreement. Upon such designation, the
Terminating Members shall (i) sell to the Corporation, and the Corporation shall
purchase from each such Terminating Member, ninety-nine percent (99%) of all
Shares then held by each such Terminating Member, and (ii) sell to NovaMed's
Medical Director or the New Member (as defined in the NovaMed Agreement), as the
case may be, and NovaMed's Medical Director or such New Member, as the case may
be, shall purchase from each such Terminating Member, the remainder of the
Shares then held by each such Terminating Member, in accordance with the
provisions of this Section __.
(c) Purchase Price. The purchase price to be paid for each Terminating
--------------
Member's Shares (the "Purchase Price") shall be as follows:
(i) The Purchase Price for the Shares to be purchased by the
Corporation shall consist of each Terminating Member's pro rata share
of the [Partnership] interests held by the Corporation.
(ii) The Purchase Price for the Shares to be purchased by
NovaMed's Medical Director or the New Member, as the case may be,
shall be an amount equal to ______________________________________.
(d) Closing. The closing of any purchase and sale pursuant to this
-------
Section __ (the "Closing") shall take place within [thirty (30)] days after the
Final Triggering Event at the principal office of the Corporation or at such
other place as the parties to such purchase and sale may mutually agree. At the
Closing, each Terminating Member shall deliver certificates for the Shares to be
purchased, duly endorsed in blank, and such Shares shall be conveyed (i) to the
Corporation effective as of the close of business of the day of the Final
Triggering Event, and (ii) to NovaMed's Medical Director or the New Member, as
the case may be, effective as of the opening of business on the day after the
Final Triggering Event, in each case free and clear of all claims, liens,
encumbrances and other rights of third parties, and the Corporation and
NovaMed's Medical Director or the New Member, as the case may be, shall deliver
the Purchase Price in the form of instruments of transfer, in form and substance
satisfactory to the Terminating Members, assigning and transferring to the
Terminating Members, effective as of the date of the Final Triggering Event,
each Terminating Member's share of the [Partnership] interests and all of the
Corporation's right, title and interest therein, free and clear of all claims,
liens, encumbrances and other rights of third parties, or in immediately
available funds, as applicable.
(e) Taxable Year. The Corporation's taxable year shall be closed as of
------------
the close of business of the day of the Final Triggering Event.
(f) Violation of Law. In the event that the consummation of the
----------------
purchase and sale of Shares as contemplated under this Section __ violates
applicable law, the Terminating Members and NovaMed's Medical Director shall in
good faith negotiate and consummate an alternative transaction structure,
including without limitation, the purchase of the Corporation's assets and
assumption of the Corporation's liabilities by NovaMed's Medical Director or his
designee, which will allow (i) the continuation of the Corporation's business by
the Corporation or a successor entity, (ii) the continued performance by the
Corporation or a successor entity and NovaMed of
their respective obligations under that certain Management Services Agreement by
and between NovaMed and the Corporation, dated as of _______ __, 199_, and (iii)
the transfer of the [Partnership] interests held by the Corporation to the
Terminating Members.
(g) NovaMed's Failure to Designate New Member. In the event that
-----------------------------------------
NovaMed's Medical Director fails to elect to purchase Shares or to designate a
New Member as required pursuant to the NovaMed Agreement, the provisions of this
Section __ shall not be binding on the Corporation or the Terminating Members.
Legend on Certificates.
----------------------
The certificates representing all Shares now or hereafter owned by the
Members shall be subject to the terms of this Agreement, and shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
MEMBERS' AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION. THE SHARES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE
DISPOSED OF EXCEPT IN STRICT ACCORDANCE WITH THE TERMS OF THE
MEMBERS' AGREEMENT. BY ACCEPTING THE SHARES OF STOCK EVIDENCED BY
THIS CERTIFICATE, THE HOLDER AGREES TO BE BOUND BY THE MEMBERS'
AGREEMENT.
Termination.
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This Agreement and all restrictions on the transfer of Shares created
hereby shall terminate upon the bankruptcy or receivership of the Corporation or
the execution by all parties hereto of a written instrument terminating this
Agreement. Termination of this Agreement for any reason shall not affect any
right or remedy existing hereunder prior to the effective date of termination.
Binding Effect. This Agreement is binding upon, and shall inure to the
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benefit of, the Corporation, its successors, and assigns and to the Members and
their respective heirs, personal representatives, successors, and assigns.
EXHIBIT 5.2A-1
FORM OF EMPLOYMENT AGREEMENT (NON-SHAREHOLDERS)
See Attached
EXHIBIT 5.2A-2
FORM OF EMPLOYMENT AGREEMENT
EMPLOYED OPTOMETRISTS
EXHIBIT 5.2B
FORM OF INDEPENDENT CONTRACTOR AGREEMENT
See Attached
