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EXHIBIT 10.32
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
EMCARE, INC.
A DELAWARE CORPORATION
AND
EMERGENCY PHYSICIANS OF NORTHERN CALIFORNIA, INC.
A CALIFORNIA PROFESSIONAL CORPORATION
EFFECTIVE SEPTEMBER 1, 1996
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TABLE OF CONTENTS
PAGE NO.
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Manager Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Existing Billing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Existing Billing Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Gross Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Net Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Office Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Operating Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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Physician . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Practice Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Patient Referrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.4 Internal Management of Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.5 Practice of Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III. COVENANTS AND RESPONSIBILITIES CONCERNING BUSINESS MANAGER . . . . . . . . . . . . . . . . . . . 7
Section 3.1 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 Support Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Quality Assurance, Risk Management, and Utilization Review . . . . . . . . . . . . . . . . . . . . 7
Section 3.4 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.5 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.6 Contract Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.7 Billing and Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.8 Physician Group Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.9 Fiscal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Accounting and Financial Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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(b) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.10 Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Medical Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Other Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.11 Recruitment of Physician Group Physicians . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.12 Confidential and Proprietary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.13 Business Manager's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.14 No Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.15 Additional Obligations of Business Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV. COVENANTS AND RESPONSIBILITIES CONCERNING PHYSICIAN GROUP . . . . . . . . . . . . . . . . . . . 13
Section 4.1 Organization and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.2 Physician Group Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Physician Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Non-physician Health Care Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.3 Professional Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4 Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.5 Exclusive Authority of the Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6 Peer Review and Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.7 Physician Group's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.8 Confidential and Proprietary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.9 Non-competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.10 Name, Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.11 Lease Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V. FINANCIAL ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.1 Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.2 Year-End Adjustment to Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.3 Reasonable Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Section 5.4 Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.5 Dispute Regarding Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.6 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.7 Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Initial and Renewal Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Termination By Business Manager for Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Termination by Business Manager Without Cause . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Termination by Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Termination by Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(e) Legislative, Regulatory or Administrative Change . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.3 Effects of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.4 Repurchase Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.5 Repurchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.6 Closing of Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.1 Physician Group Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2 Business Manager Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.3 Administrative Services Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.4 Status of Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.8 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Applicable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.9 Waiver of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.10 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Section 7.11 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.12 Additional Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.13 Consents, Approvals, and Exercise of Discretion . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.14 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.16 Divisions and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.17 Amendments and Agreement Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT ("Agreement") is made and entered
into effective as of September 1, 1996 (the "Effective Date"), by and between
EmCare, Inc., a Delaware corporation, ("Business Manager"), and Emergency
Physicians of Northern California, Inc., a California professional corporation
("Physician Group").
RECITALS
This Agreement is made with reference to the following facts:
A. Physician Group is a validly existing California professional
corporation, formed for and engaged in the conduct of a medical practice and
the provision of Medical Services (hereinafter defined) through individual
physicians who are licensed to practice medicine in the State of California and
who are employed or otherwise retained by Physician Group.
B. Business Manager is a duly formed and validly existing
Delaware corporation, which is in the business of managing the non-medical
aspects of physician practices.
C. Physician Group desires to focus its energies, expertise and
time on the practice of medicine and on the delivery of medical services to
patients, and to accomplish this goal it desires to delegate the increasingly
complex business functions of its medical practice to persons with business
expertise.
D. Physician Group wishes to engage Business Manager to provide
such management, administrative and business services as are necessary and
appropriate for the day-to-day administration of the non-medical aspects of
Physician Group's medical practice in the Practice Territory (as defined
below), and Business Manager desires to provide such services all upon the
terms and conditions hereinafter set forth.
E. Physician Group 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, desire to enter into this Agreement so that each party
to this Agreement may devote its skills and expertise to the appropriate
responsibilities and functions set forth herein.
F. Business Manager is willing to commit significant resources to
Physician Group based upon the representations and warranties of Physician
Group that the current members of Physician Group will continue to practice
medicine for Physician Group in the Practice Territory for _______(__) years
from the Effective Date.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
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ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings ascribed thereto, unless otherwise clearly required by the context in
which such term is used:
Adjustments shall mean any adjustments in accordance with GAAP for
uncollectible accounts, Medicare, and other payor contractual adjustments,
discounts, workers' compensation adjustments, professional courtesies, and
other reductions in collectible revenue that result from activities that do not
result in collectible charges.
Affiliate shall mean any person or entity that directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with another person or entity. The term "control" shall mean
the ownership or the power to vote twenty-five percent (25%) or more of the
outstanding voting securities or interests of such other person.
Agreement shall mean this Agreement by and between Physician Group and
Business Manager and any amendments to this Agreement.
Budget shall mean an operating budget and capital expenditure budget
for each Operating Year as prepared by Business Manager and approved by
Physician Group.
Business Manager shall mean EmCare, Inc., a Delaware corporation, or
any entity that succeeds to the interests of EmCare, Inc. and to whom the
obligations of Business Manager are assigned and transferred.
Business Manager Default shall have the meaning ascribed to it in
Section 6.2(c).
Confidential Information shall mean any information of Business
Manager or Physician Group, as appropriate (whether written or oral), including
all business management or economic studies, patient lists, proprietary forms,
proprietary business or management methods, marketing data, fee schedules, or
trade secrets of the Business Manager or of Physician Group, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Agreement.
Confidential Information shall also include the terms and provisions of this
Agreement and any transaction or document executed by the parties pursuant to
this Agreement. Confidential Information does not include any information that
the receiving party can establish (i) is or becomes generally available to and
known by the public or medical community (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 non-confidential basis from a source other than the
furnishing party or its Affiliates 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; or (iii) has already been or is hereafter independently acquired or
developed by the receiving party without violating any confidentiality
agreement with or other obligation of secrecy to the furnishing party.
Effective Date shall mean the date of this Agreement as set forth in
the introductory paragraph of this Agreement.
Existing Billing Agreement shall have the meaning ascribed to it in
Section 3.7.
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Existing Billing Company shall have the meaning ascribed to it in
Section 3.7.
GAAP mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity or other practices and procedures as may be approved by a
significant segment of the accounting profession, which are applicable to the
circumstances as of the date of the determination. For purposes of this
Agreement, GAAP shall be applied on an accrual basis in a manner consistent
with the historic practices of the person to which the term applies.
Governmental Authority shall mean the United States, State of
California, and any political or other subdivision of any of the foregoing, and
any agency, department, commission, board, bureau, court or instrumentality of
any of them which now or hereafter has jurisdiction over the Business Manager,
the performance of Management Services, the Physician Group or the performance
of Medical Services by the Physician Group.
Gross Revenue in any respect of any period shall mean all revenues,
receipts and income of the Physician Group during such period, as determined by
GAAP.
Legal Requirements shall mean any law, ordinance, order, rule or
regulation of any Governmental Authority.
Management Fee in respect of any period shall mean an amount equal to
Net Revenue for such period minus Physician Group Expense for such period.
Management Services shall mean the business, administrative, and
management services to be provided to Physician Group by Business Manager,
including, without limitation, the administration and performance of all
services required under the Medical Contracts (other than the performance of
Medical Services), the provision of supplies, support services, non-medical
personnel, any necessary office space, management, administration, financial
recordkeeping and reporting, and other business office services.
Medical Assets shall mean Physician Group's right, title and interest
in and to (i) any 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 any other
governmental authorization held by a licensed health care provider as specified
under any Legal Requirement, (ii) any records of identity, diagnosis,
evaluation or treatment of patients, (iii) any insurance policies covering or
relating to medical malpractice, (iv) any franchises, licenses, permits,
certificates, approvals and other governmental authorizations necessary or
desirable to own and operate any of the other Medical Assets, and (v) any
contract or agreement that requires performance by a licensed health care
provider under any Legal Requirement.
Medical Contracts shall mean (i) Emergency Medicine Agreement dated
June 1, 1994, by and between Xxxxx Xxxxxxx Memorial Hospital at Hollister,
California, and Physician Group; (ii) Emergency Physicians Agreement dated
March 27, 1995, by and between Good Samaritan Health System dba San Xxxx
Medical Center and Physician Group; (iii) Agreement between the County of Santa
Xxxxx and Physician Group relating to the provision of emergency physician
services to Santa Xxxxx Valley Medical Center, executed and delivered by the
Physician Group on February 13, 1996, to the County of Santa Xxxxx; (iv) Health
Care Services Agreement dated September 1, 1995, by and
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between San Xxxx Medical Clinic, Inc. dba San Xxxx Medical Group, a California
professional corporation, and Physician Group; (v) Service Agreement between
Santa Xxxxx Valley Health and Hospital System and Community Health Services and
Physician Group relating to the provision of supplemental provider services,
executed and delivered by the Physician Group on February 13, 1996; (vi)
Agreement dated June 24, 1992, by and between Stanford University Hospital and
Physician Group; (vii) Agreement dated January 1, 1995, by and between Acorn
Personnel Agency, Inc. and Physician Group; and (viii) any and all other
contracts now or hereafter entered into by Physician Group providing for the
provision of medical services and administrative services related thereto, and
any and all amendments, restatements, extensions, substitutions and
modifications of any of the foregoing described agreements.
Medical Services shall mean medical care and services, including but
not limited to emergency department services and all related health care
services provided by Physician Group through Physician Group's Physicians and
other health care providers that are retained by or professionally affiliated
with Physician Group.
Net Revenue in respect of any period shall mean Gross Revenue for such
period minus Adjustments for such period.
Office shall mean any office space, clinic, facility, including
satellite facilities, that Business Manager shall own or lease or otherwise
procure for the use of Physician Group.
Office Expense shall mean all operating and non-operating expenses
incurred by the Business Manager in the provision of Management Services by the
Business Manager. All Office Expenses shall be determined in accordance with
GAAP. Without limitation, Office Expense shall include:
(a) the salaries, benefits, and other direct costs of all
employees of Business Manager at the Office and the salaries, benefits, and
other direct costs of the non-physician employees of Physician Group, but not
any amounts paid to, or benefits or other direct costs of the Physicians or
physician assistants or nurse practitioners employed or retained by the
Physician Group;
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Office for improved clinic performance,
such as management, billing and collections, business office consultation,
accounting and legal services, but only when such services are approved in
advance by Business Manager;
(c) reasonable recruitment costs and out-of-pocket expenses of
Business Manager or Physician Group associated with the recruitment of
additional physician employees of Physician Group;
(d) comprehensive and general liability insurance covering the
Office and employees of Business Manager at the Office;
(e) the expense of using, leasing, purchasing or otherwise
procuring the Office and related equipment, including depreciation;
(f) the cost of capital (whether as actual interest on
indebtedness incurred on behalf of Physician Group or as reasonable imputed
interest on capital advanced by Business Manager pursuant to Section 5.4 of
this Agreement or otherwise, which shall be equal to the average cost of
borrowing by Business Manager as reflected on its most recent published
financial statements);
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(g) the reasonable travel expenses associated with attending
meetings, conferences, or seminars to benefit Physician Group; and
(h) the cost of office supplies, other than office supplies owned
by Physician Group on the date of this Agreement.
Operating Year shall mean each twelve (12) month period during the
Term commencing on January 1 and ending on December 31, except that the first
Operating Year shall be that period commencing on the Effective Date and ending
on the next succeeding December 31. In the event that this Agreement shall
terminate on a date other than December 31, the last Operating Year hereunder
shall end on the date of termination.
Physician shall mean each individually licensed physician who is
employed or otherwise retained by or associated with Physician Group, each of
whom shall meet at all times the qualifications described in Section 4.2 and
Section 4.3.
Physician Group shall mean Emergency Physicians of Northern
California, Inc., a California professional corporation.
Physician Group Account shall have the meaning ascribed to it in
Section 3.7 of this Agreement.
Physician Group Default shall have the meaning ascribed to it in
Section 6.2(a).
Physician Group Expense shall mean (i) the consideration, salaries,
benefits, and other direct costs of Physicians employed or retained by
Physician Group pursuant to agreements with such Physicians in the form of
Exhibit 4.1 and Section 4.2(a); (ii) the salaries and benefits of physician
assistants and nurse practitioners employed or retained by the Physician Group;
(iii) state and federal income taxes of Physician Group; (iv) malpractice
insurance expenses for Physicians, physician assistants, nurse practitioners
and other caregivers; (v) any interest expense incurred pursuant to Section 5.4
of this Agreement; and (vi) any other expense reasonably designated by Business
Manager as a Physician Group Expense. The Physician Group, and not Business
Manager is financially liable for all Physician Group Expense. In the event
Physician Group incurs consulting, accounting, or legal fees without
coordinating such engagement through Business Manager, all fees and expenses so
incurred shall be Physician Group Expenses. Physician Group, and not Business
Manager, shall be financially liable for the payment of Physician Group
Expense.
Practice Territory shall mean the geographic area within the County of
Santa Clara, California, representing the geographic boundaries of the medical
practice conducted by Physician Group.
Representatives shall mean a party's officers, directors, employees,
or other agents, representatives or advisors.
State shall mean the State of California.
Term shall mean the initial and any renewal periods of duration of
this Agreement as described in Section 6.1.
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ARTICLE II.
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 Appointment. Physician Group hereby appoints
Business Manager as its sole and exclusive agent for the management, and
administration of the business functions and business affairs of Physician
Group, and Business Manager hereby accepts such appointment, subject at all
times to the provisions of this Agreement.
Section 2.2 Authority. Consistent with the provisions of this
Agreement, Business Manager shall have the responsibility and commensurate
authority to provide Management Services to Physician Group. Subject to the
terms and conditions of this Agreement, Business Manager is hereby expressly
authorized to provide the Management Services in any reasonable manner Business
Manager deems appropriate to meet the day-to-day requirements of the business
functions of Physician Group. Moreover, Business Manager, acting alone and
without the joinder of Physician Group or any other party, shall have the sole
and exclusive authority to sell, transfer or encumber all or any part of the
assets (other than Medical Assets) of the Physician Group. Subject to the
provisions of this Agreement, Business Manager is also expressly authorized to
negotiate and execute on behalf of Physician Group contracts that do not relate
to the provision of Medical Services. The parties acknowledge and agree that
Physician Group, 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. Business Manager shall
have and exercise absolutely no control or supervision over the provision of
Medical Services.
Section 2.3 Patient Referrals. Business Manager and Physician
Group agree that the benefits to Physician Group hereunder do not require, are
not payment for, and are not in any way contingent upon the referral,
admission, or any other arrangement for the provision of any item or service
offered by Business Manager to patients of Physician Group in any facility,
laboratory, or health care operation controlled, managed, or operated by
Business Manager.
Section 2.4 Internal Management of Physician Group. Matters
involving the internal management, control, or finances of Physician Group,
including specifically the allocation of professional income among the members
and Physician employees of Physician Group, tax planning, and investment
planning, shall remain the responsibility of Physician Group and the members of
Physician Group.
Section 2.5 Practice of Medicine. The parties acknowledge that
Business Manager is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of medicine. To the
extent any act or service herein required by Business Manager should be
construed to constitute the practice of medicine by any Governmental Authority,
the requirement to perform that act or service by Business Manager shall be
deemed waived and unenforceable.
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ARTICLE III.
COVENANTS AND RESPONSIBILITIES CONCERNING BUSINESS MANAGER
During the Term, Business Manager shall provide all Management
Services as are necessary and appropriate for the day-to-day administration of
the business aspects of Physician Group's operations, including without
limitation those set forth in this Article III in accordance with all Legal
Requirements.
Section 3.1 Office.
(a) To the extent deemed necessary and appropriate by Business
Manager, in its sole discretion, taking into consideration the professional
concerns of Physician Group, Business Manager shall lease, acquire, or
otherwise procure an Office in a location or locations reasonably acceptable to
Physician Group, and the expenses associated with such lease, acquisition, or
procurement shall be Office Expenses. Any Office procured by Business Manager
for the use by Physician Group shall be procured at commercially reasonable
rates.
(b) Business Manager shall provide all non-medical equipment,
fixtures, office supplies, furniture and furnishings deemed reasonably
necessary by Business Manager for the operation of the Office and reasonably
necessary for the provision of Medical Services.
(c) Business Manager shall be responsible for the repair and
maintenance of the Office, consistent with Business Manager's responsibilities
under the terms of any lease or other use arrangement, and for the repair,
maintenance, and replacement of all equipment other than such repairs,
maintenance and replacement necessitated by the negligence or willful
misconduct of Physician Group, its Physicians or other personnel employed by
Physician Group, the repair or replacement of which shall be a Physician Group
Expense and not an Office Expense.
Section 3.2 Support Services. Business Manager shall provide or
arrange for all printing, stationery, forms, postage, duplication or
photocopying services, and other support services as are reasonably necessary
and appropriate for the provision of services by Physician Group pursuant to
the Medical Contracts.
Section 3.3 Quality Assurance, Risk Management, and Utilization
Review. Business Manager shall assist Physician Group and the various
hospitals and other parties to the Medical Contracts in the implementation of
procedures to ensure the consistency, quality, appropriateness, and medical
necessity of Medical Services provided by Physician Group, and shall provide
administrative support for Physician Group's overall quality assurance, risk
management, and utilization review programs. Business Manager shall perform
these tasks in a manner to ensure the confidentiality and non-discoverability
of these program actions to the fullest extent allowable under state and
federal law.
Section 3.4 Licenses and Permits. Business Manager shall, on
behalf of and in the name of Physician Group, apply for and use reasonable
efforts to obtain and maintain all licenses and regulatory permits required by
any Legal Requirements for or in connection with the operation of Physician
Group, other than those relating to the practice of medicine or the
administration of drugs by Physicians retained by or associated with Physician
Group.
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Section 3.5 Personnel. Except as specifically provided in
Section 4.2(b) of this Agreement, Business Manager shall employ or otherwise
retain and shall be responsible for selecting, hiring, training, supervising,
and terminating, all management, administrative, clerical, secretarial,
bookkeeping, accounting, payroll, billing and collection and other
non-professional personnel as Business Manager deems reasonably necessary and
appropriate for Business Manager's performance of its duties and obligations
under this Agreement. Consistent with reasonably prudent personnel management
policies, Business Manager shall seek and consider the advice, input, and
requests of Physician Group in regard to personnel matters. Business Manager
shall have sole responsibility for determining the salaries and providing such
fringe benefits, or for withholding, as required by any Legal Requirements
including any sums for income tax, unemployment insurance, social security.
Section 3.6 Contract Negotiations. Business Manager shall advise
Physician Group with respect to and negotiate, either directly or on Physician
Group's behalf, as appropriate, all contractual arrangements with third parties
as are reasonably necessary and appropriate for Physician Group's provision of
Medical Services, including, without limitation, negotiated price agreements
with third party payors, alternative delivery systems, or other purchasers of
group health care services.
Section 3.7 Billing and Collection. On behalf of and for the
account of Physician Group, Business Manager shall establish and maintain
credit and billing and collection policies and procedures, and shall use
Business Manager's reasonable best efforts to timely xxxx and collect all
professional and other fees for all billable Medical Services provided by
Physician Group. Business Manager shall advise and consult with Physician
Group regarding the fees for Medical Services provided by Physician Group; it
being understood, however, that Physician Group 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 and collection services to be provided hereunder, and throughout
the Term (and thereafter as provided in Section 6.3), Physician Group hereby
grants to Business Manager an exclusive special power of attorney and appoints
Business Manager as Physician Group'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 Physician Group's patients, in Physician Group's name
and on Physician Group's behalf, for all billable Medical Services provided by
Physician Group to patients.
(b) To xxxx, in Physician Group's name and on Physician Group's
behalf, all claims for reimbursement or from Blue Shield/Blue Cross, insurance
companies, Medicare, Medicaid, and all other third party payors or fiscal
intermediaries for all covered billable Medical Services provided by Physician
Group to patients.
(c) To collect and receive, in Physician Group's name and on
Physician Group's behalf, all accounts receivable generated by such xxxxxxxx
and claims for reimbursement, to administer such accounts including, but not
limited to, extending the time of payment of any such accounts for cash, credit
or otherwise; discharging or releasing the obligors of any such accounts;
suing, assigning or selling at a discount such accounts to collection agencies;
or taking other measures to require the payment of any such accounts.
(d) To deposit into one or more accounts with a financial
institution selected by Manager and approved by Physician Group (the "Physician
Group Account") all revenues,
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receipts and accounts receivable collected by Business Manager on behalf of
Physician Group. Physician Group covenants to transfer and deliver to Business
Manager all funds received by Physician Group from patients or third party
payors for Medical Services. Upon receipt by Business Manager of any funds
from patients or third party payors or from Physician Group for Medical
Services, Business Manager shall immediately deposit same into the Physician
Group Account.
(e) To take possession of, endorse in the name of Physician Group,
and deposit into the Physician Group Account any notes, checks, money orders,
insurance payments, and any other instruments received in payment of accounts
receivable for Medical Services.
(f) To sign checks, drafts, bank notes or other instruments on
behalf of Physician Group, and to make withdrawals from the Physician Group
Account for the payment of Office Expenses, Physician Group Expenses or other
cost and expenses as specified in this Agreement.
Upon request of Business Manager, Physician Group shall execute and
deliver to the financial institution wherein the Physician Group Account is
maintained, such additional instruments as may be necessary to evidence or
effect the special power of attorney granted to Business Manager by Physician
Group pursuant to this Section 3.7 and Section 3.8 of this Agreement. Business
Manager and Physician Group acknowledge that pursuant to that certain agreement
(the "Existing Billing Agreement") dated _______________, 1996, by and between
____________________________ (the "Existing Billing Company") and Physician
Group, the Existing Billing Company bills and collects for all Medical Services
provided by Physician Group. So long as the Billing Agreement is in full force
and effect, Business Manager shall administer the provision of services
thereunder and shall, on behalf of Physician Group, have the right to enforce
the terms and provisions of the Existing Billing Agreement and exercise all
rights and options granted to Physician Group thereunder, including but not
limited to the right to terminate the Existing Billing Agreement.
Section 3.8 Physician Group Account. Business Manager shall have
access to the Physician Group Account solely for the purposes stated herein and
shall use all funds on deposit therein to pay all Office Expenses and Physician
Group Expenses in accordance with the terms of this Agreement. In connection
herewith, throughout the Term (and thereafter as provided in Section 6.3),
Physician Group hereby grants to Business Manager an exclusive special power of
attorney and appoints Business Manager as Physician Group'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 Physician Group
Account all funds, fees, and revenues generated from the Physician Group's
provision of Medical Services and collected by Business Manager, and to make
withdrawals from Physician Group Account for payments specified in this
Agreement and as requested from time-to-time by Physician Group. The special
power of attorney granted in Section 3.7 and in this Section may be revoked by
the Physician Group at any time, but such revocation shall constitute a breach
of this Agreement. Such special power of attorney shall expire when this
Agreement has been terminated, all accounts receivable purchased by Business
Manager have been collected, and all Management Fees and other sums due to
Business Manager under this Agreement have been paid. If Business Manager
assigns this Agreement in compliance with Section 7.7 of this Agreement,
Physician Group shall execute a special power of attorney in favor of the
assignee containing substantially the same terms and provisions as this Section
3.8. Notwithstanding any provision herein to the contrary, Physician Group
shall not draw checks or make any other withdrawals from the Physician Group
Account. The payment of Office Expenses and Physician Group
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Expenses from the Physician Group Account shall be made in such order and
priority as Business Manager shall determine in its reasonable business
judgment.
Section 3.9 Fiscal Matters.
(a) Accounting and Financial Records. Business Manager shall
establish and administer accounting policies, procedures, controls and systems
(including accounts payable and payroll) for the development, preparation, and
safekeeping of administrative or financial records and books of account
relating to the business prepared and maintained in accordance with GAAP.
Business Manager shall prepare and deliver to Physician Group, within one
hundred fifty (150) days of the end of each Operating Year, a balance sheet and
a profit and loss statement reflecting the financial status of Physician Group
in regard to the provision of Medical Services as of the end of such Operating
Year, all of which shall be prepared in accordance with GAAP consistently
applied. Business Manager shall calculate the amount of Office Expense,
Physician Group Expense, Gross Revenue, Net Revenue, and the amount of the
Management Fee for the preceding Operating Year. Such calculations, unless
objected to in writing within thirty (30) days after receipt thereof, shall be
conclusive and binding on Business Manager and Physician Group. If Business
Manager and Physician Group cannot agree on such calculations, such
calculations shall be submitted to the certified public accounting firm
described above, whose calculations and determinations of such items shall be
binding on Business Manager and Physician Group. Business Manager shall also
prepare or assist in the preparation of any other financial statements or
records as Physician Group may reasonably request.
(b) Tax Matters.
(1) In General. Business Manager shall have no
obligation to prepare or arrange for the preparation
of any tax returns or reports required of Physician
Group.
(2) Sales and Use Taxes. Business Manager and Physician
Group 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 Physician Group
and to remit same to the appropriate tax collection
authorities. Physician Group agrees to pay in
addition to the payment of the Management Fee, the
applicable state sales and use taxes in respect of
the portion of the Management Fees attributable to
such services.
Section 3.10 Reports and Records.
(a) Medical Records. Business Manager shall establish, monitor,
and maintain procedures and policies for the timely creation, preparation,
filing and retrieval of all medical records generated by Physician Group in
connection with Physician Group's provision of Medical Services; and, subject
to applicable Legal Requirements, 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 Legal
Requirements relating to the confidentiality and retention thereof. All
medical records shall be and remain the property of Physician Group.
(b) Other Reports and Records. Business Manager shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate for
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Physician Group's provision of Medical Services, and shall be prepared to
analyze and interpret such reports and records upon the reasonable request of
Physician Group.
Section 3.11 Recruitment of Physician Group Physicians. Business
Manager shall perform all administrative services reasonably necessary and
appropriate to recruit potential physician personnel to be retained by
Physician Group. Business Manager shall provide Physician Group with model
agreements to document Physician Group's employment, retention or other service
arrangements with such individuals. Physician Group shall have the sole and
complete responsibility to interview, select, contract with, supervise, control
and terminate all Physicians performing Medical Services or other professional
services, and Business Manager shall have no authority whatsoever with respect
to such activities.
Section 3.12 Confidential and Proprietary Information.
(a) Business Manager will not disclose any Confidential
Information of Physician Group to other persons without Physician Group's
express written authorization, such Confidential Information will not be used
in any way directly or indirectly detrimental to Physician Group, 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 non-disclosure obligations; provided, however,
that Business Manager may disclose Confidential Information to those of its
Representatives who need to know Confidential Information for the purposes of
this Agreement, it being understood and agreed to by Business Manager that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by
Business Manager not to disclose to any other person any Confidential
Information. Business Manager agrees to be responsible for any breach of this
Section by its Affiliates or Representatives. If Business Manager is requested
or required (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demands, or similar processes) to
disclose or produce any Confidential Information furnished in the course of its
dealings with Physician Group or its Affiliates, or Representatives, Business
Manager will (i) provide Physician Group will prompt notice thereof and copies,
if possible, and, if not, a description, of the Confidential Information
requested or required to be produced so that Physician Group may seek an
appropriate protective order or waive compliance with the provisions of this
Section and (ii) consult with Physician Group as to the advisability of
Physician Group taking legally available action to resist or narrow such
request. Business Manager further agrees that, if in the absence of a
protective order or the receipt of a waiver hereunder Business Manager is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning Physician Group to any tribunal
legally authorized to request and entitled to receive such Confidential
Information or to stand liable for contempt or suffer other censure or penalty,
Business Manager may disclose or produce such Confidential Information to such
tribunal without liability hereunder; provided, however, that Business Manager
shall give Physician Group written notice of the Confidential Information to be
so disclosed or produced as far in advance of its disclosure or production as
is practicable and shall use 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, with other professional
corporations, associations, medical practices, or health care delivery entities
the practice statistics of Physician Group, including data concerning
utilization review, quality assurance, cost, outcomes, or other practice. Such
information shall only be disclosed to other medical groups with whom
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Business Manager has a management relationship or to managed care providers or
other third party payors or 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 securities
of Business Manager or any of its Affiliates. No such information will
disclose or divulge patient identifying information or, to the extent possible,
physician identifying information.
Section 3.13 Business Manager's Insurance. Throughout the Term,
Business Manager shall, as an Office Expense, obtain and maintain with
commercial carriers, through self-insurance or some combination thereof,
appropriate worker's compensation coverage for personnel employed by Business
Manager pursuant to this Agreement, and professional, casualty and
comprehensive general liability insurance covering Business Manager, Business
Manager's personnel, and all of Business Manager's equipment in such amounts,
on such basis and upon such terms and conditions as Business Manager deems
appropriate. Business Manager may also carry, as an Office Expense, key person
life and disability insurance on any member or Physician employee of Physician
Group in amounts determined reasonable and sufficient by Business Manager.
Business Manager shall be the owner and beneficiary of any such insurance.
Section 3.14 No Warranty. Physician Group acknowledges that
Business Manager has not made and will not make any express or implied
warranties or representations that the services provided by Business Manager
will result in any particular amount or level of medical practice or income to
Physician Group.
Section 3.15 Additional Obligations of Business Manager. In
addition to the duties and obligations specified above, Business Manager shall
perform the following:
(a) Within a reasonable period of time after execution of this
Agreement, Business Manager shall, as an Office Expense, develop and implement
data gathering and processing capabilities designed to assist Physician Group
in managing the cost of providing Medical Services by Physician Group.
Business Manager shall use such capabilities and the information obtained
therefrom to assist Physician Group in obtaining and maintaining managed care
contracts (including, but not limited to, capitation and global pricing
arrangements).
(b) Business Manager shall, as an Office Expense, develop for
Physician Group and assist Physician Group in implementing outcomes management
and work management systems and other protocols to enable Physician Group to
achieve greater efficiencies in resource utilization.
(c) Business Manager shall commit reasonable resources to pursue,
negotiate and maintain managed care contracts on behalf of Physician Group.
Business Manager shall advise Physician Group with respect to the economic
impact of any such managed care contract.
(d) Business Manager shall assist the Physician Group in obtaining
the malpractice insurance required by Section 4.7 of this Agreement.
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ARTICLE IV.
COVENANTS AND RESPONSIBILITIES CONCERNING PHYSICIAN GROUP
Section 4.1 Organization and Operation. Physician Group, as a
continuing condition of Business Manager's obligations under this 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 Legal Requirements.
Physician Group shall operate and maintain a full time practice of medicine
specializing in the provision of emergency department services, and for the
first five (5) years of the Term of this Agreement, Physician Group shall
maintain and enforce agreements in the form of Exhibit 4.1 with the equity
owners of Physician Group specified in Exhibit 4.1A. Physician Group shall not
amend the agreements or waive any rights thereunder without the prior approval
of Business Manager. Recognizing that Business Manager would not have entered
into this Agreement but for Physician Group's covenant to maintain such
agreements with its original members, on or before three (3) days after receipt
thereof, Physician Group shall pay to Business Manager, in addition to the
Management Fee, any damages, compensation, payment, or settlement received by
Physician Group from a Physician who terminates his or her agreement without
cause or whose agreement is terminated by Physician Group for cause. Such
payment shall constitute liquidated damages of Business Manager for Physician
Group's breach of the covenant contained in this Section 4.1.
Section 4.2 Physician Group Personnel.
(a) Physician Personnel. Physician Group shall retain that number
of Physicians, sufficient in the discretion of the Policy Board as are
reasonably necessary and appropriate for the provision of Medical Services
pursuant to the Medical Contracts, each of whom shall be bound by and subject
to applicable provisions of this Agreement. Each Physician retained by
Physician Group shall hold and maintain a valid and unrestricted license to
practice medicine in the State. Physician Group shall enter into and maintain
with each such retained Physician a written agreement substantially in the form
of either Exhibit 4.1 for equity owners of Physician Group as specified in
Exhibit 4.1A or Exhibit 4.2(a) for non-equity owners. Physician Group shall be
responsible for paying the compensation, and benefits as applicable, for all
Physicians and any other physician personnel or other contracted or affiliated
physicians, and for withholding, as required by any Legal Requirements.
Business Manager may, on behalf of Physician Group, establish and administer
the compensation with respect to such individuals in accordance with the
written agreement between Physician Group and each Physician. Business Manager
shall neither control nor direct any Physician in the performance of Medial
Services for patients.
(b) Non-physician Health Care Personnel. All physician assistants
and nurse practitioners who provide patient care services shall be employed by
or retained by Physician Group and shall be under Physician Group's control,
supervision and direction in the performance of or in connection with Medical
Services for patients. Physician Group shall be responsible for paying the
compensation, and benefits as applicable of all physician assistants and nurse
practitioners employed by any Physician Group, and for withholding as required
by any Legal Requirements.
Section 4.3 Professional Standards. As a continuing condition of
Business Manager's obligations hereunder, each Physician and any other
physician personnel retained by Physician Group to provide Medical Services
must (i) have and maintain a valid and unrestricted license to practice
medicine in the State and (ii) comply with, be controlled and governed by and
otherwise provide Medical Services in accordance with all
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Legal Requirements, and the ethics and standard of care of the medical
community wherein the Medical Services are performed, and (iii) obtain and
retain appropriate medical staff membership with appropriate clinical
privileges at any hospital or health care facility at which Medical Services
are to be provided. Procurement of temporary staff privileges pending the
completion of the medical staff approval process shall satisfy this provision,
provided the Physician actively pursues full appointment and actually receives
full appointment within a reasonable time.
Section 4.4 Medical Services. Physician Group shall ensure that
Physicians and non-physician health care personnel are available as necessary
to provide Medical Services to patients. In the event that Physicians employed
by Physician Group are not available to provide Medical Services coverage,
Physician Group shall engage and retain locum tenens coverage. Physicians
retained on a locum tenens basis shall meet all of the requirements of Section
4.3, and cost of providing locum tenens coverage shall be a Physician Group
Expense. With the assistance of the Business Manager, Physician Group and the
Physicians shall be responsible for scheduling Physician and non-physician
health care personnel coverage of all medical procedures. Physician Group
shall cause all Physicians to exert reasonable efforts to develop and promote
Physician Group in such a manner as to ensure that Physician Group is able to
serve the diverse needs of the community.
Section 4.5 Exclusive Authority of the Physician Group. The
Physician Group shall have exclusive authority to review and resolve issues
relating to (i) the types and levels of Medical Services to be provided by the
Physician Group; (ii) the recruitment of physicians to the Physician Group,
including the specific qualifications and specialties of recruited physicians;
(iii) the performance of Medical Services under any contract or arrangement
regarding the provision of Medical Services; and (iv) fee schedules of the
Physician Group.
Section 4.6 Peer Review and Quality Assurance. Physician Group
shall adopt a peer review and quality assurance program to monitor and evaluate
the quality and cost-effectiveness of Medical Services provided by physician
personnel of Physician Group. Pursuant to such program, Physician Group shall
designate a committee of Physicians to function as a medical peer review
committee to review credentials of potential recruits, perform quality
assurance functions, and otherwise resolve medical competence issues. The
medical peer review committee shall function pursuant to formal written
policies and procedures. Upon request of Physician Group, Business Manager
shall provide administrative assistance to Physician Group in performing its
peer review and quality assurance activities, but only if such assistance can
be provided consistent with maintaining the confidentiality and
non-discoverability of the processes and actions of the Peer Review and Quality
Assurance process of Physician Group.
Section 4.7 Physician Group's Insurance. With the advice and
assistance of Business Manager, Physician Group shall obtain and maintain with
commercial carriers reasonably acceptable to Business Manager appropriate
worker's compensation coverage for Physician Group's employed personnel and
professional and comprehensive general liability insurance covering physician
Group and each of the Physicians. The comprehensive general liability coverage
shall be in amounts customary for physician groups similarly situated and
professional liability coverage shall be in a minimum amount of $1,000,000 for
each occurrence and $3,000,000 in the aggregate. The insurance policy or
policies shall provide for at least thirty (30) days advance written notice to
Business Manager from the insurer as to any alteration of coverage,
cancellation, or proposed cancellation for any reason. Physician Group shall
cause to be issued to Business Manager by such insurer or insurers a
certificate reflecting such coverage. Upon the termination of this Agreement
for any reason, Physician Group shall continue to carry professional
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liability insurance in the amounts specified herein for ten (10) years after
termination, or if Physician Group dissolves or ceases to practice medicine,
Physician Group shall obtain and maintain as a Physician Group Expense "tail"
professional liability coverage, in the amounts specified in this Section for
an extended reporting period of ten (10) years. Physician Group shall be
responsible for paying all premiums for "tail" insurance coverage. In no event
shall the professional liability insurance carrier be replaced or changed
without the written consent of Business Manager.
Section 4.8 Confidential and Proprietary Information. Physician
Group 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 Physician Group will keep such Confidential Information
confidential and will ensure that its Affiliates and Representatives who have
access to such Confidential Information comply with these non-disclosure
obligations; provided, however, that Physician Group may disclose Confidential
Information to those of its Affiliates and Representatives who need to know
Confidential Information for the purposes of this Agreement, it being
understood and agreed to by Physician Group that such Affiliates and
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by
Physician Group not to disclose to any other person any Confidential
Information. Physician Group agrees to be responsible for any breach of this
Section by its Affiliates or Representatives. If Physician Group is requested
or required (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demands, or similar processes) to
disclose or produce any Confidential Information furnished in the course of its
dealings with Business Manager or its Affiliates or Representatives, Physician
Group will (i) provide Business Manager with prompt notice thereof and copies,
if possible, and, if not, a description, of the Confidential Information
requested or required to be produced so that Business Manager may seek an
appropriate protective order or waive compliance with the provisions of this
Section and (ii) consult with Business Manager as to the advisability of
Business Manager taking legally available action to resist or narrow such
request. Physician Group further agrees that, if in the absence of a
protective order or the receipt of a waiver hereunder Physician Group 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, Physician
Group may disclose or produce such Confidential Information to such tribunal
legally authorized to request and entitled to receive such Confidential
Information without liability hereunder; provided, however, that Physician
Group shall give Business Manager written notice of the Confidential
Information to be so disclosed or produced as far in advance or its disclosure
or production as is practicable and shall use 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.
Section 4.9 Non-competition. Physician Group hereby recognizes
and acknowledges that Business Manager will incur substantial costs in
providing the equipment, support services, personnel, management,
administration, and other items and services that are the subject matter of
this Agreement and that in the process of providing services under this
Agreement, Physician Group will be privy to financial and Confidential
Information, to which Physician Group would not otherwise be exposed. The
parties also recognize that the services to be provided by Business Manager
will be feasible only if Physician Group operates an active practice to which
the Physicians associated with Physician Group devote their full time and
attention. Physician Group agrees and acknowledges that the non-competition
covenants described hereunder are necessary for the
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protection of Business Manager, and that Business Manager would not have
entered into this Agreement without the following covenants.
(a) During the Term, except for its obligations pursuant to this
Agreement, Physician Group shall not establish, operate, or provide Medical
Services at a medical office, clinic or other health care facility anywhere
within the Practice Territory.
(b) Physician Group covenants that, during the Term and for a
period of five (5) years from the date this Agreement is terminated, other than
if terminated by Physician Group for cause, it will not individually, or in
concert, directly or indirectly, either on its own account or for any other
person, solicit, induce, attempt to induce, interfere with, or endeavor to
cause any party to a Medical Contract to modify, amend, terminate or otherwise
alter the Medical Contract.
(c) Except as specifically agreed to by Business Manager in
writing, Physician Group covenants and agrees that during the Term and for a
period of five (5) years from the date this Agreement is terminated, other than
if terminated by Physician Group for cause, Physician Group shall not directly
or indirectly own (excluding ownership of less than one percent (1%) of the
equity of any publicly traded entity), manage, operate, control, lend funds to,
lend its name to, or maintain any interest whatsoever in any enterprise (i)
having to do with the provision, distribution, promotion, or advertising of any
type of management or administrative services or products to third parties in
competition with Business Manager, in the Practice Territory; and/or (ii)
offering any type of service(s) or product(s) to third parties substantially
similar to those offered by Business Manager to Physician Group in the Practice
Territory. Notwithstanding the above restriction, nothing herein shall
prohibit Physician Group or any of its members from providing management and
administrative services to its or their own medical practices after the
termination of this Agreement for any reason other than if terminated by
Business Manager for cause, and nothing herein shall prohibit Physician Group
or its members from contracting with a third party manager to provide
administrative or management services for its or their medical practices after
termination of this Agreement for any reason other than if terminated by
Business Manager for cause as long as such relationship complies with the
provisions of this Section 4.9(b).
(d) The written agreements described in Section 4.1 shall contain
covenants of the equity owners of Physician Group pursuant to which they shall
agree not to compete with Physician Group within the Practice Territory for one
(1) year after termination of the such agreement.
(e) Physician Group shall obtain and enforce formal written
agreements from its non-equity owner Physicians in the form of Exhibit 4.2(a),
pursuant to which they shall agree not to compete with Physician Group within
the Practice Territory for one (1) year after termination of their respective
agreements.
(f) Physician Group understands and acknowledges that the
foregoing provisions in Section 4.8 and Section 4.9 are designed to preserve
the goodwill of Business Manager and the goodwill of the individual Physicians
of Physician Group. Accordingly, if Physician Group breaches any obligation of
Section 4.8 or Section 4.9 in addition to any other remedies available under
this Agreement, at law or in equity, Business Manager shall be entitled to
enforce this Agreement by injunctive relief and by specific performance of this
Agreement, such relief to be without the necessity of posting a bond, cash or
otherwise. Additionally, nothing in this paragraph shall limit Business
Manager's right to recover any other damages to which it is entitled as result
of Physician Group's breach of Section 4.8 or Section 4.9. If any provision of
the covenants set forth in Section 4.8 or
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Section 4.9 is held by a court of competent jurisdiction to be unenforceable
due to an excessive time period, geographic area, or restricted activity, the
covenant shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable.
Section 4.10 Name, Trademark. Physician Group represents and
warrants that Physician Group conducts its professional practice under the name
of, and only under the name of "Emergency Physicians of Northern California,
Inc." and that such name is duly registered, qualified, or licensed under the
Legal Requirements of the State, and that, to Physician Group's knowledge,
Physician Group is the sole and absolute owner of the name in the State.
Physician Group covenants and promises that, without the prior written consent
of the Business Manager, Physician Group will not:
(a) take any action that is reasonably likely to result in the
loss of registration, qualification or licensure of the name;
(b) fail to take any reasonably necessary action that will
maintain the registration, qualification or licensure current;
(c) 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
(d) cease conducting the professional practice of Physician Group
under the name.
Section 4.11 Lease Assignment. Upon Business Manager's request,
if Physician Group is the lessee of the Office, Physician Group shall assign
the lease to Business Manager upon receipt of consent from the lessor.
Physician Group shall use its best efforts to assist in obtaining the lessor's
consent to the assignment. Upon request, Physician Group shall execute any
instruments and shall take any acts that Business Manager may deem necessary to
accomplish the assignment of the lease. If the lessor under such lease is an
Affiliate or otherwise related to Physician Group, then Physician Group agrees
that prior to any such assignment such lease shall be modified to reflect fair
market rental and other terms and conditions reasonably satisfactory to
Business Manager.
ARTICLE V.
FINANCIAL ARRANGEMENT
Section 5.1 Management Fee. On or before the tenth (10th) day of
each calendar month during the Term, and at the expiration or sooner
termination of this Agreement, the Business Manager shall be paid an amount
equal to the Management Fee for the period from the commencement of the then
current Operating Year to the end of the immediately preceding calendar month
or the date of such expiration or sooner termination of this Agreement, as the
case may be, less the aggregate amount of monthly payments theretofore paid in
respect to the Management Fee for such Operating Year.
Section 5.2 Year-End Adjustment to Management Fee. If for any
Operating Year, the aggregate amount of the monthly payments of the Management
Fee theretofore paid by Physician Group to Business Manager shall be more or
less than the Management Fee payable for such Operating Year based upon the
final determination of such Management Fee as reflected in the annual financial
statements of the Physician Group prepared pursuant to Section 3.9 of this
Agreement, then, by way of year-end adjustment, within fifteen (15) days after
the delivery of such annual financial statement to the
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Physician Group, Business Manager shall pay into the Physician Group Account
the amount of any overpayment or withdraw from the Physician Group Account the
amount of any underpayment.
Section 5.3 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 Physician Group'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 Agreement, considering the
nature and volume of the services required and the risks assumed by Business
Manager. Physician Group and Business Manager recognize and acknowledge that:
(i) Business Manager's administrative expertise will contribute significant
value to Physician Group's performance, (ii) Business Manager will incur
substantial costs and business risks in arranging for Physician Group's use of
the Office and in providing the equipment, support services, personnel,
marketing, office space, management, administration, and other items and
services that are the subject matter of this Agreement, and (iii) certain of
such costs and expenses can vary to a considerable degree according to the
extent of Physician Group's business and services. It is the intent of the
parties that the Management Fee reasonably compensate Business Manager for the
value to Physician Group of Business Manager's administrative expertise, given
the considerable business risk to Business Manager in providing the items and
services that are the subject of this Agreement.
Section 5.4 Working Capital. To assist Physician Group in
maintaining reasonable cash flow for the payment of Physician Group Expenses,
Business Manager may lend funds to the Physician Group or purchase, with
recourse to Physician Group for the amount of the purchase, all of any part of
the accounts receivable of Physician Group arising during any previous month by
transferring the consideration for the purchase into the Physician Group
Account. The consideration for the purchase shall be an amount equal to the
Net Revenue recorded for such previous month. Business Manager shall be
entitled to offset any sums due Business Manager under this Agreement against
the amount payable for the accounts receivable. Although Business Manager may
purchase and thereby become the owner of the accounts receivable of Physician
Group, in the event such purchase shall be ineffective for any reason,
Physician Group has granted a security interest in such accounts receivable
pursuant to Section 5.6 of this Agreement All collections in respect of such
accounts receivable purchased by Business Manager shall be received by Business
Manager as the agent of Physician Group and shall be endorsed to Business
Manager and deposited in a bank account at a bank designated and owned by
Business Manager. To the extent Physician Group comes into possession of any
payments in respect of such accounts receivable, Physician Group shall direct
such payments to Business Manager for deposit in bank accounts designated and
owned by Business Manager. Any sums lent by Business Manager to Physician
Group shall be secured by the security interest granted in Section 5.6 of the
Agreement and shall bear interest as set forth in clause (f) in the definition
of Office Expense in Article I of this Agreement.
Section 5.5 Dispute Regarding Fees.
(a) Any disputes regarding performance standards of the Business
Manager shall be resolved to the extent possible by good faith negotiation. To
that end, the parties agree that if Physician Group in good faith believes that
Business Manager has failed to perform its obligations, Physician Group shall
give Business Manager notice of the perceived failure. Business Manager and
Physician Group shall then negotiate the dispute in good
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faith, and if an agreement is reached, the parties shall implement the
resolution without further action.
(b) If the parties cannot reach a resolution within a reasonable
time, Physician Group shall, at its option, submit the dispute to mediation.
Mediation shall be conducted in Dallas, Texas, in accordance with the rules of
the National Health Lawyers Association Alternative Dispute Resolution Service,
and if the amount in dispute is $25,000 or less, the mediation shall be
binding.
(c) If the amount in dispute is greater than $25,000, or if the
mediation process fails to resolve the dispute, the dispute shall be submitted
by either party to binding arbitration as provided for in Section 7.8 of this
Agreement.
Section 5.6 Security Interest. The Physician Group hereby grants
to the Business Manager a security interest in all the Physician Group's
accounts receivable which may be created during the Term, for medical or other
services rendered by the Physician Group (the "Collateral"), to secure the
payment of all monetary obligations of the Physician Group to the Business
Manager arising under this Agreement. In the event of a default by Physician
Group under any provision in this Agreement, the Business Manager may, with or
without terminating this Agreement in accordance with Article VI, exercise all
rights and remedies afforded a secured party with respect to the Collateral
under the Uniform Commercial Code as enacted and in force in the State of
Texas. The Physician Group agrees to execute all financing statements or other
documents which may be necessary to perfect Business Manager's security
interest hereunder.
Section 5.7 Default Interest. If either party hereto should fail
to pay the other party hereto any sum payable when due hereunder, then such
defaulting party shall, without notice or demand, be liable to the
non-defaulting party for the payment of all such sums due hereunder with
interest thereon at the highest lawful rate permitted by applicable Legal
Requirements. The terms and provisions of this Section shall survive the
termination of this Agreement for any reason whatsoever and shall continue
until all such amounts, together with interest thereon are paid in full.
ARTICLE VI.
TERM AND TERMINATION
Section 6.1 Initial and Renewal Term. The Term of this Agreement
will be for an initial period of forty (40) years after the Effective Date, and
shall be automatically renewed for successive five (5) year periods thereafter,
provided that neither Business Manager nor Physician Group shall have given
notice of termination of this 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 6.2 of this Agreement.
Section 6.2 Termination.
(a) Termination By Business Manager for Cause. Business Manager
may terminate this Agreement upon the occurrence of any one of the following
events ("Physician Group Default") which shall be deemed to be "for cause":
(i) Physician Group's loss or suspension for more than ninety
(90) days of its Medicare or Medicaid provider number, or
Physician Group's restriction from treating beneficiaries
of the Medicare or Medicaid programs for more than ninety
(90) days;
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(ii) The revocation, suspension, cancellation or restriction
of any Physician licensed to practice medicine within the
State if, in the reasonable discretion of the Business
Manager, Physician Group will not be financially viable
after such revocation, suspension, cancellation or
restriction;
(iii) The dissolution of Physician Group or the filing of a
petition in voluntary bankruptcy, an assignment for the
benefit of creditors, or other action taken voluntarily
or involuntarily under any state or federal statute for
the protection of debtors;
(iv) Default by Physician Group in the performance of any of
its duties or obligations hereunder, and such default
continues for sixty (60) days after notice is given by
Business Manager of such default, provided, however, that
in the event such default is of a nature that it cannot,
with due diligence, be cured within sixty (60) days, it
shall not constitute a Physician Group Default, as
hereinafter defined, so long as Physician Group begins to
cure such default within sixty (60) days and thereafter
diligently pursues such cure to completion;
(v) Business Manager and Physician Group are unable to reach
an agreement on a new service agreement or basis for
compensation after the occurrence of an event described
in Section 6.2(e).
(b) Termination by Business Manager Without Cause. Business
Manager may terminate this Agreement at any such time or from time to time
without cause upon ninety (90) days written notice from Business Manager to
Physician Group.
(c) Termination By Physician Group. Physician Group may terminate
this Agreement, which shall be deemed to be "for cause", upon at least sixty
(60) days notice in the event that Business Manager defaults in the performance
of any of its material obligations hereunder and such default continues for at
least sixty (60) days after Business Manager receives notice of such default;
provided, however, that in the event that such default is of a nature that it
cannot, with due diligence, be cured within sixty (60) days, it shall not
constitute a Business Manager Default so long as Business Manager begins to
cure such default within sixty (60) days and thereafter diligently pursues such
cure to completion. The occurrence of the foregoing is herein called "Business
Manager Default". Termination by Physician Group hereunder shall require the
affirmative vote of 100% of the outstanding equity ownership interests in
Physician Group entitled to vote.
(d) Termination by Agreement. In the event Physician Group and
Business Manager shall mutually agree in writing, this Agreement may be
terminated on the date specified in such written agreement.
(e) Legislative, Regulatory or Administrative Change. In the event
there shall be a change in the Medicare or Medicaid statutes or any other Legal
Requirements or 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 Agreement or which shall make this
Agreement unlawful, the parties shall immediately use their best efforts to
enter into a new service arrangement or basis for compensation for the services
furnished pursuant to this Agreement that complies with all Legal Requirements,
or policy and that approximates as closely as possible the economic position of
the parties prior to
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the change. If the parties are unable to reach a new agreement within a
reasonable time, then either party may submit the issue to arbitration pursuant
to Section 7.8 for the purpose of reaching an alternative arrangement that is
equitable under the circumstances.
Section 6.3 Effects of Termination. Upon termination of this
Agreement, as hereinabove provided, neither party shall have any further
obligations hereunder except for (i) obligations accruing prior to the date of
termination, including, without limitation, payment of the Management Fee
relating to services provided prior to the termination of this Agreement, (ii)
obligations, promises, or covenants set forth herein that are expressly made to
extend beyond the Term, including, without limitation, indemnities and
non-competition provisions, which provisions shall survive the expiration or
termination of this Agreement; (iii) the obligation of Physician Group to pay
to Business Manager all sums advanced or lent to Physician Group by Business
Manager pursuant to Section 5.4 of this Agreement, which obligations shall be
due and payable upon termination of this Agreement; and (iv) the obligations of
Physician Group described in Section 6.4. In effectuating the provisions of
this Section 6.3, Physician Group specifically acknowledges and agrees that
Business Manager shall continue to collect and receive on behalf of Physician
Group all cash collections from accounts receivable in existence at the time
this Agreement is terminated, it being understood that Business Manager has a
security interest in such accounts as provided in Section 5.6 of this Agreement
and that such cash collections will represent, in part, compensation to
Business Manager for management services already rendered and compensation on
accounts receivable purchased by Business Manager. Upon the expiration or
termination of this Agreement for any reason or cause whatsoever, Business
Manager shall surrender to Physician Group all books and records pertaining to
Physician Group's medical practice.
Section 6.4 Repurchase Obligation. Upon termination of this
Agreement by Business Manager as a result of Physician Group Default, Physician
Group shall:
(a) Purchase from Business Manager at book value the intangible
assets, deferred charges, and all other amounts on the books of the Business
Manager relating to this Agreement and the acquisition consummated pursuant to
that certain Stock Purchase Agreement of even date herewith by and between
Business Manager and the Stockholders of AEP Management Services, Inc., and
Doctors Billing Service, Inc., including amounts, if any, for the covenants
described in Section 4.9 above, as adjusted through the last day of the month
most recently ended prior to the date of such termination in accordance with
GAAP to reflect amortization or depreciation of the intangible assets, deferred
charges, or covenants;
(b) Purchase from Business Manager any real estate owned by
Business Manager and used as an Office at the greater of the appraised fair
market value thereof or the then book value thereof. In the event of any
repurchase of real property, the appraised value shall be determined by
Business Manager and Physician Group, each selecting a duly qualified
appraiser, who in turn will agree on a third appraiser. The third appraiser
shall perform the appraisal which shall be binding on both parties. In the
event either party fails to select an appraiser within fifteen (15) days of the
selection of an appraiser by the other party, the appraiser selected by the
other party shall make the selection of the third party appraiser;
(c) Purchase at book value all improvements, additions, or
leasehold improvements that have been made by Business Manager at any Office
and that relate solely to the performance of Business Manager's obligations
under this Agreement;
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(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 Agreement or the
properties leased or subleased by Business Manager; and
(e) Purchase from Business Manager at book value all of the
equipment owned by the Business Manager pursuant to this Agreement, including
all replacements and additions thereto made by Business Manager pursuant to the
performance of its obligations under this Agreement, and all other assets,
including inventory and supplies, tangibles and intangibles, set forth on the
books of the Business Manager as adjusted through the last day of the month
most recently ended prior to the date of such termination in accordance with
GAAP to reflect operations of the Office, depreciation, amortization, and other
adjustments of assets shown on the books of the Business Manager. Physician
Group acknowledges that certain assets listed above have been or may be pledged
as collateral for loans made by Business Manager.
Section 6.5 Repurchase Option. Upon termination of this
Agreement pursuant to Section 6.2(b), or Section 6.2(c) Physician Group shall
be released from the restrictive covenants in Section 4.9 and shall have the
option but not the obligation to do all or none of the following:
(a) Purchase from Business Manager any real estate owned by
Business Manager and used as an Office at the greater of the appraised fair
market value thereof or the then book value thereof. In the event of any
repurchase of real property, the appraised value shall be determined by
Business Manager and Physician Group, each selecting a duly qualified
appraiser, who in turn will agree on a third appraiser. The third appraiser
shall perform the appraisal which shall be binding on both parties. In the
event either party fails to select an appraiser within fifteen (15) days of the
selection of an appraiser by the other party, the appraiser selected by the
other party shall make the selection of the third party appraiser;
(b) Purchase at book value all improvements, additions, or
leasehold improvements that have been made by Business Manager at any Office
and that relate solely to the performance of Business Manager's obligations
under this Agreement;
(c) Assume all debt, and all contracts, payables, and leases that
are obligations of Business Manager and that related principally to the
performance of Business Manager's obligations under this Agreement or the
properties leased or subleased by Business Manager; and
(d) Purchase from Business Manager at book value all of the
equipment owned by Business Manager pursuant to this Agreement, including all
replacements and additions thereto made by Business Manager pursuant to the
performance of its obligations under this Agreement, and all other tangible
assets, including inventory and supplies, set forth on the books of the
Business Manager as adjusted through the last day of the month most recently
ended prior to the date of such termination in accordance with GAAP to reflect
operations of the Office, depreciation, amortization, and other adjustments of
assets shown on the books of the Business Manager.
Physician Group shall provide notice to Business Manager of its intent to
exercise the option above described at the same time that Physician Group
provides notice to Business Manager of Physician Group's election to terminate
this Agreement for cause. Physician
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Group acknowledges that certain assets listed above have been or may be pledged
as collateral for loans made to Business Manager.
Section 6.6 Closing of Repurchase. If Physician Group purchases
the assets pursuant to Section 6.4 or 6.5, Physician Group 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
Physician Group, which shall be offset against the purchase price. Physician
Group and any Physician associated with Physician Group shall execute such
documents as may be required to assume the liabilities set forth in Section
6.4(d) or Section 6.5(c) and to remove Business Manager from any liability with
respect to such repurchased asset and with respect to any property leased or
subleased by Business Manager. The closing date for the repurchase shall be
determined by the parties, but shall in no event occur later than one hundred
eighty (180) days from the date of the notice of termination. The termination
of this Agreement shall become effective upon the closing of the sale of the
assets if the assets are purchased, and all parties shall be released from any
restrictive covenants provided for in Section 3.15 or Section 4.9 on the
closing date. If Physician Group chooses not to purchase the assets pursuant
to Section 6.5, the termination shall be effective as of the notice date given
by Physician Group under Section 6.2(b), at which time the parties shall be
released from the restrictive covenants in Section 3.15 and Section 4.9. From
and after any termination, each party shall provide the other party with
reasonable access of the books and records then owned by it to permit such
requesting party to satisfy reporting and contractual obligations that may be
required of it.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Physician Group Indemnification. (a) The Physician
Group hereby agrees to indemnify, defend, and hold harmless the Business
Manager, and each of the Business Manager's officers, directors, shareholders,
agents and employees, from and against any and all claims, demands, losses,
liabilities, actions, lawsuits and other proceedings, judgments and awards, and
costs and expenses (including reasonable attorneys' fees), arising directly or
indirectly, in whole or in part, out of any matter related to any breach by the
Physician Group of this Agreement including but not limited to the negligence
of the Physician Group or any acts or omissions by the Physician Group in its
performance of this Agreement, excluding the professional acts or omissions of
the Physician Group to the extent that such is not paid or covered by the
proceeds of insurance. The provisions of this Section 7.1 shall survive
termination or expiration of this Agreement. The Physician Group shall
immediately notify the Business Manager of any lawsuits or actions, or any
threat thereof, that may become known to the Physician Group that might
adversely affect any interest of the Physician Group or the Business Manager
whatsoever.
(b) The indemnity set forth herein shall be deemed to include an
obligation and on the part of the indemnifying party to appear on behalf of the
indemnified party in any and all proceedings involving a claim or cause of
action covered by such indemnity and to defend the indemnified party against
such claim or cause of action, all at the indemnifying party's cost; provided,
however, at the option of any party indemnified hereunder, such party shall
have the right to appear on its behalf, employ its own legal counsel and defend
any claim or cause of action indemnified in this Section all at indemnifying
party's cost.
Section 7.2 Business Manager Indemnification. (a) The Business
Manager hereby agrees to indemnify, defend and hold harmless the Physician
Group, and each of the Physician Group's officers, managers, members, agents
and employees, from and
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against any and all claims, demands, losses, liabilities, actions, lawsuits and
other proceedings, judgments and awards, and costs and expenses (including
reasonable attorneys' fees), arising directly or indirectly, in whole or in
part, out of any matter related to any breach by Business Manager of this
Agreement or any acts or omissions by Business Manager in its performance of
this Agreement, including but not limited to the negligence of the Business
Manager or any acts or omissions of the Business Manager, to the extent that
such is not paid or covered by the proceeds of insurance. The provisions of
this Section 7.2 shall survive termination or expiration of this Agreement.
Notwithstanding the foregoing, the Business Manager shall not indemnify the
Physician Group for the acts, or failure to act, by personnel who perform
services under the direct supervision or control of any Physician. The
Business Manager shall immediately notify the Physician Group of any lawsuits
or actions, or any threat thereof, that may become known to the Business
Manager that might adversely affect any interest of the Business Manager or the
Physician Group whatsoever.
(b) The indemnity set forth herein shall be deemed to include an
obligation on the part of the indemnifying party to appear on behalf of the
indemnified party in any and all proceedings involving a claim or cause of
action covered by such indemnity and to defend the indemnified party against
such claim or cause of action, all at the indemnifying party's cost; provided,
however, at the option of any party indemnified hereunder, such party shall
have the right to appear on its behalf, employ its own legal counsel and defend
any claim or cause of action indemnified in this Section all at indemnifying
party's cost.
Section 7.3 Administrative Services Only. Nothing in this
Agreement is intended or shall be construed to allow Business Manager to
exercise control or direction over the manner or method by which Physician
Group or its Physicians 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 Physician Group and its Physicians, and Business
Manager shall not interfere in any manner or to any extent therewith. Nothing
contained in this Agreement shall be construed to permit Business Manager to
engage in the practice of medicine, it being the sole intention of the parties
hereto that the services to be rendered to Physician Group by Business Manager
are solely for the purpose of providing non-medical management and
administrative services to Physician Group so as to enable Physician Group to
devote its full time and energies to the professional conduct of its medical
practice and provision of Medical Services to its patients and not to
administration, or practice management.
Section 7.4 Status of Contractor. It is expressly acknowledged
that the parties hereto are "independent contractors," and nothing in this
Agreement is intended and nothing shall be construed to create an
employer/employee, partnership, or joint venture relationship, or to allow
either to exercise control or direction over the manner or method by which the
other performs the services that are the subject matter of this Agreement;
provided always 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 Agreement. Each party understands and agrees that (i) the
other will not be treated as an employee for federal tax purposes, (ii) neither
will withhold on behalf of the other any sums for income tax, unemployment
insurance, social security, or any other withholding pursuant to any law or
requirement of any governmental body or make available any of the benefits
afforded to its employees, (iii) all of such payments, withholdings, and
benefits, if any, are the sole responsibility of the party incurring the
liability, and (iv) each will indemnify and hold the other harmless from any
and all loss or liability arising with respect to such payments, withholdings,
and benefits, if any.
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Section 7.5 Notices. Any notice, demand, or communication
required, permitted, or desired to be given hereunder shall be deemed
effectively given when in writing and personally delivered or mailed by prepaid
certified or registered mail, return receipt requested, addressed as follows:
Physician Group: Emergency Physicians of Northern California, Inc.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, III
with a copy to: Xxxxxxx X. Xxxxxxx, Esq.,
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Business Manager: EmCare, Inc.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, III
with a copy to: Xxxxxxx X. Xxxxxxx, Esq.,
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
Section 7.6 Governing Law. This Agreement shall be governed by
the laws of the State of Texas applicable to agreements to be performed wholly
within the state. Texas law was chosen by the parties after negotiation to
govern interpretation of this Agreement because the principal offices of
Business Manager are located in Dallas County, Texas.
Section 7.7 Assignment. Except as may be herein specifically
provided to the contrary, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
successors, and assigns; provided, however, that Physician Group may not assign
this Agreement without the prior written consent of Business Manager, which
consent may be withheld. The sale, transfer, pledge, or assignment of any of
the equity ownership interests held by any equity owner of Physician Group or
the issuance by Physician Group of voting equity interests to any other person,
or any combination of such transactions within a period of one (1) year, such
that the existing equity owners of Physician Group fail to maintain a majority
of the voting interests in Physician Group shall be deemed an attempted
assignment by Physician Group, and shall be null and void unless consented to
in writing by Business Manager prior to any such transfer or issuance. Any
breach of its provision, whether or not void or voidable, shall constitute a
material breach of this Agreement, and in the event of such breach, Business
Manager may terminate this Agreement upon twenty-four (24) hours notice to
Physician Group. The parties agree that Business Manager may transfer its
rights and
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obligations under this Agreement to any Affiliate of Business Manager for
performance of this Agreement. In addition, Business Manager or the 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 Agreement and its
right to collect Management Fees hereunder to any financial institution or
other third party without the consent of Physician Group.
Section 7.8 Arbitration. The parties shall use good faith
negotiation to resolve any controversy, dispute or disagreement arising out of
or relating to this Agreement or the breach of this Agreement. Any matter not
resolved by negotiation shall be submitted to binding arbitration pursuant to
this Section; provided however, that the terms and provisions of this Section
shall not preclude any party hereto from seeking, or a court of competent
jurisdiction from granting, a temporary restraining order, temporary injunction
or other equitable relief for any breach of (i) any non-competition or
confidentiality covenant in this Agreement or in any employment or other
agreement with any Physician or (ii) any duty, obligation, covenant,
representation or warranty set forth in this Agreement, the breach of which may
cause irreparable harm or damage.
(a) Arbitrators. In the event any claim or claims is brought by
Business Manager or Physician Group, or there is any other claim, controversy,
dispute or disagreement arising out of or relating to this Agreement, and the
parties are unable to resolve such claim, controversy, dispute or disagreement
within thirty (30) days after notice is first delivered pursuant to the other
party, the parties agree to each select one arbitrator to hear and decide all
such claims under this Section 7.8. The two arbitrators so chosen shall then
select a third arbitrator who is experienced in the matter or action that is
subject to such arbitration. If such matter or action involves health care
issues, then the third arbitrator shall have such qualifications as would
satisfy the requirements of the National Health Lawyers Association Alternative
Dispute Resolution Service. Each of the arbitrators chosen shall be impartial
and independent of all parties to this Agreement. If either of the parties
fails to select an arbitrator within twenty days after the end of such
thirty-day period, or if the arbitrators chosen fail to select a third
arbitrator within twenty days, then any party may in writing request the judge
of the United States District Court for the Northern District of Texas senior
in term of service to appoint the arbitrator or arbitrators and, subject to
this Section 7.8, such arbitrators shall hear all arbitration matters arising
under this Section 7.8.
(b) Applicable Rules. Each arbitration hearing shall be held at a
place in Dallas, Texas acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association to the extent such rules do not
conflict with the terms of this Section. The decision of a majority of the
arbitrators shall be reduced to writing and shall be binding on the parties.
Judgment upon the award(s) rendered by a majority of the arbitrators may be
entered and execution had in any court of competent jurisdiction or application
may be made to such court for a judicial acceptance of the award and an order
of enforcement. The charges and expenses of the arbitrators shall be shared
equally by the parties to the hearing. The arbitration shall commence within
ten (10) days after the arbitrators are selected in accordance with the
provisions of this Section 7.8. In fulfilling their duties with respect to
determining the amount of any loss or claim, the arbitrators may consider such
matters as, in the opinion of the arbitrators, are necessary or helpful to make
a proper valuation. The arbitrators may consult with and engage disinterested
third parties to advise the arbitrators. The arbitrators shall not add any
interest factor reflecting the time value of money to the amount of any loss
and shall not award any punitive damages. If any of the arbitrators selected
hereunder should die, resign or be unable to perform his or her duties
hereunder, the remaining arbitrators or such senior judge (or such judge's
successor) shall select a replacement arbitrator. The procedure set forth in
this
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Section 7.8 for selecting the arbitrators shall be followed from time to time
as necessary. As to any determination of the amount of any loss, or as to the
resolution of any other claim, controversy, dispute or disagreement, that under
the terms hereof is made subject to arbitration, no lawsuit based on such
claimed loss or such resolution shall be instituted by any of the parties to
this Agreement, other than to compel arbitration proceedings or enforce the
award of a majority of the arbitrators. All privileges under Texas and federal
law, including attorney-client and work-product privileges, shall be preserved
and protected to the same extent that such privileges would be protected in a
federal court proceeding applying Texas law.
Section 7.9 Waiver of Breach. The waiver by either party of a
breach or violation of any provision of this Agreement shall not operate as, or
be construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
Section 7.10 Enforcement. In the event either party resorts to
legal action to enforce or interpret any provision of this Agreement, the
prevailing party shall be entitled to recover the costs and expenses of such
action so incurred, including, without limitation, reasonable attorneys' fees.
Section 7.11 Gender and Number. Whenever the context of this
Agreement requires, the gender of all words herein shall include the masculine,
feminine, and neuter, and the number of all words herein shall include the
singular and plural.
Section 7.12 Additional Assurances. Except as may be herein
specifically provided to the contrary, the provisions of this Agreement shall
be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall
execute such additional instruments and take such additional acts as are
reasonable and as the requesting party may deem necessary to effectuate this
Agreement.
Section 7.13 Consents, Approvals, and Exercise of Discretion.
Whenever this 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 herein to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that
such discretion shall be reasonably exercised.
Section 7.14 Force Majeure. Neither party shall be liable or
deemed to be in default for any delay or failure in performance under this
Agreement or other interruption of service deemed to result, directly or
indirectly, from acts of God, civil or military authority, acts of public
enemy, war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either party's
employees, or any other similar cause beyond the reasonable control of either
party unless such delay or failure in performance is expressly addressed
elsewhere in this Agreement.
Section 7.15 Severability. The parties hereto have negotiated and
prepared the terms of this 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
Agreement or the application thereof to any person or circumstance shall be
adjudged to any extent invalid, unenforceable, void or voidable for any reason
whatsoever by a court of competent jurisdiction or an arbitration tribunal,
such provision shall be as narrowly construed as possible, and each and all of
the remaining terms, provisions, promises, covenants and conditions of this
Agreement or their application to other persons or circumstances shall not be
affected thereby and shall be valid and
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enforceable to the fullest extent permitted by law. To the extent this
Agreement is in violation of applicable Legal Requirements, then the parties
agree to negotiate in good faith to amend the Agreement, to the extent possible
consistent with its purposes, to conform to all Legal Requirements.
Section 7.16 Divisions and Headings. The divisions of this
Agreement into articles, sections, and subsections and the use of captions and
headings in connection therewith is solely for convenience and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 7.17 Amendments and Agreement Execution. This Agreement
and amendments hereto shall be in writing and may be executed in multiple
copies. Each multiple copy shall be deemed an original, but all multiple
copies together shall constitute one and the same instrument.
Section 7.18 Entire Agreement. With respect to the subject matter
of this Agreement, this Agreement supersedes all previous contracts and
constitutes the entire agreement between the parties. Neither party shall be
entitled to benefits other than those specified herein. No prior oral
statements or contemporaneous negotiations or understandings or prior written
material not specifically incorporated herein shall be of any force and effect,
and no changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to
become effective on the date stipulated in such amendment(s). The parties
specifically acknowledge that, in entering into and executing this Agreement,
the parties rely solely upon the representations and agreements contained in
this Agreement and no others.
[SIGNATURES INTENTIONALLY APPEAR ON NEXT PAGE]
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IN WITNESS WHEREOF, Physician Group and Business Manager have caused
this Agreement to be executed by their duly authorized representatives, all as
of the day and year first above written.
PHYSICIAN GROUP: EMERGENCY PHYSICIANS OF NORTHERN
CALIFORNIA, INC., a professional medical
corporation
By: /s/ XXXXXX X. XXXXXXXX, M.D.
-------------------------------------
Name: Xxxxxx X. Xxxxxxxx, M.D.
-----------------------------------
Title: President
----------------------------------
BUSINESS MANAGER: EMCARE, INC., a Delaware corporation
By: /s/ XXXXXXX X. XXXXXX, III
-------------------------------------
Name: Xxxxxxx X. Xxxxxx, III
-----------------------------------
Title: President
----------------------------------
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