Exhibit 10.12
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MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
NOVAMED EYECARE MANAGEMENT, LLC,
a Delaware limited liability company
AND
HUNKELER EYE CENTERS-CHICAGO, L.L.C.,
a Delaware limited liability company
EFFECTIVE JULY 1, 1999
TABLE OF CONTENTS
Page No.
ARTICLE 1 DEFINITIONS..........................................................2
1.1 Adjustments.........................................................2
1.2 Affiliate...........................................................3
1.3 Ancillary Revenue...................................................3
1.4 Budget..............................................................3
1.5 Business Manager....................................................3
1.6 Business Manager Consent............................................3
1.7 Business Manager Expense............................................3
1.8 Capitation/Case Rate Revenues.......................................4
1.9 Confidential Information............................................4
1.10 Depository Account..................................................5
1.11 Designated Allied Health Professionals..............................5
1.12 Dispensary Business.................................................5
1.13 GAAP................................................................5
1.14 Managed Care Contract...............................................5
1.15 Management Fee......................................................5
1.16 Management Services.................................................5
1.17 Management Services Agreement.......................................6
1.18 Medical Advisory Board..............................................6
1.19 Medical Services....................................................6
1.20 Monthly Office Expense..............................................6
1.21 Monthly Practice Expense............................................6
1.22 Non-Ophthalmic Business.............................................6
1.23 Non-Ophthalmic Business Budgeted Office Expense.....................6
1.24 Non-Ophthalmic Business Budgeted Practice Expense...................6
1.25 Non-Ophthalmic Business Budgeted Revenue............................6
1.26 Non-Ophthalmic Business Management Fee..............................6
1.27 Non-Ophthalmic Business Monthly Fee.................................6
1.28 Non-Ophthalmic Business Monthly Office Expense......................6
1.29 Non-Ophthalmic Business Monthly Practice Expense....................7
1.30 Non-Ophthalmic Business Office Expense..............................7
1.31 Non-Ophthalmic Business Revenue.....................................7
1.32 Office or Offices...................................................7
1.33 Office Expense......................................................7
1.34 Optometric Business.................................................9
1.35 Optometrist.........................................................9
1.36 Physician..........................................................10
1.37 Physician Discretionary Expenses...................................10
1.38 Physician-Employee.................................................10
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Page No.
1.39 Policy Board.......................................................10
1.40 Practice...........................................................10
1.41 Practice Consent...................................................10
1.42 Practice Expense...................................................10
1.43 Practice-Owner.....................................................11
1.44 Predecessor Management Services Agreements.........................11
1.45 Preexisting Obligation Payments....................................11
1.46 Principal Services.................................................11
1.47 Principal Services Budgeted Office Expense.........................11
1.48 Principal Services Budgeted Practice Expense.......................11
1.49 Principal Services Budgeted Revenue................................11
1.50 Principal Services Management Fee..................................11
1.51 Principal Services Monthly Fee.....................................11
1.52 Principal Services Monthly Office Expense..........................11
1.53 Principal Services Monthly Practice Expense........................12
1.54 Principal Services Office Expense..................................12
1.55 Principal Services Revenue.........................................12
1.56 Professional Services Revenues.....................................12
1.57 Purchase Agreements................................................12
1.58 Representatives....................................................12
1.59 Services Agreements................................................12
1.60 Xxxxx Act..........................................................12
1.61 Subcontractor Costs................................................12
1.62 Term...............................................................12
ARTICLE 2 APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER.......................13
2.1 Appointment.........................................................13
2.2 Authority...........................................................13
2.3 Patient Referrals...................................................13
2.4 Internal Practice Matters...........................................14
2.5 Practice of Medicine or Optometry...................................14
ARTICLE 3 RESPONSIBILITIES OF THE POLICY BOARD................................14
3.1 Formation and Operation of the Policy Board.........................14
3.2 Duties and Responsibilities of the Policy Board.....................15
3.3 Medical Decisions...................................................17
ARTICLE 4 COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER..................17
4.1 Offices and Equipment...............................................17
4.2 Medical Supplies....................................................18
4.3 Support Services....................................................18
4.4 Quality Assurance, Risk Management, and Utilization Review..........18
4.5 Licenses and Permits................................................19
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Page No.
4.6 Personnel..........................................................19
4.7 Contract Negotiations..............................................19
4.8 Billing and Collection.............................................20
4.9 Priority of Payments...............................................24
4.10 Fiscal Matters.....................................................25
4.11 Reports and Records................................................27
4.12 Recruitment of Physicians and Optometrists.........................27
4.13 Confidential and Proprietary Information...........................27
4.14 Insurance..........................................................28
4.15 No Warranty........................................................30
ARTICLE 5 COVENANTS AND RESPONSIBILITY OF PRACTICE............................31
5.1 Organization and Operation.........................................31
5.2 Practice Personnel.................................................32
5.3 Professional Standards.............................................33
5.4 Medical Services...................................................34
5.5 Peer Review/Quality Assurance......................................34
5.6 Confidential and Proprietary Information...........................34
5.7 Noncompetition.....................................................35
5.8 Name, Trademark....................................................36
5.9 Medical Advisory Board.............................................37
5.10 Indemnification of Business Manager................................37
5.11 Indemnification of Practice........................................38
ARTICLE 6 FINANCIAL ARRANGEMENT...............................................38
6.1 Definitions........................................................38
6.2 Management Fee.....................................................41
6.3 Reasonable Value...................................................41
6.4 Payment of Management Fee..........................................41
6.5 Accounts Receivable................................................41
6.6 Disputes Regarding Fees............................................42
ARTICLE 7 MEDIATION AND ARBITRATION...........................................43
ARTICLE 8 TERM AND TERMINATION................................................43
8.1 Initial and Renewal Term............................................43
8.2 Termination.........................................................44
8.3 Effects of Termination..............................................46
8.4 Repurchase Obligation...............................................46
8.5 Repurchase Option...................................................48
8.6 Closing of Repurchase...............................................49
8.7 Rights and Remedies.................................................49
8.8 Interpretation......................................................49
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Page No.
ARTICLE 9 MISCELLANEOUS.......................................................50
9.1 Administrative Services Only.......................................50
9.2 Status of Contractor...............................................50
9.3 Notices............................................................50
9.4 Governing Law and Consent to Jurisdiction..........................51
9.5 Assignment.........................................................52
9.6 Waiver of Breach...................................................52
9.7 Enforcement........................................................52
9.8 Gender and Number..................................................53
9.9 Additional Assurances..............................................53
9.10 Consents, Approvals, and Exercise of Discretion....................53
9.11 Force Majeure......................................................53
9.12 Severability.......................................................53
9.13 Divisions and Headings.............................................54
9.14 Amendments and Management Services Agreement Execution.............54
9.15 Entire Management Services Agreement...............................54
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective as of
July 1, 1999 (the "Effective Date"), by and between NovaMed Eyecare Management,
LLC, a Delaware limited liability company ("Business Manager"), and Hunkeler Eye
Centers-Chicago, L.L.C., a Delaware limited liability company ("Practice"), and
replaces and supercedes, in their entirety, the Predecessor Management Services
Agreements (as hereinafter defined).
RECITALS
This Management Services Agreement is made with reference to the following
facts:
A. Business Manager is a validly existing Delaware limited liability
company which is in the business of providing physician practice management
services to medical practices.
B. Since January 1, 1996, Business Manager has provided physician
practice management services pursuant to Predecessor Management Services
Agreements with several practices in the Chicago, Illinois metropolitan area and
Northwest Indiana, including Xxxxxxxxx-Xxxxxxxx Eye Institute, P.C., Xxxxxxxxx
Eye Center, P.C., Xxxxxx X. Xxxxx, Ph.D., M.D., S.C., Xxxx Eye Center, S.C.,
Northshore Eye Associates, Ltd., and Northwest Ophthalmology Associates, S.C.
(the "Original Practices").
C. The Original Practices and X. Xxxx, S.C., Xxxxxxxx X. Xxxxxxxxx, M.D.,
S.C., Xxxxxxxx X. Xxxxx, M.D., S.C., and Xxx X. Xxxxxxxx, M.D. (collectively,
the "Regional Practices") desire to consolidate into a single group practice in
order to facilitate, among other things: (i) a focus on growth in refractive
eye surgery; (ii) more effective marketing; (iii) more efficient leveraging of
the existing infrastructure; (iv) enhanced recruiting and hiring of physicians
and other personnel; (v) further integration of subspecialists; (vi)
opportunities for intra-market acquisitions; (vii) joint managed care
contracting efforts; and (viii) such other objectives as may be determined by
the parties.
D. The Regional Practices formed the Practice, of which they are initial
owners, as the consolidated entity through which they will satisfy the
aforementioned objectives.
E. Practice is a validly existing Delaware limited liability company,
formed for and engaged in all lawful businesses for which limited liability
companies may be organized under the Limited Liability Company Act of the State
of Delaware, Del. Code tit. 6, (S) 18-101 et seq., as amended from time to time,
including, without limitation, the practice of medicine outside of the State of
Delaware; provided that the Practice shall not engage in any business from which
a licensed professional corporation would be prohibited under the laws of
Illinois, Indiana, or any other state under whose professional regulations the
Practice may at any time become subject. Specifically, the Practice's initial
purpose is to render professional medical services in the fields of
ophthalmology and optometry and to provide related and ancillary services and
products.
F. In addition to providing medical services, Practice conducts an
Optometric Business (as hereinafter defined) and a Dispensary Business (as
hereinafter defined) (hereinafter collectively defined as the "Non-Ophthalmic
Business").
G. Practice desires to focus its energies, expertise and time on the
practice of medicine and on the delivery of medical services to patients, and
desires to delegate the business functions of its medical practice and Non-
Ophthalmic Business to persons with business expertise.
H. Practice desires to engage Business Manager to provide all management,
administrative and business services as are necessary or appropriate for the
day-to-day administration of the nonmedical aspects of Practice's medical
practice and Non-Ophthalmic Business, including the provision of all non-medical
assets necessary or appropriate for the operation of Practice's medical practice
and Non-Ophthalmic Business, and Business Manager desires to provide such
services upon the terms and conditions hereinafter set forth.
I. Practice and Business Manager have determined a fair market value for
the services to be rendered by Business Manager and, based on this fair market
value, have developed a formula for compensating Business Manager that will
allow the parties to establish a relationship permitting each party to devote
its skills and expertise to the appropriate responsibilities and functions.
J. Business Manager is willing to commit significant resources to
Practice based upon the representation and warranty of Practice that the current
owners of Practice intend to continue to practice medicine for Practice in the
Chicago, Illinois metropolitan and northwest Indiana areas for a substantial
period during the term of this Management Services Agreement pursuant to
employment agreements (the "Employment Agreements") or Services Agreements (the
"Services Agreements") between Practice and each Practice-Owner (as hereinafter
defined).
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Management Services Agreement, the following terms shall
have the meanings set forth below.
1.1 Adjustments. The term "Adjustments" shall mean any adjustments on an
accrual basis in accordance with GAAP for uncollectible accounts, Medicare,
Medicaid and other payor contractual adjustments, discounts, worker's
compensation adjustments, professional courtesies and other reductions in
collectible revenue. On a continual basis, Business Manager and Practice agree
that Principal Services Revenue and Non-Ophthalmic Business Revenue will be
adjusted to cause amounts from such revenues to be stated at their net
realizable value in accordance with GAAP.
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1.2 Affiliate. The term "Affiliate" shall mean any person, firm or entity
which directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, any other person (including
members of such person's family), firm or entity.
1.3 Ancillary Revenue. The term "Ancillary Revenue" shall mean all other
revenue of Practice, Physicians and Optometrists actually recorded each month
(net of Adjustments) which is not Professional Services Revenue or Non-
Ophthalmic Business Revenue and shall include, without limitation, any revenues
of Practice or its Physicians and Optometrists which are derived from
professionally related activities such as expert witness fees, and any
royalties, honoraria or the like from authored documents or speeches.
1.4 Budget. The term "Budget" shall mean an operating budget and capital
expenditure budget for each fiscal year for each of the Non-Ophthalmic Business
and the Principal Services, as prepared by Business Manager and adopted by
Practice in accordance with Section 4.10 hereof. The initial Budget shall be
attached hereto and incorporated herein as Exhibit 1.4. Each succeeding Budget
subsequently adopted pursuant to Section 4.10 hereof shall also be incorporated
herein.
1.5 Business Manager. The term "Business Manager" shall mean NovaMed
Eyecare Management, LLC, a Delaware limited liability company, or any permitted
successor or assign under Section 8.5 hereof.
1.6 Business Manager Consent. The term "Business Manager Consent" shall
mean the consent granted by any of Business Manager's representatives to the
Policy Board. When any provision of this Management Services Agreement requires
Business Manager Consent, such consent shall not be unreasonably withheld or
delayed and shall be binding on Business Manager.
1.7 Business Manager Expense. The term "Business Manager Expense" shall
mean any expense or cost incurred by Business Manager which does not relate
directly to the provision of services to Practice or Practice-Owners. Such
expenses or costs shall include, without limitation:
(a) all salaries, benefits and other direct costs (including payroll
and other withholding taxes) of executive officers and management personnel of
Business Manager or employees of Business Manager who devote substantially all
of their time and effort to the operations of Business Manager in the aggregate
rather than the operations of Practice;
(b) the expense of using, leasing, maintaining or repairing the
corporate offices of Business Manager;
(c) the cost of capital to finance the general business obligations of
Business Manager, or acquisition of assets not used in the operation or
management of Practice, and any costs associated with raising such capital; and
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(d) the costs of any consultants or advisors who provide services for
Business Manager in connection with its business operations, such as accounting,
financial and legal services, other than those services which constitute an
Office Expense pursuant to Section 1.33 hereof. Except as otherwise expressly
provided in this Agreement, no Business Manager Expense shall be allocated to or
against Practice pursuant to Article 2 or otherwise without Practice Consent.
1.8 Capitation/Case Rate Revenues. The term "Capitation/Case Rate Revenues"
shall mean all revenues from managed care organizations, third party payors or
employers in which payments are based on a per member, case rate or other
similar basis (i.e., all payments which are not based on a fee-for-service
payment methodology or discounted fee-for-service reimbursement methodology) for
the medical needs of a subscribing patient. Capitation/Case Rate revenues shall
include any associated plan payments received such as patient co-payments,
incentive bonuses or incentive fund penalties. Subject to the review and
approval of the Policy Board, all Capitation/Case Rate Revenues shall be
allocated in good faith on an actuarial basis as follows:
(a) "Non-Ophthalmic Business Capitation" shall be the portion, if any,
of payments designated for Non-Ophthalmic Business goods sold or services
provided by Practice. Non-Ophthalmic Business Capitation shall be Non-Ophthalmic
Business Revenue;
(b) "Professional Services Capitation" shall be the portion of
payments designated for physician services performed by Practice. Professional
Services Capitation shall be Professional Services Revenues; and
(c) "Subcontractor Capitation Revenues" shall be the portion of
payments designated for physicians, optometrists or other medical or optometric
services that will be Subcontractor Costs (e.g., reinsurance, hospitalization,
surgical facility fees, etc.), including incentive bonuses or penalties, and an
estimate for incurred but not reported claims. The Policy Board shall determine
how Subcontractor Capitation Revenues are accounted for under this Management
Services Agreement.
Notwithstanding the foregoing, subject to the approval of the Policy Board,
Business Manager shall develop and implement an appropriate allocation
methodology for each Capitation/Case Rate Revenues contract.
1.9 Confidential Information. The term "Confidential Information" shall
mean any and all financial, technical, commercial or other information of
Business Manager or Practice, as appropriate (whether written or oral),
including, without limitation, all information, notes, studies, patient lists
and records, reports, analyses, financial statements, compilations, studies,
forms, business or management methods, marketing data, fee schedules, peer
review information, credentialing information, quality assurance and utilization
review information, interpretations, information technology systems and
programs, projections, forecasts or trade secrets of Business Manager or of
Practice, as applicable, whether or not such Confidential Information is
disclosed or otherwise made available to one party by the other party pursuant
to this Management Services
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Agreement. Confidential Information shall also include the terms and provisions
of this Management Services Agreement and any transactions consummated or
documents executed by the parties pursuant to this Management Services
Agreement. Confidential Information does not include any information that (i) is
or becomes generally available to and known by the public (other than as a
result of an unpermitted disclosure directly or indirectly by the receiving
party or its Affiliates, advisors or Representatives); (ii) is or becomes
available to the receiving party on a nonconfidential basis from a source other
than the furnishing party or its Affiliates, advisors or Representatives,
provided that such source is not and was not bound by a confidentiality
agreement with or other obligation of secrecy to the furnishing party of which
the receiving party has knowledge at the time of such disclosure; or (iii) has
already been developed, or is hereafter independently acquired or developed, by
the receiving party without violating any confidentiality agreement with or
other obligation of secrecy to the furnishing party.
1.10 Depository Account. The term "Depository Account" shall mean the bank
account referred to in Section 4.8 hereof.
1.11 Designated Allied Health Professionals. The term "Designated Allied
Health Professionals" shall mean those medical professionals working for or on
behalf of Practice, other than Physicians and Optometrists, whose services must
be rendered "incident to" a Physician's services in order to be billable under
the Medicare program.
1.12 Dispensary Business. The term "Dispensary Business" shall mean the
business of selling prescription and non-prescription eyewear, contact lenses
and other related optical products.
1.13 GAAP. The term "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants,
statements and pronouncements of the Financial Accounting Standards Board, or
other statements, practices and procedures as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of the determination.
1.14 Managed Care Contract. The term "Managed Care Contract" shall include
any Capitation/Case Rate Revenues contract, or any contracts based on a fee-for-
service payment methodology or discounted fee-for-service reimbursement
methodology and other agreements with third party payors, alternative delivery
systems or other purchasers of group health care services.
1.15 Management Fee. The term "Management Fee" shall mean the amount
determined pursuant to Article 6 hereof.
1.16 Management Services. The term "Management Services" shall mean the
business, administrative and management services to be provided to Practice by
or through Business Manager under this Agreement including, without limitation,
the provision of equipment, supplies, support services, nonphysician personnel,
office space, management, administration, financial
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record keeping and reporting, information systems and all other business office
services necessary for the nonmedical operations of Practice.
1.17 Management Services Agreement. The term "Management Services
Agreement" shall mean this Management Services Agreement by and between Practice
and Business Manager and any amendments hereto.
1.18 Medical Advisory Board. The term "Medical Advisory Board" shall have
the meaning set forth in Section 5.9 hereof.
1.19 Medical Services. The term "Medical Services" shall mean ophthalmic
and optometric services as provided by Practice through Physicians or
Optometrists, as the case may be, but any such services by Optometrists shall be
limited to those services performed at the locations listed on Exhibit 1.19 (all
optometric services provided by Optometrists at any other location of Practice
shall be deemed part of Optometric Business (as hereinafter defined)).
1.20 Monthly Office Expense. The term "Monthly Office Expense" shall have
the meaning set forth in Section 6.1 hereof.
1.21 Monthly Practice Expense. The term "Monthly Practice Expense" shall
have the meaning set forth in Section 6.1 hereof.
1.22 Non-Ophthalmic Business. The term "Non-Ophthalmic Business" shall mean
the Optometric Business and Dispensary Business, collectively.
1.23 Non-Ophthalmic Business Budgeted Office Expense. The term "Non-
Ophthalmic Business Budgeted Office Expense" shall have the meaning set forth in
Section 6.1 hereof.
1.24 Non-Ophthalmic Business Budgeted Practice Expense. The term "Non-
Ophthalmic Business Budgeted Practice Expense" shall have the meaning set forth
in Section 6.1 hereof.
1.25 Non-Ophthalmic Business Budgeted Revenue. The term "Non-Ophthalmic
Business Budgeted Revenue" shall have the meaning set forth in Section 6.1
hereof.
1.26 Non-Ophthalmic Business Management Fee. The term "Non-Ophthalmic
Business Management Fee" shall have the meaning set forth in Section 6.1 hereof.
1.27 Non-Ophthalmic Business Monthly Fee. The term "Non-Ophthalmic Business
Monthly Fee" shall have the meaning set forth in Section 6.1 hereof.
1.28 Non-Ophthalmic Business Monthly Office Expense. The term "Non-
Ophthalmic Business Monthly Office Expense" shall have the meaning set forth in
Section 6.1 hereof.
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1.29 Non-Ophthalmic Business Monthly Practice Expense. The term "Non-
Ophthalmic Business Monthly Practice Expense" shall have the meaning set forth
in Section 6.1 hereof.
1.30 Non-Ophthalmic Business Office Expense. The term "Non-Ophthalmic
Business Office Expense" shall have the meaning set forth in Section 6.1 hereof.
1.31 Non-Ophthalmic Business Revenue. The term "Non-Ophthalmic Business
Revenue" shall mean all revenues of the Non-Ophthalmic Business of the Practice
recorded on an accrual basis under GAAP (net of Adjustments). Non-Ophthalmic
Business Revenue shall include, without limitation, such revenues governed by
the Billing and Collection Agreements (as defined in Section 4.8 hereof).
1.32 Office or Offices. The term "Office" or "Offices" shall mean any
office spaces, clinics, facilities or satellite facilities that Business Manager
owns, leases or otherwise procures for the exclusive use of Practice.
1.33 Office Expense. The term "Office Expense" shall mean all expenses
incurred by Business Manager, Practice or Practice-Owners, in accordance with
GAAP in the provision of services to Practice and Practice-Owners and the
operation of the Offices, except insofar as such expenses are Business Manager
Expenses or Practice Expenses. Except as specifically enumerated below, Office
Expense shall not include any state or federal income tax liability of Practice,
Practice-Owners, or any other expense that is a Practice Expense or a Business
Manager Expense. Without limitation, Office Expense shall include:
(a) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all employees of Business Manager who are either
located at, or devote substantially all of their time and effort to, Practice;
(b) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all Optometrists and Physician-Employees, but
excluding the salaries, benefits, fees, and other direct costs (including
payroll and other withholding taxes) of all Practice-Owners and of those
Physician-Employees and Optometrists set forth on Exhibit 1.33(b) (the "Practice
Expense Employees"); provided, however, that in the event any Practice-Owner
shall fail to work in the performance of its/his/her duties as described in such
Practice-Owner's Employment Agreement or Services Agreement, as applicable, (i)
due to the Practice-Owner being Permanently Disabled, as defined in the
Operating Agreement of Practice (the "Operating Agreement") for a period
exceeding six (6) consecutive months or twelve (12) months within any eighteen
(18) consecutive month period, or (ii) otherwise fails to work, for any reason,
in performance of its/his/her such duties for a period exceeding two (2) months,
whether or not such failure (i) gives rise to termination rights pursuant to
such Employment Agreement or Services Agreement or (ii) occurs prior to or after
the termination of the Initial Term (as such term is defined in Section 4.1 of
the Employment Agreement and Section 4.1 of the Services Agreement), then the
expenses described in this Section 1.33(b) with respect to any Physician or
Optometrist necessary to replace such Practice-Owner's services shall thereafter
be categorized
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as a Practice Expense. Notwithstanding anything herein to the contrary, the
Policy Board shall determine the Practice Expense Employees to be listed on
Exhibit 1.33(b) from time to time;
(c) except as otherwise provided in Section 5.4, the direct or
reasonably allocated costs of providing locum tenens coverage with respect to
any Optometrists or Physician-Employees as may be necessary pursuant to Section
5.4 hereof, which costs shall include, without limitation, the salaries,
benefits and other direct costs of any Physician-Employees and Optometrists
retained by Practice for such purposes;
(d) the direct or reasonably allocated costs of any employee or
consultant to the extent such person provides services at the direction of
Business Manager for improved performance of Practice, such as management,
xxxxxxxx and collections, business office consultation, training, and accounting
and legal services;
(e) the direct or reasonably allocated costs and out-of-pocket
expenses of Business Manager or Practice incurred to recruit Office personnel,
Physician-Employees and Optometrists of Practice;
(f) all reasonable and customary business insurance expenses of
Practice, Physicians, Optometrists, Designated Allied Health Professionals and
the Offices, including, without limitation, professional and general liability
insurance;
(g) without duplication of expenses included pursuant to any other
subparagraph of this Section 1.33, the expense of using, leasing, maintaining,
repairing, purchasing or otherwise procuring the Offices and related equipment
(including any leasehold improvements), including, without limitation, any
depreciation expense, any personal property taxes assessed against assets
utilized for the benefit of Practice, and any and all expenses relating to the
equipment listed on Exhibit 1.33(g) attached hereto and incorporated herein, but
excluding any Preexisting Obligation Payments;
(h) without duplication of expenses included pursuant to any other
subparagraph of this Section 1.33, the cost of capital, whether as actual
interest on indebtedness incurred on behalf of Practice or as reasonable imputed
interest on capital advanced by Business Manager to finance or refinance
obligations of Practice, purchase medical or nonmedical equipment, renovate the
Offices, or finance new ventures of Practice, but excluding any Preexisting
Obligation Payments;
(i) the Management Fee;
(j) the direct or reasonably allocated costs relating to sales or
marketing activities or materials relating to Practice, including, without
limitation, brochures, pamphlets, displays, direct mail, promotional materials,
patient screening, network directories, signs, video and audio tapes, equipment,
media, development costs and consulting services;
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(k) the direct or reasonably allocated costs of obtaining, maintaining
and supporting Managed Care Contracts for Practice;
(l) the direct or reasonably allocated costs relating to any third
party service agreements for the general day-to-day operations of Offices and
Practice, which services shall include, without limitation, maintenance, patient
transportation, janitorial, answering services, landscaping, snow removal and
uniform rental;
(m) with Practice Consent, the direct or reasonably allocated travel
expenses of Business Manager associated with attending meetings, conferences or
seminars primarily benefitting Practice;
(n) the cost of medical supplies (including, without limitation,
drugs, pharmaceuticals, products, substances or medical devices), office
supplies, inventory (including, without limitation, inventory for the Non-
Ophthalmic Business) and utilities;
(o) direct costs, not to exceed budgeted allowances, for professional
dues, subscriptions, continuing medical education expenses and travel costs for
continuing medical education or other business travel of Practice employees;
(p) all direct or reasonably allocated costs relating to the operation
of the Offices, including without limitation, expenses relating to utilities;
and
(q) a licensing and access fee for each Windows terminal to cover
expenses relating to capital equipment and maintenance, system installation and
training, telecommunications and wide area networking, installation and support
of software provided by Business Manager, and support and system administration;
provided, however, that capital equipment and support fees will be adjusted
accordingly to the extent PCs and/or notebooks are utilized in lieu of Windows
terminals; provided further that Business Manager shall have the discretion to
adjust this fee annually provided that such adjustments are consistently applied
by Business Manager to all managed practices on a company-wide basis.
1.34 Optometric Business. The term "Optometric Business" shall mean the
business comprised of all professional services performed by, on behalf of, or
under the direction and/or supervision of, all Optometrists employed by
Practice, including, without limitation, any professional fitting fees relating
to contact lenses, and any visual field tests performed by a certified
technician employed by Practice at the location of such Optometrists; provided,
however, that Optometric Business shall not include any services provided by
Optometrists at locations listed on Exhibit 1.19 (which services shall be a
component of Principal Services).
1.35 Optometrist. The term "Optometrist" shall mean each individually
licensed doctor of optometry who is employed or otherwise retained by or
associated with Practice, each of whom shall meet at all times the
qualifications described in Sections 5.2 and 5.3 hereof.
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1.36 Physician. The term "Physician" shall mean each individual licensed to
practice medicine in the States of Illinois and/or Indiana who is employed or
otherwise retained by or associated with Practice, including without limitation,
those individuals employed by, and an owner of, any Practice-Owner, each of whom
shall meet at all times the qualifications described in Sections 5.2 and 5.3
hereof.
1.37 Physician Discretionary Expenses. The term "Physician Discretionary
Expenses" shall mean any expenses or debt obligations of Practice or Physicians
which are not included in the Budget or approved by Business Manager and shall
include, without limitation, the following: accounting, consulting or legal
expenses incurred by Practice without coordinating such engagement through
Business Manager; professional dues, subscriptions, continuing medical education
expenses and travel costs for continuing medical education in excess of budgeted
allowances for such items and any equipment obtained by Practice without the
approval of the Policy Board as set forth in Section 4.1(d) hereof; and other
discretionary business expenses incurred directly by Physicians or Practice.
1.38 Physician-Employee. The term "Physician-Employee" shall mean any
Physician employed by Practice, but shall not include (i) Practice-Owners or
(ii) any Physician directly employed by, and an owner of, a Practice-Owner.
1.39 Policy Board. The term "Policy Board" shall refer to the body
responsible for developing and implementing management and administrative
policies pursuant to this Agreement.
1.40 Practice. The term "Practice" shall mean Hunkeler Eye Centers -
Chicago, L.L.C., a Delaware limited liability company authorized to do business
in Illinois and Indiana, or any permitted successor or assign under Section 8.5
hereof.
1.41 Practice Consent. The term "Practice Consent" shall mean the consent
unanimously granted by Practice's Managers (as described in the Operating
Agreement). When any provision of this Management Services Agreement requires
Practice Consent, such consent shall not be unreasonably withheld or delayed
and, once granted, shall be binding on Practice.
1.42 Practice Expense. The term "Practice Expense" shall mean an expense
incurred by Business Manager or Practice that is not an Office Expense and for
which Practice, and not Business Manager, is financially liable. Practice
Expense shall include, without limitation, such items as Preexisting Obligation
Payments, Physician Discretionary Expenses, salaries, benefits, fees, and other
direct costs of all Practice-Owners, the Physicians directly employed by, and
who are owners of, a Practice-Owner and the Practice Expense Employees, any
costs of providing locum tenens coverage designated as a Practice Expense
pursuant to Section 5.4 hereof, any continuing medical education ("CME")
expenses in excess of the CME expenses allocated for each Physician in the
Budget, which amount will not be less than $10,000, and any other expenses
incurred by Practice, Practice-Owners and Physicians directly employed by, and
who are owners of, a Practice-Owner, the general nature of which are not
contemplated in the Budget.
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1.43 Practice-Owner. The term "Practice-Owner" shall mean any Physician
who is employed by, and an owner of, Practice, and any professional or medical
service corporation that is an owner of Practice and provides professional
medical services (through its employed Physician Shareholder) under a Services
Agreement.
1.44 Predecessor Management Services Agreements. The term "Predecessor
Management Services Agreements" shall mean the management services agreements
dated as of January 1, 1996, as amended from time to time, by and between
Business Manager and each of the Original Practices.
1.45 Preexisting Obligation Payments. The term "Preexisting Obligation
Payments" shall mean (i) the expense for principal and interest amortization of
debt obligations of Practice or any Practice-Owner relating to the operation of
Practice (A) that were not assumed by Business Manager under the Purchase
Agreements, and which existed prior to the execution of the Predecessor
Management Services Agreements; or (B) which existed prior to the execution of
this Management Services Agreement and did not constitute an Office Expense
under the terms and conditions of the applicable Predecessor Management Services
Agreement and (ii) lease payments and other costs relating to any outstanding
debt, obligations or liabilities of Practice or any Practice-Owner relating to
the operation of Practice (A) that were not assumed by Business Manager under
the Purchase Agreements and which existed prior to the execution of the
Predecessor Management Services Agreements, or (B) which existed prior to the
execution of this Management Services Agreement and did not constitute an Office
Expense under the terms and conditions of the applicable Predecessor Management
Services Agreement.
1.46 Principal Services. The term "Principal Services" shall mean all
services performed by or on behalf of Practice which generate Professional
Services Revenues or Ancillary Revenues.
1.47 Principal Services Budgeted Office Expense. The term "Principal
Services Budgeted Office Expense" shall have the meaning set forth in Section
6.1 hereof.
1.48 Principal Services Budgeted Practice Expense. The term "Principal
Services Budgeted Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.49 Principal Services Budgeted Revenue. The term "Principal Services
Budgeted Revenue" shall have the meaning set forth in Section 6.1 hereof.
1.50 Principal Services Management Fee. The term "Principal Services
Management Fee" shall have the meaning set forth in Section 6.1 hereof.
1.51 Principal Services Monthly Fee. The term "Principal Services Monthly
Fee" shall have the meaning set forth in Section 6.1 hereof.
1.52 Principal Services Monthly Office Expense. The term "Principal
Services Monthly Office Expense" shall have the meaning set forth in Section 6.1
hereof.
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1.53 Principal Services Monthly Practice Expense. The term "Principal
Services Monthly Practice Expense" shall have the meaning set forth in Section
6.1 hereof.
1.54 Principal Services Office Expense. The term "Principal Services
Office Expense" shall have the meaning set forth in Section 6.1 hereof.
1.55 Principal Services Revenue. The term "Principal Services Revenue"
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
1.56 Professional Services Revenues. The term "Professional Services
Revenues" shall mean the sum of (i) all professional fees actually recorded on
an accrual basis under GAAP (net of Adjustments) as a result of Medical Services
and related health care services rendered by Physicians, the Optometrists to the
extent such services are performed at the locations listed on Exhibit 1.19, and
Designated Allied Health Professionals, whether rendered in an outpatient or
inpatient setting, as well as customary professional fees for the fitting of
contact lenses by the Physicians or the Optometrists (to the extent such
fittings are performed by the Optometrists at the locations listed on Exhibit
1.19), and (ii) Professional Services Capitation allocated to Professional
Service Revenues. Professional Services Revenues shall include, without
limitation, such professional fees and Professional Services Capitation governed
by the Billing and Collection Agreements (as defined in Section 4.8 hereof).
Except as may be otherwise provided herein, Professional Services Revenues shall
in no event include revenues derived from the Non-Ophthalmic Business.
1.57 Purchase Agreements. The term "Purchase Agreements" shall mean
collectively those agreements set forth on Exhibit 1.57.
1.58 Representatives. The term "Representatives" shall mean a party's
officers, directors, managers, employees, or other agents or representatives.
1.59 Services Agreements. The term "Services Agreements" shall mean those
agreements for the provision of professional services between Practice and any
professional or medical service corporation Practice-Owner in the form attached
hereto as Exhibit 1.59(a), including, without limitation, the agreements listed
on Exhibit 1.59(b) attached hereto and incorporated herein.
1.60 Xxxxx Act. The term "Xxxxx Act" shall mean Section 1877 of the
Social Security Act.
1.61 Subcontractor Costs. The term "Subcontractor Costs" shall mean the
amounts payable to third parties for providing goods or medical services for
Capitation/Case Rate Revenues contracts.
1.62 Term. The term "Term" shall mean the initial term and any renewal
terms of this Management Services Agreement as described in Section 8.1 hereof.
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ARTICLE 2
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
2.1 Appointment. Practice hereby appoints Business Manager as its sole
and exclusive agent for the management and administration of the business
functions and business affairs of the medical practice, including the Non-
Ophthalmic Business of Practice, and Business Manager hereby accepts such
appointment, subject at all times to the terms and conditions of this Management
Services Agreement.
2.2 Authority. Consistent with the provisions of this Management Services
Agreement, Business Manager shall have the responsibility and commensurate
authority to provide Management Services to Practice. Subject to the terms and
conditions of this Management Services Agreement, Practice expressly authorizes
Business Manager to provide the Management Services in any reasonable manner
Business Manager deems appropriate to meet the day-to-day requirements of the
business functions of Practice. In connection with Business Manager's provision
of Management Services, Practice also expressly authorizes Business Manager to
negotiate and execute on behalf of Practice any and all contracts related to the
provision of such Management Services; provided, however that, subject to
Section 4.7 hereof, Business Manager shall have no authority to negotiate and
execute on behalf of Practice contracts that relate specifically to the
provision of Medical Services, provided that Practice Consent shall be required
(which Practice Consent shall not be unreasonably withheld) for all such
contracts which legally bind Practice and result in the expenditure by Business
Manager or Practice of more than $25,000 per year, unless such contract relates
to any item specifically reflected in the Budget, in which case no Practice
Consent shall be required. The parties acknowledge and agree that Practice,
through its Physicians, shall be responsible for and shall have complete
authority, responsibility, supervision and control over the provision of all
Medical Services and other professional health care services performed for
patients, and that all diagnoses, treatments, procedures and other professional
health care services shall be provided and performed exclusively by or under the
supervision of Physicians in such manner as such Physicians, in their sole
discretion, deem appropriate. For the purposes of this Management Services
Agreement, such supervision and control means that a Physician shall be present
in the office suite where the foregoing services are being performed and be
immediately available to provide assistance and direction throughout the time
that the services are being performed. Practice shall exercise the same degree
of supervision and control over the services of personnel leased to Practice
hereunder as Practice exercises over its own employees. Business Manager shall
have and exercise absolutely no control or supervision over the provision of
Medical Services. Except as provided in Section 4.7 hereof, with respect to any
agreement relating specifically to Medical Services, and subject to the approval
of the Policy Board pursuant to Section 3.2(d), Practice shall, to the extent
commercially practicable, give Business Manager and the Policy Board thirty (30)
days' prior notice of Practice's intent to execute any such agreement obligating
Practice to perform Medical Services or otherwise creating a binding legal
obligation on Practice to perform Medical Services.
2.3 Patient Referrals. Business Manager and Practice agree that the
benefits afforded either party hereunder are not payment for, and are not in any
way contingent upon the referral,
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admission or any other arrangement for, the provision of any item or service
offered by Business Manager or Practice.
2.4 Internal Practice Matters. Except as otherwise provided herein,
matters involving the internal governance, control or finances of Practice,
including specifically the allocation of professional income among Practice-
Owners, Physician-Employees and Optometrists of Practice, and tax and investment
planning, as well as the admission and removal of Practice-Owners, shall remain
the sole responsibility of Practice, Practice-Owners, Physician-Employees and
Optometrists.
2.5 Practice of Medicine or Optometry. 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 or optometry.
To the extent that any act or service required to be performed by Business
Manager hereunder should be construed by a court of competent jurisdiction or by
the Illinois Department of Professional Regulation or the Health Profession
Bureau or Board of Medical Examiners of the State of Indiana to constitute the
practice of medicine or optometry, Business Manager's requirement to perform
that act or service shall be deemed waived and unenforceable.
ARTICLE 3
RESPONSIBILITIES OF THE POLICY BOARD
3.1 Formation and Operation of the Policy Board.
(a) Structure of Policy Board. Practice hereby acknowledges that it
has been formed by the Regional Practices, and that the Original Practices each
have previously engaged Business Manager to provide physician practice
management services under the Predecessor Management Services Agreements. The
Original Practices and Business Manager have established a Policy Board which
has been responsible for overseeing the overall operations of the non-medical
aspects of each Original Practice's facilities and certain medical issues,
subject to Section 3.3 below. Upon the Effective Date, the Policy Board shall
serve the foregoing role with respect to the Practice and all of the Practice-
Owners. The Policy Board shall consist of four (4) members, each of whom shall
serve a one-year term. Business Manager shall designate, in its sole discretion,
two (2) members of the Policy Board, and the Practice-Owners shall collectively
designate two (2) members of the Policy Board. The Policy Board members
designated by the Practice-Owners shall be either physician-shareholders of
those Practice-Owners that are professional or medical service corporations, or
shall be individual licensed physicians who are Practice-Owners. Except as
otherwise expressly provided herein, the act of a majority of the members of the
Policy Board shall be the act of the Policy Board.
(b) Appointment of Members. As of the Effective Date, the Policy
Board consists of the members set forth on Exhibit 3.1(b) attached hereto and
incorporated herein. Annually and at least thirty (30) days prior to the
commencement of each fiscal year of Business Manager, each of Business Manager
and the Practice-Owners shall deliver to the board of
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directors of Business Manager a list of two (2) designees to the Policy Board to
serve as members of the Policy Board for the upcoming fiscal year. In the event
that either Business Manager or the Practice-Owners fail to deliver the list of
designees by the required date, then such party's representatives on the Policy
Board shall remain the same for the upcoming fiscal year. Any vacancies created,
whether by death, incapacity or resignation of a designee, shall be filled by
the party that appointed such designee by no later than fifteen (15) business
days after the date of receipt by all of the Practice-Owners of notice from
Business Manager that such vacancy exists and must be filled. If the applicable
party shall fail to designate a replacement member to the Policy Board within
the required time period, then the other party shall have the right to designate
the replacement member and such replacement member shall serve on the Policy
Board on an interim basis until his or her successor is duly appointed by the
original appointing party pursuant to this Section 3.1(b). In any case in which
the Practice-Owners shall be required to designate a member or members to the
Policy Board, a previously appointed designee of the Practice-Owners shall
convene a meeting or collect the written votes of the Representatives of the
Practice-Owners to select such designee or designees. Each Practice-Owner shall
be entitled to one vote per designee to be appointed by the Practice-Owner and
those designees receiving a plurality of the votes shall serve as the
representatives of the Practice-Owners on the Policy Board. Each of Business
Manager and the Practice-Owners (acting pursuant to the Operating Agreement)
shall have the discretion, at any time and upon ten (10) days notice to such
other party, to remove any of its designated representatives from the Policy
Board and replace such representative with a new designee.
(c) Actions of the Policy Board. The Policy Board meetings shall be
held as mutually agreed, but at least semiannually, in the Chicago, Illinois
metropolitan area. Meetings may be called by any two (2) members of the Policy
Board upon notice to Business Manager. Notice of each such meeting, stating the
place, date and hour of the meeting, shall then be delivered by Business Manager
to each member of the Policy Board not less than seventy-two (72) hours prior to
such meeting; provided, however, that such notice may be delivered in a shorter
time frame if the circumstances surrounding such meeting reasonably dictate such
shorter notice. Meetings shall be open to any Practice-Owner and any officer,
director or employee (as designated by Business Manager) of Business Manager.
Members of the Policy Board may participate in a meeting by means of conference
telephone. Attendance at any meeting in person or by proxy, or participation in
a meeting by means of conference telephone, shall constitute a waiver of notice
thereof. Any action required to be taken at a meeting of the Policy Board may be
taken without a meeting and without a vote if a consent in writing, setting
forth the action to be taken, is signed by all of the members of the Policy
Board, unless such action is medical in nature, in which case such consent need
be signed only by all of the Physician members of the Policy Board. Action by
the Policy Board shall require majority approval (which in the case of actions
taken in connection with this Management Services Agreement, shall require both
members designated by Practice).
3.2 Duties and Responsibilities of the Policy Board. The Policy Board
shall have the following duties, obligations and authority:
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(a) Capital Improvements and Expansion. Subject to the items
specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, any renovation and expansion plans and capital expenditures with
respect to any one or more of the Offices, or the priority of such capital
expenditures, shall be reviewed and approved by the Policy Board and shall be
based upon economic feasibility, Physician support, productivity and then-
current market conditions.
(b) Marketing and Advertising. The Policy Board shall explore
potential marketing and other advertising of the services performed at
Practice's facilities.
(c) Fees; Collection Policies. As a part of the annual operating
budget, in consultation with Practice and Business Manager, the Policy Board
shall review and approve the collection policies for the Non-Ophthalmic Business
of, and for all Medical Services and ancillary services provided by, Practice.
(d) Provider and Payor Relationships. Subject to Sections 4.7 and
4.8 hereof, decisions regarding the establishment or maintenance of
relationships with institutional health care providers and third party payors
shall be approved by the Policy Board in consultation with Practice and Business
Manager. The Policy Board shall review and approve such discounted fee
schedules, including capitated fee arrangements, and shall approve allocations
of Capitation/Case Rate Revenues.
(e) Strategic Planning. The Policy Board shall recommend long-term
strategic planning objectives for Practice; provided, however, that the Policy
Board shall not engage in recommending any horizontal market allocations between
Practice and any other medical practice.
(f) Physician and Optometrist Hiring. Subject to the items
specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, the Policy Board shall recommend to Practice the number and type
of Physicians and Optometrists required for the efficient operation of
Practice's facilities. Practice shall have the right to accept or reject any
recommendation of the Policy Board on this matter and Practice shall retain the
number and type of Physicians and Optometrists as it shall deem necessary in its
sole discretion. The Policy Board may review and suggest any variations to the
restrictive covenants in any Employment Agreement.
(g) Fee Dispute Resolution. Upon written submission by Practice of a
dispute concerning Management Fees, the Policy Board shall consider, develop and
attempt to implement a resolution of such dispute.
(h) Employee Relations. Subject to applicable law, upon submission
by Practice or any Physician or Optometrist of a written complaint or concern
regarding any employee of Business Manager performing services for Practice
hereunder, the Policy Board shall consider, develop and attempt to implement a
resolution of such complaint or concern, which, if the circumstances warrant,
could result in the removal of such employee from the Offices.
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(i) Grievance Referrals. The Policy Board shall consider and make
recommendations to Practice regarding any disputes pertaining to matters not
specifically addressed in this Management Services Agreement as referred to it
by Practice.
(j) Miscellaneous. The Policy Board shall approve the addition of
locations to be listed on Exhibit 1.19, and shall determine the economic terms
(and any necessary amendments to this Management Services Agreement) associated
with such addition at the time the addition is being contemplated. The Policy
Board shall determine any individuals to be added to Exhibit 1.33(b) hereof,
from time to time.
3.3 Medical Decisions. Notwithstanding anything to the contrary contained
in Section 3.1 or 3.2 above, all medical decisions addressed by the Policy Board
will be made solely by Physician members of the Policy Board.
ARTICLE 4
COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide all Management Services
which are necessary or appropriate for the day-to-day administration of the
nonmedical aspects of Practice's operations (including the Non-Ophthalmic
Business), including, without limitation, those services set forth in this
Article 4 in accordance, in all material respects, with all laws, rules,
regulations and guidelines applicable to the provision of Management Services.
4.1 Offices and Equipment.
(a) Subject to Section 4.1(b) hereof, as necessary or appropriate,
and after taking into consideration the professional concerns of Practice,
Business Manager shall lease, acquire or otherwise procure Offices in locations
reasonably acceptable to Practice and shall permit Practice to use the Offices.
Any Office procured by Business Manager for use by Practice shall be procured at
commercially reasonable rates. Any move from the Offices or any particular
location or locations of said Offices shall be done only after Business Manager
has received Practice Consent.
(b) In the event Practice is the lessee of one or more of the Offices
under a lease or leases with one or more unrelated and nonaffiliated lessors,
Business Manager may require Practice to assign such lease or leases to Business
Manager upon receipt of consent from the lessor(s), and, in such event, Business
Manager shall assume Practice's obligations thereunder from and after the date
of such assignment. Practice shall use its commercially reasonable efforts to
assist in obtaining each lessor's consent to the assignment. Upon request,
Practice shall execute any instruments and shall take any acts that Business
Manager may reasonably deem necessary to accomplish the assignment of the
lease(s). Any expenses incurred in effectuating the assignment shall be an
Office Expense.
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(c) Business Manager shall provide all nonmedical equipment,
fixtures, office supplies, information systems, furniture and furnishings
reasonably deemed necessary by Business Manager for the operation of the Offices
and for the provision of Medical Services and the operation of the Non-
Ophthalmic Business, including all reasonably necessary replacements and
upgrades thereof. Notwithstanding the foregoing, with respect to information
systems, Practice acknowledges and agrees that Business Manager will have the
reasonable discretion (with reasonable advance notice to Practice) to determine
the timing and extent of the upgrade and/or replacement of Practice's
information systems from time to time during the Term.
(d) Business Manager shall provide or cause to be provided (including
financing arrangements with respect thereto) all medical equipment required by
Practice.
(e) Business Manager shall be responsible for all necessary repair
and maintenance of the Offices as an Office Expense, consistent with Business
Manager's responsibilities under the terms of any lease or other use
arrangement. Business Manager shall also be responsible for all necessary
repair, maintenance and replacement of all equipment relating to the Offices,
except for any such repairs, maintenance and replacement necessitated by the
negligence or willful misconduct of Practice, its Physicians or other personnel
employed by Practice, in which event any such repair or replacement shall be a
Practice Expense and not an Office Expense.
4.2 Medical Supplies. Business Manager shall order, procure, purchase and
provide on behalf of, and as agent for, Practice all necessary and reasonably
desirable medical supplies and optical dispensary supplies and inventory unless
otherwise prohibited by federal and/or state law, and shall appropriately
respond to any reasonable inquiries or requests by Physicians for the need to
order or repair such supplies. Business Manager shall ensure that the Offices
are adequately stocked at all times with medical supplies that are reasonably
necessary or appropriate for the operation of Practice and required for the
provision of Medical Services and optical dispensary supplies and inventory that
are reasonably necessary or appropriate for the operation of the Non-Ophthalmic
Business. The ultimate oversight, supervision and ownership of all medical
supplies is and shall remain the sole responsibility of Practice. As used in
this Section 4.2, the term "medical supplies" shall mean all drugs,
pharmaceuticals, products, substances, items or devices whose purchase,
possession, maintenance, administration, prescription or security requires the
authorization or order of a licensed health care provider or requires a permit,
registration, certification or other governmental authorization held by a
licensed health care provider as specified under any federal and/or state law.
4.3 Support Services. Business Manager shall provide or arrange for all
printing, stationery, telephone, facsimile, office supplies, forms, postage,
duplication or photocopying services, and other support services as are
reasonably necessary or appropriate for the operation of the Practice and
Offices and the provision of Medical Services and the operation of the Non-
Ophthalmic Business therein.
4.4 Quality Assurance, Risk Management, and Utilization Review. Business
Manager shall assist Practice in Practice's establishment and implementation of
procedures to ensure the
18
consistency, quality, appropriateness and medical necessity of Medical Services
provided by Practice, and shall provide administrative support for Practice's
overall quality assurance, risk management and utilization review programs.
Business Manager shall use its commercially reasonable efforts to perform these
tasks in a manner to ensure the confidentiality of, and the privileged status
afforded to, these programs and procedures to the fullest extent allowable under
state and federal law.
4.5 Licenses and Permits. Business Manager shall, on behalf of and in the
name of Practice, coordinate all development and planning processes, and assist
in the application for, and use reasonable efforts to assist Practice in
obtaining and maintaining, all federal, state and local licenses, certifications
and regulatory permits required for, or in connection with, the operation of
Practice, the equipment located at the Offices, and any optical dispensary of
Practice, other than those relating to the provision of Medical Services or the
administration of drugs by Physicians.
4.6 Personnel. Except as specifically provided in Section 5.2(b) hereof,
Business Manager shall, consistent with the Budget, employ or otherwise retain
and shall be responsible for selecting, hiring, training, supervising and
terminating, all nonphysician personnel as Business Manager reasonably deems
necessary and appropriate for Business Manager's performance of its duties and
obligations under this Management Services Agreement. Business Manager shall
have sole responsibility for determining the salaries, providing employee
benefits, and for withholding any sums for income tax, unemployment insurance,
worker's compensation coverage, social security or any other withholding
required by applicable law or governmental requirement; provided, however, that
with respect to Regional Employees (as hereinafter defined) only, any addition
in headcount with respect to any salaried employees or a material number of
hourly employees or salary increases that are not contemplated in the Budget
shall require Policy Board approval. As used herein, "Regional Employees" shall
be those individuals (i) whose compensation is an Office Expense pursuant to
Section 1.33(a) hereof, and (ii) who devote substantially all of their time and
effort providing services to Practice as a whole rather than providing services
at a particular Office location of Practice.
4.7 Contract Negotiations. Business Manager shall advise Practice with
respect to and negotiate, either directly or on Practice's behalf, as
appropriate, all contractual arrangements with third parties as are reasonably
necessary and appropriate for Practice's provision of Medical Services and for
Practice's operation of the Non-Ophthalmic Business, including, without
limitation, Managed Care Contracts. Practice hereby constitutes and appoints
Business Manager as Practice's agent for the purpose of negotiating and
executing on behalf of Practice and its Physicians any Managed Care Contract
approved by the Policy Board and Practice, as well as any modifications,
extensions and renewals of such Managed Care Contracts. Practice also designates
Business Manager as Practice's agent for the further purpose of giving and
receiving notices required or permitted to be given and received under such
Managed Care Contracts. Any notice received by Business Manager on behalf of
Practice shall be transmitted to Practice as soon as practicable. Business
Manager may engage such consultants as Business Manager deems necessary and
appropriate to pursue and negotiate Managed Care Contracts for Practice, and
Practice authorizes Business Manager to negotiate agreements for Subcontractor
Costs, for
19
approval by Practice, and, in certain instances, the Policy Board. Any Managed
Care Contract having a material economic effect on Practice ("material economic
effect" to include any capitalized arrangements) shall be submitted to and
reviewed and approved by the Policy Board. Upon approval of the Policy Board,
such approval (which will include approval by the Practice Managers who comprise
the Practice representatives on the Policy Board) shall be deemed approval by
Practice. For all other types of Managed Care Contracts, Business Manager shall
deliver a copy of such contract to Practice (or a description of the principal
terms and conditions thereof) for its review and approval. Notwithstanding
anything herein to the contrary, Practice may accept or reject any Managed Care
Contract by delivering notice to Business Manager within fifteen (15) days of
its receipt of such contract (or a description thereof). Practice's failure to
respond within such fifteen-day period shall be deemed an acceptance and
approval of the Managed Care Contract for all purposes.
4.8 Billing and Collection. On behalf of and for the account of Practice,
Practice-Owners, and Physicians directly employed by Practice-Owners, and except
as otherwise provided herein, Business Manager shall (i) establish and maintain
credit, billing and collection policies and procedures, (ii) timely xxxx and
collect all professional and other fees for all billable Medical Services
provided by Practice, Practice-Owners, Physicians or Optometrists and for all
goods sold by Practice or Practice-Owners in connection with the Non-Ophthalmic
Business, all for application solely in accordance with the Budget, and (iii)
perform all cash management services on behalf of Practice and Practice-Owners
consistent with reasonably prudent business practices. Business Manager shall
advise and consult with Practice regarding the fees for Medical Services and
ancillary services provided by Practice; it being understood, however, that
Practice shall establish the fees to be charged for Medical Services and that
Business Manager shall have no authority whatsoever with respect to the
establishment of such fees. In connection with the billing, collection and cash
management services to be provided hereunder, and throughout the Term (and
thereafter as provided in Section 8.3 hereof), Practice hereby grants to
Business Manager an exclusive special power of attorney and appoints Business
Manager, and shall cause Practice-Owners to grant an exclusive special power of
attorney and appoint Business Manager, as Practice's or Practice-Owners',
respectively, exclusive true and lawful agent and attorney-in-fact, and Business
Manager hereby, and pursuant to Billing and Collection agreements between
Business Manager and each Practice-Owner (except those Practice-Owners who are
directly employed by Practice) in the form attached hereto at Exhibit 4.8(a)
(the "Billing and Collection Agreements"), accepts such special power of
attorney and appointment, solely for the following purposes:
(a) To xxxx Practice's patients, in Practice's name and on Practice's
behalf, for all billable Medical Services provided or arranged by Practice to
patients and for all goods sold and services provided by Practice in connection
with the Non-Ophthalmic Business, unless such billing would cause Practice to be
in violation of the Xxxxx Act, any state referral ban or any other applicable
federal, state or local law or regulation. Consistent with the foregoing, the
following specifications shall apply to all billing and collection provisions of
this Management Services Agreement:
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(i) Business Manager will xxxx and collect in accordance with
this Management Services Agreement for (A) all Medical Services and other
services generating Non-Ophthalmic Business Revenues rendered within any
Office, and (B) all Medical Services rendered outside of the Offices of
Practice except insofar as such Medical Services are to be paid for by
Medicare, Medicaid, or any other governmental health program, or except
insofar as such billing is not permitted by another third party payor being
billed for such Medical Services; and
(ii) For Medical Services rendered outside of an Office which are
to be paid for by Medicare, Medicaid, or any other governmental health
program, or which are to be paid for by a third party payor that does not
permit billing in accordance with Section 4.8(a)(i) hereof, Business
Manager shall xxxx and collect under this Management Services Agreement for
Medical Services only insofar as such services are provided by employees of
Practice. Medical Services rendered outside of an Office by other than an
employee of Practice, and which are to be paid for by Medicare, Medicaid,
or any other governmental health program, or by another third party payor
if so required by said third party payor, must be billed in the name of the
provider of said services or his/her employer. In most, if not all,
instances, the provider of services will be employed by a Practice-Owner,
each of which shall maintain a Billing and Collection Agreement with
Business Manager authorizing Business Manager to xxxx and collect on behalf
of said provider or employer. Pursuant to the Services Agreements and the
aforesaid Billing and Collection Agreements, all payments and proceeds of
such xxxxxxxx and collections shall be deposited into an account maintained
in Practice-Owner's name over which Practice-Owner has sole control (each
such account shall be referred to herein as a "Practice Owner Account").
Business Manager will then automatically sweep such funds into an account
selected by Business Manager and maintained in Business Manager's name (the
"Depository Account"), at which time Business Manager will collect and
allocate such funds to Practice pursuant to the direction of Practice and
in accordance with this Management Services Agreement.
(b) Except as otherwise provided in Section 4.8(a) above, to xxxx, in
Practice's name and on Practice's behalf, all claims for payment, reimbursement
or indemnification from Blue Cross/Blue Shield, insurance companies, Medicare,
Medicaid and all other third-party payors or fiscal intermediaries for all
covered billable Medical Services provided or arranged by Practice to patients
and for all goods sold by Practice in connection with the Non-Ophthalmic
Business, unless such billing would cause Practice to be in violation of the
Xxxxx Act, any state referral ban or any other applicable federal, state or
local law or regulation.
(c) Subject to applicable law, and excluding receivables for Medicare
and Medicaid services, to collect and receive, as the agent of Practice, in
Business Manager's name and for Business Manager's account all accounts
receivable of Practice purchased by Business Manager, including, without
limitation, Purchased Receivables (as defined in Section 6.5 hereof), and to
deposit such collections in the Depository Account.
21
(d) Subject to subparagraph (e) below, to collect and receive, in
Practice's name and on Practice's behalf, all accounts receivable generated by
such xxxxxxxx and claims for reimbursement that have not been purchased by
Business Manager, and to administer such accounts at its reasonable discretion
on Practice's behalf, which administration shall include, without limitation,
(i) extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) with Practice Consent, discharging or releasing the obligors of
any such accounts; (iii) with Practice Consent, suing, assigning or selling at a
discount such accounts to collection agencies; or (iv) with Practice Consent,
taking other measures to require the payment of any such accounts.
(e) Subject to Section 4.8(a)(ii) above, to collect all government
program receivables after such amounts have been received and deposited into an
account maintained in Practice's name and over which Practice has sole control
(the "Practice Account"), or into a Practice-Owner Account, as applicable. Once
deposited in such account, Practice hereby authorizes, and shall cause Practice-
Owner to authorize, the government receivables to be automatically swept into
the Depository Account as provided in Section 4.8(f), below. Practice shall
cause the institution at which it maintains the aforementioned Practice Account
to provide Business Manager with copies of all bank statements prepared with
respect to such account.
(f) To deposit all amounts collected into the Depository Account which
shall be in the name of Business Manager, but in which Business Manager will
account for such funds on a separate and distinct basis from any other funds
deposited into such account by other practices for which Business Manager
provides management services. Moreover, subject to Business Manager's authority
to discharge its responsibilities under this Agreement, Practice or Practice-
Owner, as applicable, shall retain all rights in and to such deposited funds
irrespective of their deposit into the Depository Account; provided, however,
that Practice or Practice-Owner, as applicable, shall have no rights in or to
funds in the Depository Account that have been collected and received pursuant
to Section 4.8(c). The parties hereto acknowledge and agree that Business
Manager is performing cash management services on behalf of Practice and
Practice-Owners by collecting all such amounts in the Depository Account and
making any distributions, withdrawals and payments therefrom as required in this
Management Services Agreement. The parties further acknowledge and agree that in
performing such services for Practice and Practice-Owners, Business Manager is
acting as Practice's agent pursuant to the power of attorney set forth in this
Section 4.8, and as Practice-Owner's agent pursuant to the power of attorney set
forth in the Billing and Collection Agreements, and, except as expressly
provided herein, all rights to such funds shall remain with Practice (directly
or through the Services Agreements). Practice covenants, and shall cause each
Physician and Optometrist to covenant, to forward any payments, notes, checks,
money orders, insurance payments and any other instruments received for Medical
Services provided and goods sold in connection with the Dispensary Business on
or after the Original Effective Date by or on behalf of Practice or any of the
Physicians or Optometrists to Business Manager for deposit into Depository
Account, or covenants that Practice itself or Practice-Owners themselves will
make such deposit of, all funds received by Practice or Practice-Owners from
patients or third party payors for Medical Services provided on or after the
Effective Date and for services provided and goods sold in connection with the
Non-Ophthalmic Business on or after the Effective Date. Upon receipt by Business
Manager of any funds from patients or
22
third party payors or from Practice pursuant hereto or from Practice-Owners
pursuant to the Billing and Collection Agreements, and pursuant to the Billing
and Collection Agreements for Medical Services provided on or after the
Effective Date or for services provided and goods sold in connection with the
Non-Ophthalmic Business on or after the Effective Date, Business Manager shall
have the right, at any time and from time to time, to withdraw funds from the
Practice Account and all owners of the Practice Account shall execute a
revocable standing transfer order (the "Transfer Order") under which the bank
maintaining the Practice Account shall daily transfer the entire balance of the
Practice Account to the Depository Account. Practice and Business Manager hereby
agree to execute from time to time such documents and instructions as shall be
required by the bank maintaining the Practice Account to effect the foregoing
provisions and to extend or amend such documents and instructions as reasonably
required to effect the intent of this Section 4.8. Any action or threatened
action by Practice that materially interferes with or could materially interfere
with the operation of this Section 4.8, including but not limited to, (A) any
failure to deposit into, or to allow or permit Business Manager to withdraw any
funds from, the Practice Account; (B) any withdrawal of any funds from the
Practice Account not authorized by the express terms of this Management Services
Agreement or any other written agreement executed by each of the parties; or (C)
any revocation of or attempt to revoke the Transfer Order (otherwise than upon
expiration or termination of this Management Services Agreement), will
constitute a breach of this Agreement and will entitle Business Manager, in
addition to any other remedies it may have at law or in equity, to seek a court
ordered assignment of the rights provided to Business Manager pursuant to this
Section 4.8 and to distribute account debtor letters to non-governmental payors
instructing them to make payment directly to and in the name of Business Manager
for services rendered by Practice. In the manner set forth in Section 4.9
hereof, Business Manager shall disburse such deposited funds to creditors and
other persons on behalf of Practice, maintaining records of such receipt and
disbursement of funds.
(g) To take possession of, and endorse in the name of Practice or
Practice-Owners, as applicable, solely for deposit into the Depository Account,
any notes, checks, money orders, insurance payments and any other instruments
received as payment for Medical Services, ancillary services and for goods sold
in connection with the Non-Ophthalmic Business.
(h) To sign checks, drafts, bank notes or other instruments on behalf
of Practice and Practice-Owners, and to make withdrawals from the Depository
Account for payments specified in this Management Services Agreement or as
requested from time to time by Practice.
Throughout the Term (and as provided in Section 8.3 hereof), Practice hereby
grants to Business Manager, and shall cause Practice-Owners to grant to Business
Manager, an exclusive special power of attorney for the purposes stated in this
Section 4.8 and appoints Business Manager as Practice's exclusive true and
lawful agent and attorney-in-fact, and shall cause Practice-Owners to appoint
Business Manager as Practice-Owners' exclusive true and lawful agent and
attorney-in-fact, and Business Manager hereby and pursuant to the Billing and
Collection Agreements accepts such special power of attorney and appointment, to
deposit into the Depository Account as and when received all funds, fees and
revenues generated from Practice's provision of Medical Services and ancillary
services prior to, on or after the Effective Date and collected by Business
Manager and for all goods sold by Practice in connection with the Non-Ophthalmic
Business prior
23
to, on or after the Effective Date and collected by the Business Manager, and to
make withdrawals from Depository Account solely for payments specified in this
Management Services Agreement, including any Preexisting Obligation Payments
directly affecting property used in or relating to the Offices, and/or as
requested from time to time by Practice. Upon request of Business Manager,
Practice shall execute and deliver, and shall cause Practice-Owners to execute
and deliver to the financial institution(s) where the Practice Account,
Practice-Owner Accounts and/or Depository Account are maintained, such
additional documents or instruments as may be necessary to evidence or effect
the special and limited power of attorney granted to Business Manager by
Practice pursuant to this Section 4.8 and by Practice-Owners pursuant to the
Billing and Collection Agreements. The special and limited power of attorney
granted herein shall be coupled with an interest and shall be irrevocable during
the term hereof, except with Business Manager Consent. The irrevocable power of
attorney shall expire on the later of the termination of this Management
Services Agreement, the collection, sale or release of all accounts receivable
purchased by Business Manager, or the payment of all Management Fees due to
Business Manager as of such date pursuant to Section 6.2 hereof. If Business
Manager assigns this Management Services Agreement in accordance with its terms,
then Practice shall execute a power of attorney and shall cause Practice-Owners
to execute a power of attorney in favor of the assignee and in the form of
Exhibit 4.8(b) attached hereto.
4.9 Priority of Payments. As of the Effective Date, all revenue of Practice
derived from Medical Services and ancillary services provided prior to, on and
after the Effective Date and from services provided and sales of goods in
connection with the Non-Ophthalmic Business prior to, on and after the Effective
Date (collectively, "Available Revenues") shall be deposited into the Depository
Account (or, in the alternative, identified or segregated in such a manner as to
permit the Available Revenues to be deposited into the Depository Account when
and as directed by Business Manager) for distribution in accordance with this
Section 4.9. From and after the Effective Date, each month Business Manager
shall apply, or retain on behalf of Practice, funds that are in the Depository
Account in the following order of priority:
(a) to Business Manager, in satisfaction of Office Expense, except the
Management Fee;
(b) as directed by Practice, in satisfaction of Monthly Practice
Expense; provided, that such Monthly Practice Expense shall be payable two (2)
months in arrears (i.e., payment in July will represent Monthly Practice Expense
for May, payment in August will represent Monthly Practice Expense for June,
etc.); and
(c) to Business Manager, in satisfaction of the Management Fee;
provided, that such Management Fee will be payable two (2) months in arrears
(i.e., payment in July will represent Management Fee for May, payment in August
will represent Management Fee for June, etc.).
24
4.10 Fiscal Matters.
(a) Annual Budget.
(i) Initial Budget. The initial Budget has been agreed upon by
the parties before the execution of this Management Services Agreement and
is attached hereto as Exhibit 1.4 and made a part hereof.
(ii) Process for Succeeding Budgets. Annually and at least forty-
five (45) days prior to the commencement of each fiscal year of Business
Manager, Business Manager, in consultation with the Policy Board, shall
prepare and deliver to Practice for its approval a proposed Budget, setting
forth an estimate of Practice's revenues and expenses for the upcoming
fiscal year (including, without limitation, the Non-Ophthalmic Business
Budgeted Practice Expense, the Principal Services Budgeted Practice
Expense, the Non-Ophthalmic Business Monthly Fee and the Principal Services
Monthly Fee). Practice shall review the proposed Budget and either approve
the proposed Budget or request any changes within fifteen (15) days after
receiving the proposed Budget. The Budget shall be adopted upon mutual
agreement of Business Manager and Practice after reasonable review and
comment and may be revised or modified only in consultation with Business
Manager. Once approved by both Business Manager and Practice, each
succeeding Budget shall be attached hereto and made a part hereof.
(iii) Deadlock. In the event the parties are unable to agree on a
Budget by the beginning of the fiscal year (a "Deadlock"), then until an
agreement is reached, the Budget for the prior year shall be deemed to be
adopted as the Budget for the current year. Notwithstanding the foregoing,
the Policy Board, in its judgment, may impose reductions on a consistent
basis to each of Budgeted Practice Expense and the Monthly Fee in the event
that the Policy Board makes a determination that general economic
conditions and/or regulatory developments adversely affecting the Medical
Services provided by Practice render the present levels of the Budgeted
Practice Expense and the Monthly Fee impractical. For purposes of
illustration only, and without limitation, such general economic conditions
and/or regulatory developments could include proposed or actual cuts in
Medicare/Medicaid reimbursement for procedures that are a material
component of the Medical Services performed by Practice. Following
resolution of any Deadlock, Budgeted Practice Expense and the Monthly Fee
(and the corresponding Monthly Practice Expense and Management Fee as
calculated in Article 6 hereof) shall be recomputed retroactive to the
beginning of the fiscal year based upon the parameters agreed to in the new
Budget, and appropriate adjustments in payments owing to Practice and/or
Business Manager, as the case may be, resulting from such recomputation
shall be made promptly. Notwithstanding the foregoing, if after six months
the parties are still unable to agree on a Budget, then the dispute shall
be submitted to arbitration in accordance with Article 7 of this Management
Services Agreement; provided, however, that the scope of such arbitration
shall be limited to the parties resolving the dispute relating to the
Budget and shall not address or rule in any manner on matters relating to
any alleged breaches by either party hereto or any potential remedies
therefor. Until the arbitrator renders a
25
judgment or the dispute is otherwise resolved, the adjustments described in
this Section 4.10(a)(iii) shall continue to apply. Notwithstanding anything
to the contrary contained herein, nothing in this Section 4.10(a)(iii)
shall affect the payment of Office Expense, which shall be paid in full in
accordance with the provisions of this Agreement. For purposes of Section
4.10(a)(iii) and (iv), "Budgeted Practice Expense" and "Monthly Fee" shall
refer to either Principal Services or Non-Ophthalmic Business, as
appropriate.
(iv) Modifications to Budget. The Budget may be modified at any
time by mutual agreement of Practice and Business Manager, which
modifications may include, without limitation, modifications to the Monthly
Fee and Budgeted Practice Expense in the event that additional Physicians
or Optometrists become affiliated with Practice during the calendar year.
(b) Accounting and Financial Records. Business Manager shall
establish and administer adequate accounting procedures, controls and systems
for the development, preparation and safekeeping of administrative and financial
records in connection with the performance of its duties and responsibilities
hereunder, all of which shall be prepared and maintained in accordance with GAAP
and applicable laws and regulations. Business Manager shall provide Practice
with the following:
(i) Monthly Reports. As soon as practicable, and in any event
no later than fifteen (15) days after the end of each calendar month,
Business Manager shall furnish to Practice a monthly statement reflecting
the computation for the Office Expenses, Non-Ophthalmic Business Monthly
Practice Expense, Principal Services Monthly Practice Expense, the Non-
Ophthalmic Business Management Fee and the Principal Services Management
Fee. Within forty-five (45) days after the end of each month, Business
Manager shall provide Practice with a monthly statement reflecting the
accounting activity for Practice prepared in accordance with GAAP.
(ii) Annual Financial Statements. As soon as practicable, and
in any event no later than one hundred twenty (120) days after the end of
each calendar year, Business Manager shall furnish to Practice (A) audited
financial statements of Business Manager, consisting of a balance sheet and
related statements of income, changes in members' equity and cash flow, all
of which (taken as a whole) shall reflect the financial status of Business
Manager as of the end of such calendar year, and shall be prepared in
accordance with GAAP consistently applied; and (B) an annual statement
reflecting the computation for the Office Expenses, Non-Ophthalmic Business
Monthly Practice Expense, Principal Services Monthly Practice Expense, the
Non-Ophthalmic Business Management Fee and the Principal Services
Management Fee.
(c) Review of Expenditures. A Representative of Practice shall have
the right to review all expenditures related to the operation of Practice, but
Practice shall not have the power to prohibit or invalidate any expenditure that
is consistent with the Budget.
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(d) Tax Matters.
(i) In General. Upon request of Practice, Business Manager shall
assist Practice with the preparation of all appropriate tax schedules and
reports required by Practice in preparing its tax returns.
(ii) Sales and Use Taxes. Business Manager and Practice acknowledge
and agree that, to the extent that any of the services to be provided by
Business Manager hereunder may be subject to any state sales and use taxes,
Business Manager may have a legal obligation to collect such taxes from
Practice and to remit same to the appropriate tax collection authorities.
Practice agrees to pay, in addition to the payment of the Management Fee,
the applicable state sales and use taxes in respect of the portion of the
Management Fees attributable to such services.
4.11 Reports and Records.
(a) Medical Records. Business Manager shall advise and assist
Practice as to the establishment, monitoring and maintenance of procedures and
policies for the timely creation, preparation, filing and retrieval of all
medical records generated by Practice in connection with Practice's provision of
Medical Services; and, subject to applicable law, shall ensure that medical
records are promptly available to Physicians and any other appropriate persons.
All such medical records shall be retained and maintained in accordance with all
applicable state and federal laws. All medical records are, and will remain, the
property and Confidential Information of Practice and its patients.
(b) Other Reports and Records. Business Manager shall timely create,
prepare and file such additional reports and records as are reasonably necessary
or appropriate for Practice's provision of Medical Services, and shall be
prepared to analyze and interpret such reports and records upon the request of
Practice.
4.12 Recruitment of Physicians and Optometrists. Upon Practice's request,
Business Manager shall perform all administrative services reasonably necessary
or appropriate to recruit potential Physicians and Optometrists to become
employees of Practice. Business Manager shall provide Practice with model
agreements to document Practice's employment, retention or other service
arrangements with such individuals. It is and will remain the sole and complete
responsibility of Practice to interview, select, contract with, supervise,
control and terminate all Physicians and Optometrists performing Medical
Services or other professional services, and Business Manager shall have no
authority whatsoever with respect to such activities.
4.13 Confidential and Proprietary Information.
(a) Business Manager will not disclose any Confidential Information
of Practice to other persons without Practice Consent. Business Manager will
not, directly or indirectly, use such Confidential Information in a manner
detrimental to Practice, and Business Manager will keep such Confidential
Information confidential and will ensure that its affiliates and advisors who
27
have access to such Confidential Information comply with these nondisclosure
obligations. Notwithstanding the foregoing, Business Manager may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Management Services Agreement,
it being understood and agreed to by Business Manager that such Representatives
will be informed of the confidential nature of the Confidential Information,
will agree to be bound by this Section 4.13, and will be directed by Business
Manager not to disclose to any other person any Confidential Information.
Business Manager shall be responsible for any breach of this Section 4.13 by its
affiliates, advisors or Representatives. If Business Manager is required (by
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or similar legal processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Practice
or its affiliates, advisors or Representatives, Business Manager will (i)
provide Practice with prompt prior notice thereof and copies, if possible, and,
if not, a description, of the request and the Confidential Information requested
or required to be produced so that Practice may seek an appropriate protective
order or other protections to enforce the provisions of this Section 4.13, or,
alternatively, waive compliance with the provisions of this Section 4.13, and
(ii) consult with Practice as to whether Practice should attempt to resist or
narrow such request. If Business Manager is compelled to disclose or produce
Confidential Information concerning Practice or, in the alternative, be liable
for contempt or suffer other censure or penalty, Business Manager may disclose
or produce such Confidential Information without liability hereunder; provided,
however, that Business Manager shall give Practice notice of the Confidential
Information to be so disclosed or produced, and a copy of the request therefor,
as far in advance of its disclosure or production as is reasonably practicable
and shall use its best efforts to obtain, to the greatest extent practicable, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced.
(b) Notwithstanding clause (a) above, Business Manager may share,
subject to the restrictions of this Section 4.13(b), with other professional
corporations, associations, medical practices or health care delivery entities,
the statistics of Practice, including utilization review data, quality assurance
data, cost data, outcomes data or other Practice data. Business Manager may
disclose such statistics to other medical groups with whom Business Manager has
a management relationship, to managed care providers or other third party payors
for the purpose of obtaining or maintaining third party payor contracts, or to
financial analysts and underwriters. In addition, Business Manager may disclose
all Practice-related information necessary or desirable in connection with any
public or private offering of any security of Business Manager, but no such data
will disclose or divulge patient identifying information.
4.14 Insurance.
(a) Business Manager's Insurance. Throughout the Term, Business
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof and in a manner
consistent with good business practice, appropriate workers' compensation
coverage for Business Manager's employed personnel provided to Practice pursuant
to this Management Services Agreement (such employed personnel to be the
personnel whose salaries and benefits are Office Expenses pursuant to Section
1.33(a) hereof, and
28
professional, casualty and comprehensive general and vicarious liability
insurance covering Business Manager, the Offices, Business Manager's personnel
and all of Business Manager's equipment in such amounts, on such basis and upon
such terms and conditions as Business Manager deems appropriate. Upon the
request of Practice, Business Manager shall provide Practice with a certificate
evidencing such insurance coverage and Business Manager shall use commercially
reasonable efforts to list Practice as an additional insured. Business Manager
may also carry, as an Office Expense, key person life and disability insurance
on any Physician in amounts determined reasonable and sufficient by Business
Manager, but only upon the express written permission of Practice. Business
Manager shall be the owner and beneficiary of any such insurance; provided,
however, that any key person life and disability insurance on any Physician
which is purchased by Business Manager and for which such premiums are paid as a
Principal Services Office Expense hereunder shall require that benefit payments
under such insurance be Principal Services Revenue.
(b) Professional and General Liability Insurance of Practice.
Business Manager shall obtain and maintain, on behalf of Practice and as an
Office Expense, professional and comprehensive general liability insurance
covering Practice and each of Physicians and Optometrists for the services they
provide for Practice. The comprehensive general liability coverage shall be in
the minimum amount of One Million dollars ($1,000,000) for each occurrence and
Two Million dollars ($2,000,000) annual aggregate in each of Illinois, Indiana
and Delaware; and professional liability coverage shall be in the minimum amount
of One Million dollars ($1,000,000) for each occurrence and Three Million
dollars ($3,000,000) annual aggregate, in Illinois, and in the minimum amount of
One Hundred Thousand dollars ($100,000) for each occurrence and Three Hundred
Thousand dollars ($300,000) annual aggregate, in Indiana, or any other higher
minimum coverage requirements established by law. The insurance policy or
policies shall provide for at least (30) days' advance written notice to
Business Manager and Practice from the insurer as to any alteration of coverage,
cancellation or proposed cancellation for any cause. Business Manager shall
cause to be issued to Practice a certificate of such insurer or insurers
reflecting such coverage and either party hereunder shall provide notice to the
other party promptly upon receipt of any notice canceling or proposing to cancel
the insurance coverage of Practice, or any Physician or Optometrist for any
reason. Upon the termination of this Management Services Agreement for any
reason, Practice shall obtain and maintain as a Practice Expense "tail"
professional liability coverage, in the amounts specified in this Section
4.14(b) for an extended reporting period of ten (10) years, and Practice shall
be responsible for paying all premiums for "tail" insurance coverage.
(c) Health Insurance. Business Manager shall, to the extent such
coverage is available from Business Manager's current insurance carrier, make
available to, and accessible by, Physicians and Optometrists health benefits
under any health benefit program maintained by Business Manager. If any
Physician or Optometrist elects such coverage, the cost of such coverage shall
be deemed an Office Expense for any Optometrist or Physician-Employee, and a
Practice Expense for any Practice-Owner, except that the cost of such coverage
for the Practice Expense Employees shall be a Practice Expense.
29
4.15 No Warranty. Practice acknowledges that Business Manager has not
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of revenue or income to Practice.
4.16 Future Transactions.
(a) The parties acknowledge that a component of Business Manager's
business is to affiliate with Ophthalmic Practices (as hereinafter defined) by
one or more business transactions, ventures or arrangements, including, without
limitation, acquiring the nonmedical assets of, and entering into a Management
Services Agreement with, such Ophthalmic Practices (such transactions
hereinafter referred to as "Ophthalmic Transactions"). In the event Business
Manager is negotiating with, is actually considering initiating negotiations
with, or is approached by any third party with a proposal or view to initiating
negotiation with, any Ophthalmic Practice regarding an Ophthalmic Transaction,
and such Ophthalmic Practice is located and/or serves patients within the
Chicago Territory (as hereinafter defined) (such Ophthalmic Practice to be
referred to as the "Target Practice"), Business Manager will in all events give
Practice first notice and opportunity with respect to such Ophthalmic
Transaction and use all commercially reasonable efforts to structure the
Ophthalmic Transaction through or involving Practice. Such efforts shall entail
at a minimum the following: Business Manager will give Practice at least thirty
(30) days' prior written notice of any proposed Ophthalmic Transaction, unless
such Ophthalmic Transaction has come to Business Manager's attention in such a
way or under such circumstances as to require shorter notice and response time
in order for Business Manager and Practice to be reasonably able to take
advantage of the opportunity (for example, if there are multiple bidders or the
Target Practice has of its own accord established a response deadline and
expediency is therefore required), in which case Business Manager shall give
Practice the maximum amount of advance notice permitted under the circumstances.
Business Manager shall use all commercially reasonable efforts and shall
negotiate with Practice in good faith to structure such Ophthalmic Transaction
so as to involve the business combination of the Target Practice with Practice,
or another transaction or structure designed to achieve a substantially similar
economic result. Business Manager shall express to the Target Practice that the
preferred transaction alternative for all concerned will involve a business
combination with Practice, shall use all commercially reasonable efforts to
encourage the principals of the Target Practice to negotiate with Practice to
this end and shall use commercially reasonable efforts to facilitate
negotiations between Practice and the Target Practice. Business Manager shall
not engage in any transaction or arrangement designed to circumvent the
requirements of this Section 4.16. If, notwithstanding the foregoing efforts by
Business Manager the parties are unable to structure the Ophthalmic Transaction
so as to involve Practice, Business Manager shall be deemed to have satisfied
its obligation set forth in this Section 4.16 and shall be free to negotiate a
transaction with such Target Practice that does not involve Practice.
Notwithstanding the foregoing, nothing herein shall be construed as requiring
Business Manager to structure through or on behalf of Practice any transactions
involving any practice or business that is not an Ophthalmic Practice, nor shall
Business Manager be required to structure through Practice any component of the
Ophthalmic Practice that does not involve the provision of ophthalmic
professional services. Examples of practices or businesses that are not
Ophthalmic Practices (or ophthalmic-related components thereof) include, without
limitation, the provision
30
of optometric professional services, the provision of optical dispensing
services, the operation of an ambulatory surgery or refractive laser center, or
the operation of an optical lab.
(b) As used herein, (i) the "Chicago Territory" is comprised of Lake
and Xxxxxx counties in Indiana, and the Illinois counties of Cook, Lake, Will,
Kane, Kendall, McHenry and DuPage; and (ii) "Ophthalmic Practice" shall mean an
ophthalmologist or group of ophthalmologists engaged in the provision of
professional ophthalmic services.
ARTICLE 5
COVENANTS AND RESPONSIBILITY OF PRACTICE
5.1 Organization and Operation. Practice, as a continuing condition of
Business Manager's obligations under this Management Services Agreement, shall
at all times during the Term be and remain legally organized and operated to
provide Medical Services in a manner consistent in all material respects with
all state and federal laws.
(a) Employment of Physicians.
(i) Practice shall operate and maintain within the Practice
Territory a full-time practice of medicine specializing in the provision of
Medical Services, and shall maintain and enforce employment agreements in
the form of Exhibit 5.1A (the "Employment Agreements") with individual
physician Practice-Owners, and Services Agreements with professional or
medical service corporation Practice-Owners, including, without limitation,
the initial Practice-Owners identified in Exhibit 5.1B. Practice-Owners
that are parties to Services Agreements shall maintain employment
agreements with their Physician Shareholders in the form of Exhibit 5.1C.
Practice shall not amend the Employment Agreements or the Services
Agreements in any material manner or waive any material rights of Practice
thereunder without the prior written approval of Business Manager.
Recognizing that Business Manager would not have entered into this
Management Services Agreement but for Practice's covenant to maintain
Employment Agreements or Services Agreements with Practice-Owners, and
subject to subparagraph (ii) below, Practice shall pay to Business Manager,
in addition to the Management Fee, any damages, compensation, payment or
settlement received by Practice from a Practice-Owner (A) pursuant to
Section 4.2 of the Employment Agreements and/or Section 4.2 of the Services
Agreement, or (B) arising from any other material breaches of the
Employment Agreements or Services Agreements or (C) any funds remitted (1)
by Physician to Owner-Contractor in accordance with Section 6.5 of the
Employment Agreement or (2) by Owner-Contractor to Practice pursuant to
Section 6.5 the Services Agreement (such damages being collectively
referred to herein as the "Business Manager Damages"). If any Physician
shall fail to perform any of the material duties and obligations of a
Physician under an Employment Agreement or pursuant to an employment
agreement with a Practice-Owner that is a party to a Services Agreement,
and Practice fails to enforce vigorously (as determined reasonably and in
good faith by the Policy Board) such Employment Agreement or Services
Agreement (and associated employment
31
agreement), Business Manager shall have the right, but not the obligation,
to enforce the provisions of such Employment Agreement or Services
Agreement (and associated employment agreement), and Practice shall assign
all of its rights and remedies under such Employment Agreement or Services
Agreement (and any associated employment agreement) upon the request of
Business Manager. To the extent permitted by law, Practice acknowledges and
agrees that Business Manager has third party beneficiary rights to the
extent set forth above in each Employment Agreement or Service Agreement.
(ii) Notwithstanding the provisions of Section 5.1(a)(i) above,
or any other provision to the contrary contained herein, Practice shall
have a period of not less than forty-five (45) days following the
occurrence of any event described in Section 5.1(a)(i) above that entitles
Business Manager to receive Business Manager Damages to take such actions
to cure the breach of any Employment Agreement or Services Agreement by a
Practice-Owner (which actions to cure may, without limitation, include
retention of additional Physicians to replace the levels of revenue and
income previously generated by the Practice-Owner causing such breach);
provided, however, that the determination of whether or not such breach has
been cured shall be made by Business Manager in its good faith discretion,
and provided further, that Practice shall in no event be permitted to cure
any breach that results from a breach by a Practice-Owner of any non-
competition provision contained in any Employment Agreement or Services
Agreement.
(b) Corporate Governance. Throughout the Term of this Management
Services Agreement, Practice shall maintain and enforce the Operating Agreement,
and shall cause all new owners of Practice to become a party to, and bound by
the Operating Agreement prior to becoming an owner of Practice. Practice will
also maintain its articles of organization and Operating Agreement in accordance
with applicable law, including, without limitation, any laws governing the
transferability of shares from disqualified owners to qualified owners.
Throughout the Term of this Management Services Agreement, Practice shall not,
without the prior written consent of Business Manager, amend the following
sections of the Operating Agreement: 1(p); 10.8(f); 10.8(h); or 13.9. To the
extent Practice elects to bring in any New Member (as such term is defined in
the Operating Agreement) who was previously an employee of Practice
participating in NovaMed's 401(k) plan (the "NovaMed Plan"), Practice agrees
that the effective date of such New Member's procurement of an equity interest
in Practice shall be the first day of the next succeeding calendar year in which
such election is made. Alternatively, Practice will advise any potential New
Member not to participate in the NovaMed Plan in the calendar year in which he
or she becomes a New Member.
5.2 Practice Personnel.
(a) Physician Personnel and Optometrists. Practice shall retain
(either directly or through Services Agreements or other agreements) the number
of Physicians and Optometrists as is reasonably necessary and appropriate in the
sole discretion of Practice for the provision of Medical Services. Each
Physician shall hold and maintain a valid and unrestricted license to practice
medicine each state in which said Physician practices, which may include,
without limitation, Illinois and/or Indiana, and shall be competent, in the
reasonable opinion of Practice,
32
in the practice of ophthalmology. Each Optometrist shall hold and maintain a
valid and unrestricted license to practice optometry in each state in which said
Optometrist practices, which may include, without limitation, Illinois and/or
Indiana, and shall be competent, in the reasonable opinion of Practice, in such
practice. Practice shall enter into and maintain with each such retained
Physician and Optometrist a written employment agreement substantially in the
form of either Exhibit 5.1A for Practice-Owners who are individual Physicians or
Exhibit 5.2A for Physician-Employees, or a written services agreement
substantially in the form of Exhibit 1.59 for professional or medical service
corporation Practice-Owners that employ a Physician pursuant to the terms of an
employment agreement in the form of Exhibit 5.1A. Practice will neither commit
nor permit to remain outstanding any breach of such employment agreement or
Services Agreement that would allow any Practice-Owner, Physician or Optometrist
to terminate for cause. Regardless of whether the compensation is a Practice
Expense or Office Expense, Practice shall be responsible for paying the
compensation and benefits, as applicable, for all Physicians, Optometrists, and
any other physician personnel or other contracted or affiliated physicians, and
for withholding any sums for income tax, unemployment insurance, social security
or any other withholding required by applicable law (except as may be otherwise
provided in the services agreements). Business Manager shall, on behalf and at
the direction of Practice, administer the compensation with respect to such
individuals in accordance with the written agreement between Practice and each
Practice-Owner, other Physician or Optometrist. Business Manager shall neither
control nor direct any Physician or Optometrist in the performance of Medical
Services for patients.
(b) Nonphysician Personnel. Business Manager shall retain all
nonphysician personnel necessary for the operation of Practice and such
nonphysician personnel shall be under Business Manager's control, supervision
and direction in the performance of their duties, except for (i) Designated
Allied Health Professionals, who shall perform their duties under the
supervision and control of Physicians, consistent with the requirements
necessary to meet the "incident to" provisions of the Medicare program, and (ii)
opticians and others providing services in Practice's optical dispensary, who
shall perform their duties under the supervision and control of Physicians and
Optometrists.
5.3 Professional Standards. As a continuing condition of Business
Manager's obligations hereunder, each Physician, Optometrist and any other
physician personnel retained by Practice to provide Medical Services must comply
with, be controlled and governed by, and otherwise provide Medical Services in
all material respects in accordance with, all applicable federal, state and
municipal laws, rules, regulations, ordinances and orders, and the ethical
standards and standards of care of the medical community wherein the principal
office of each Physician or Optometrist is located. In addition, each Physician
and any other physician personnel retained by Practice to provide Medical
Services must obtain and retain appropriate admitting privileges at local area
hospitals or health care facilities which are reasonably adequate for Physician
to perform Medical Services. Procurement of temporary staff privileges pending
the completion of the medical staff approval process shall satisfy this
provision, provided Physician actively pursues full admitting privileges and
actually receives full admitting privileges within a reasonable time.
33
5.4 Medical Services. Practice shall use reasonable efforts to ensure
that Physicians and Optometrists are available to provide Medical Services to
patients. In the event that Physicians or Optometrists are not available to
provide the relevant Medical Services coverage, Practice shall engage and retain
locum tenens coverage. Physicians and Optometrists retained on a locum tenens
basis shall meet all of the requirements of Section 5.3 hereof in all material
respects and the cost of providing locum tenens coverage shall be an Office
Expense unless such locum tenens coverage is attributable to a Practice-Owner or
a Practice Expense Employees exceeding the maximum amount of vacation, and
personal and educational leave days allowable under such Practice-Owner's
Employment Agreement or Services Agreement or such Physician Employee's or
Optometrist's employment agreement with Practice, in which case the cost of such
coverage attributable to such Practice-Owner, Physician-Employee or Optometrist
shall be a Practice Expense. With the assistance of Business Manager, Practice,
Physicians and Optometrists shall be responsible for scheduling the relevant
coverage of all medical and eye-related procedures. Practice shall use all
reasonable efforts to develop and promote Practice.
5.5 Peer Review/Quality Assurance. Practice shall adopt a peer
review/quality assurance program to monitor and evaluate the quality and cost-
effectiveness of Medical Services provided by Physicians and Optometrists of
Practice, the cost of which shall be an Office Expense. Upon request of
Practice, Business Manager shall provide administrative assistance to Practice
in performing its peer review/quality assurance activities, but only if such
assistance can be provided in a manner consistent with maintaining the
confidentiality and privileged status of the processes and actions of the peer
review/quality assurance process of Practice.
5.6 Confidential and Proprietary Information. Practice will not disclose
any Confidential Information of Business Manager without Business Manager's
express written authorization. Such Confidential Information will not be used in
any way directly or indirectly detrimental to Business Manager, and Practice
will keep such Confidential Information confidential and will ensure that its
affiliates and advisors who have access to such Confidential Information comply
with these nondisclosure obligations. Notwithstanding the foregoing, Practice
may disclose Confidential Information to those of its Representatives who need
to know Confidential Information for the purposes of this Management Services
Agreement, it being understood and agreed to by Practice that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section 5.6, and will be directed by
Practice not to disclose to any other person any Confidential Information.
Practice shall be responsible for any breach of this Section 5.6 by its
affiliates, advisors or Representatives. If Practice is required (by
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its affiliates, advisors or Representatives, Practice will (i)
provide Business Manager with prompt prior notice thereof and copies, if
possible, and, if not, a description, of the request and the Confidential
Information requested or required to be produced so that Business Manager may
seek an appropriate protective order or other protections to enforce the
provisions of this Section 5.6, or, alternatively, waive compliance with the
provisions of this Section 5.6 and (ii) consult with Business Manager as to the
advisability of Business Manager's taking of legally available steps to resist
or narrow such request. Practice further agrees that if, in the absence of a
protective order or the receipt of a waiver hereunder, Practice is nonetheless,
34
in the written opinion of its legal counsel, compelled to disclose or produce
Confidential Information concerning Business Manager to any tribunal or to stand
liable for contempt or suffer other censure or penalty, Practice may disclose or
produce such Confidential Information to such tribunal legally authorized to
request and receive such Confidential Information without liability hereunder;
provided, however, that Practice shall give Business Manager written notice of
the Confidential Information to be so disclosed or produced, and a copy of the
request therefor, as far in advance of its disclosure or production as is
practicable and shall use its best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced.
5.7 Noncompetition. Practice hereby recognizes and acknowledges that
Business Manager has incurred and will continue to incur substantial costs in,
and devote substantial resources to, providing the equipment (including, without
limitation, lasers, microkeratomes and/or other equipment used to perform vision
correction procedures), support services, personnel, management, administration,
and other items and services that are the subject matter of this Management
Services Agreement, including, without limitation, devoting significant
resources to developing Practice's laser vision correction practice, and that in
the process of providing services under this Management Services Agreement,
Practice will be privy to financial and Confidential Information of Business
Manager and other practices for whom Business Manager provides services, to
which Practice would not otherwise be exposed. The parties also recognize that
the services to be provided by Business Manager will be feasible only if
Practice operates an active practice to which Physicians associated with
Practice devote their full professional time and attention. Practice agrees and
acknowledges that the noncompetition covenants described hereunder are necessary
for the protection of Business Manager, and that Business Manager would not have
entered into this Management Services Agreement without the following covenants:
(a) During the Term of this Management Services Agreement and except
for the performance of Medical Services and ancillary services at Offices
contemplated by, or subject to, this Management Services Agreement or as
expressly agreed to by Business Manager in writing, Practice shall not
establish, operate or provide Medical Services at any other medical office,
clinic or other health care facility. During the Term of this Management
Services Agreement and except for the operation of the Non-Ophthalmic Business
at Offices contemplated by, or subject to, this Management Services Agreement or
as expressly agreed to by Business Manager in writing, Practice shall not
establish, operate or engage in a Non-Ophthalmic Business at any other office or
facility. During the Term of this Management Services Agreement, Practice shall
not acquire, by purchase, lease or otherwise, any medical or nonmedical
equipment, including, without limitation, lasers, microkeratomes and/or other
equipment, used to perform vision correction procedures, except from or through
Business Manager or with the express written consent of Business Manager.
Notwithstanding the foregoing, and subject to the terms and conditions of the
Employment Agreements and other written agreements with Practice's Physicians
and Optometrists, no Physician or Optometrist shall be prohibited from providing
services at medical offices, clinics or other health care facilities other than
the Offices.
(b) Except as specifically agreed to by Business Manager in writing,
Practice commits and agrees that during the Term of this Management Services
Agreement and, if this
35
Agreement terminates other than for expiration of the Term or by Practice for
Practice Cause under Section 8.2(b), for a period of five (5) years from the
termination date of this Management Services Agreement, Practice shall not
directly or indirectly own (excluding ownership of less five percent (5%) of the
equity of any publicly traded entity), manage, operate, control, contract with,
or otherwise be associated with, lend funds to, lend its name to, or maintain
any interest whatsoever in any enterprise (i) having to do with the provision,
distribution, promotion or advertising of any type of management or
administrative services or products to third parties in competition with
Business Manager; and/or (ii) offering any type of service or product to third
parties similar to those offered by Business Manager to Practice.
Notwithstanding the above restriction, nothing herein shall prohibit Practice or
any of its holders from providing management and administrative services to its
or their own medical practices after the termination of this Management Services
Agreement.
(c) The written Employment Agreements and Services Agreements (and
the employment agreements required thereby) described in Section 5.1 hereof
shall contain covenants of Practice-Owners and any Physician employed by, and an
owner of, a Practice-Owner whereby they agree: (i) not to compete with Practice
within a prescribed territory for one (1) year after termination of the
Employment Agreement or Services Agreement (or the employment agreement required
by said Services Agreement), except in the event Practice-Owner terminates such
agreement for Physician Cause under an Employment Agreement, or for Owner-
Contractor Cause under a Services Agreement, or certain buyout rights are
exercised, and (ii) not to acquire, by purchase, lease or otherwise, any medical
or nonmedical equipment, including without limitation, lasers, microkeratomes
and/or other equipment, used to perform vision correction procedures, during the
term of the applicable Employment Agreement and for one (1) year after
termination of the applicable Employment Agreement, except from or through
Business Manager or with the express written consent of Business Manager.
(d) Unless waived by Business Manager, Practice shall obtain and
enforce formal written agreements with Physician-Employees and Optometrists in
the form of Exhibit 5.2A, pursuant to which the employees agree: (i) not to
compete with Practice within a prescribed territory for one (1) year after
termination of the Employment Agreement, except in the event Physician
terminates such agreement for Physician Cause (as defined in the Employment
Agreements), or exercises his or her right to buy out of such noncompete
provision in accordance with the terms of the Employment Agreements, and (ii)
not to acquire, by purchase, lease or otherwise, any medical or nonmedical
equipment, including, without limitation, lasers, microkeratomes and/or other
equipment, used to perform vision correction procedures, during the term of the
applicable Employment Agreement and for one (1) year after termination of the
applicable Employment Agreement, except from or through Business Manager or with
the express written consent of Business Manager.
(e) Practice understands and acknowledges that the provisions in
Section 5.6 hereof and this Section 5.7 are designed to preserve the goodwill of
Business Manager and the goodwill of the individual Physicians and Optometrists
of Practice. Accordingly, if Practice breaches any obligation of Section 5.6
hereof or this Section 5.7, in addition to any other remedies available under
this Management Services Agreement at law or in equity, Business Manager shall
36
be entitled to enforce this Management Services Agreement by injunctive relief
and by specific performance of the Management Services Agreement, such relief to
be without the necessity of posting a bond, cash or otherwise. Additionally,
nothing in this paragraph shall limit Business Manager's right to recover any
other damages to which it is entitled as a result of Practice's breach. If any
provision of the covenants herein is held by a court of competent jurisdiction
to be unenforceable due to an excessive time period, geographic area or
restricted activity, the covenant shall be reformed to comply with such time
period, geographic area or restricted activity that would be held enforceable.
5.8 Name, Trademark. Pursuant to that certain License Agreement by and
between Business Manager and Hunkeler Eye Centers, P.C., a Missouri professional
corporation, of even date herewith (the "License Agreement"), Business Manager
has the royalty-free right to use the name "Hunkeler Eye Centers" (the "HEC
Name") in connection with its management of Practice, and the right to
sublicense the HEC Name to Practice. At the end of the term of the License
Agreement, Business Manager shall either: (i) renew the License Agreement and
continue to have the right to sublicense the HEC Name to Practice, (ii) purchase
the HEC Name and license same to Practice, or (iii) arrange for Hunkeler Eye
Centers, P.C., an affiliated practice of Business Manager located in Kansas
City, Missouri ("HEC-KC") to license the HEC Name to Practice pursuant to a
royalty-free license. Business Manager hereby grants to Practice a royalty-free
sublicense to use the HEC Name to practice medicine and conduct business in the
Chicago Territory, and a royalty-free license to use the HEC Name to practice
medicine and conduct business in the Chicago Territory. The license or
sublicense granted hereunder (whether by Business Manager or through a separate
agreement between HEC-KC and Practice) shall be effective for the Term of this
Management Services Agreement and shall terminate immediately upon termination
of this Management Services Agreement. Practice represents and warrants that
Practice conducts its professional practice under the name of, and only under
the name of "Hunkeler Eye Centers-Chicago, L.L.C." and any registered d/b/a's,
including, without limitation, the d/b/a's set forth on Exhibit 5.8 and that
such name is the name under which Practice practices medicine and conducts
business under state law. Each party hereto covenants and promises that, without
the prior written consent of the other party hereto, it will not:
(a) knowingly take any action or omit to take any action that would
result in the change or loss of the HEC Name; or
(b) license, sell, give or otherwise transfer the HEC Name, or the
right to use the HEC Name, to any medical practice, physician, professional
corporation or any other entity not affiliated with Practice.
5.9 Medical Advisory Board. The board of directors of Business Manager
has appointed a medical advisory board (the "Medical Advisory Board") to provide
a general forum for review and analysis of medical and clinical issues affecting
Practice and all other medical practices with which Business Manager has entered
into a management services agreement or similar agreement. The Medical Advisory
Board consists of at least three Doctors of Ophthalmology, one of whom is
designated as the "Medical Director," and may include, at the discretion of the
board of directors of Business Manager, one or more Doctors of Optometry,
Registered Nurses or other health care
37
professionals. The Vice President Clinical Operations of Business Manager,
and/or such other designee as Business Manager shall select, attends meetings of
the Medical Advisory Board on a consulting basis. Members of the Medical
Advisory Board serve for one-year terms and are appointed or re-appointed for
such term during the first meeting of the board of directors of Business Manager
held for each calendar year. The board of directors of Business Manager may name
additional members, remove any member, or fill any vacancy created by the
resignation, death or disability of any member, of the Medical Advisory Board
during any duly called meeting of such board of directors. Notwithstanding
anything to the contrary contained herein, the Medical Advisory Board will serve
in a solely advisory capacity and the ultimate authority over medical decisions
affecting Practice shall reside with Practice's Practice-Owners.
5.10 Indemnification of Business Manager. Practice shall hold Business
Manager, its Affiliates, Representatives, successors and assigns and each of
them harmless from and against any and all losses, damages, fines, costs,
claims, judgments, proceedings, expenses or liabilities (including, without
limitation, reasonable attorneys' fees, paralegal fees, and costs and expenses
thereof), (a) arising out of or attributable to, or which result from, the
provision of medical services in connection with the operation of the Non-
Ophthalmic Business or the performance of Medical Services (including, without
limitation, malpractice claims) or the gross negligence or willful misconduct of
Practice and/or its members, officers, employees, agents, and/or independent
contractors (other than Business Manager and/or its employees, agents, members,
officers, and/or independent contractors) and (b) arising out of, or
attributable to, or which result from, any claim of a third party with respect
to any miscoding or other error in medical service or optical non-ophthalmic
documentation by Practice or its Physicians or Optometrists resulting in false
or inaccurate xxxxxxxx.
5.11 Indemnification of Practice. Business Manager shall hold Practice,
its Affiliates, Representatives, successors and assigns and each of them
harmless from and against any and all losses, damages, fines, costs, claims,
judgments, proceedings, expenses or liabilities (including, without limitation,
reasonable attorneys' fees, paralegal fees, and costs and expenses thereof) (a)
arising out of or attributable to, or which result from, the gross negligence or
willful misconduct of Business Manager and/or its members, officers, employees,
agents, and/or independent contractors (other than Practice and/or its members,
officers, employees, agents, and/or independent contractors), and (b) arising
out of, or attributable to, or which result from, any claim of a third party
with respect to any miscoding or other error in medical service documentation by
Business Manager or its employees resulting in false or inaccurate xxxxxxxx.
ARTICLE 6
FINANCIAL ARRANGEMENT
6.1 Definitions. For purposes of this Article 6, capitalized terms used
herein shall have the meanings ascribed as follows:
38
(a) Management Fee. The term "Management Fee" shall mean, for any
month, the sum of the Non-Ophthalmic Business Management Fee for such month and
the Principal Services Management Fee for such month.
(b) Monthly Office Expense. The term "Monthly Office Expense" shall
mean, for any month, the sum of the Non-Ophthalmic Business Monthly Office
Expense for such month and the Principal Services Monthly Office Expense for
such month.
(c) Monthly Practice Expense. The term "Monthly Practice Expense"
shall mean, for any month, the sum of the Non-Ophthalmic Business Monthly
Practice Expense for such month and the Principal Services Monthly Practice
Expense for such month.
(d) Non-Ophthalmic Business Budgeted Office Expense. The term "Non-
Ophthalmic Business Budgeted Office Expense" shall mean, for any month, the Non-
Ophthalmic Business Office Expense (other than the Non-Ophthalmic Business
Management Fee) established in the Budget for such month.
(e) Non-Ophthalmic Business Budgeted Practice Expense. The term "Non-
Ophthalmic Business Budgeted Practice Expense" shall mean, for any month, the
Non-Ophthalmic Business Practice Expense (as defined in the Budget) established
in the Budget for such month.
(f) Non-Ophthalmic Business Budgeted Revenue. The term "Non-
Ophthalmic Business Budgeted Revenue" shall mean, for any month, the Non-
Ophthalmic Business Revenue established in the Budget for such month.
(g) Non-Ophthalmic Business Management Fee. The term "Non-Ophthalmic
Business Management Fee" shall be, for any month, the Non-Ophthalmic Business
Monthly Fee, except in the event that either (i) Non-Ophthalmic Business Revenue
for such month does not equal Non-Ophthalmic Business Budgeted Revenue for such
month or (ii) Non-Ophthalmic Business Budgeted Office Expense for such month
does not equal Non-Ophthalmic Business Monthly Office Expense for such month, in
which case the "Non-Ophthalmic Business Management Fee" for such month shall be
the amount of the Non-Ophthalmic Business Revenue for such month, available
after payment of the Non-Ophthalmic Business Monthly Office Expense for such
month (other than the Non-Ophthalmic Business Management Fee) and Non-Ophthalmic
Business Monthly Practice Expense for such month.
(h) Non-Ophthalmic Business Monthly Fee. The term "Non-Ophthalmic
Business Monthly Fee" shall be for any month, the Non-Ophthalmic Business
Monthly Fee established in the Budget for such month.
(i) Non-Ophthalmic Business Monthly Office Expense. The term "Non-
Ophthalmic Business Monthly Office Expense" for any month shall mean the amount
of Non-Ophthalmic Business Budgeted Office Expense for such month, plus or minus
any difference between (i) the actual Non-Ophthalmic Business Office Expense
incurred by or on behalf of
39
Practice for such month, as measured in accordance with GAAP (other than the
Non-Ophthalmic Business Management Fee) and (ii) Non-Ophthalmic Business
Budgeted Office Expense for such month.
(j) Non-Ophthalmic Business Monthly Practice Expense. The term "Non-
Ophthalmic Business Monthly Practice Expense" shall mean, for any month, the
Non-Ophthalmic Business Budgeted Practice Expense for such month, except in the
event that either (i) Non-Ophthalmic Business Revenue for such month does not
equal Non-Ophthalmic Business Budgeted Revenue for such month or (ii) Non-
Ophthalmic Business Monthly Office Expense for such month does not equal Non-
Ophthalmic Business Budgeted Office Expense for such month, in which case the
term "Non-Ophthalmic Business Monthly Practice Expense" for such month shall
mean an amount equal to the product of (x) the difference between Non-Ophthalmic
Business Revenue for such month and Non-Ophthalmic Business Monthly Office
Expense for such month and (y) a fraction of which the numerator is Non-
Ophthalmic Business Budgeted Practice Expense for such month and the denominator
is the difference between Non-Ophthalmic Business Budgeted Revenue and Non-
Ophthalmic Business Budgeted Office Expense for such month.
(k) Non-Ophthalmic Business Office Expense. The term "Non-Ophthalmic
Business Office Expense" shall mean all Office Expenses, operating and non-
operating, which constitute direct expenses to produce Non-Ophthalmic Business
Revenue, as determined consistent with the Budget; provided that any
disagreement over whether an expense constitutes a direct expense to produce
Non-Ophthalmic Business Revenue shall be resolved by the Policy Board.
(l) Principal Services Budgeted Office Expense. The term "Principal
Services Budgeted Office Expense" shall mean, for any month, the Principal
Services Office Expense (other than the Principal Services Management Fee)
established in the Budget for such month.
(m) Principal Services Budgeted Practice Expense. The term "Principal
Services Budgeted Practice Expense" shall mean, for any month, the Principal
Services Practice Expense (as defined in the Budget) established in the Budget
for such month.
(n) Principal Services Budgeted Revenue. The term "Principal Services
Budgeted Revenue" shall mean, for any month, the amount of Principal Services
Revenue established in the Budget for such month.
(o) Principal Services Management Fee. The term "Principal Services
Management Fee" shall be, for any month, the Principal Services Monthly Fee,
except in the event that either (i) Principal Services Revenue for such month
does not equal Principal Services Budgeted Revenue for such month or (ii)
Principal Services Budgeted Office Expense for such month does not equal
Principal Services Monthly Office Expense for such month, in which case the
"Principal Services Management Fee" for such month shall be the amount of the
Principal Services Revenue for such month, if any, available after payment of
the Principal Services Monthly Office Expense for such month (other than the
Principal Services Management Fee) and the Principal Services Monthly Practice
Expense for such month.
40
(p) Principal Services Monthly Fee. The term "Principal Services
Monthly Fee" shall mean, for any month, the Principal Services Monthly Fee
established in the Budget for such month.
(q) Principal Services Monthly Office Expense. The term "Principal
Services Monthly Office Expense" shall mean, for any month, the amount of
Principal Services Budgeted Office Expense for such month, plus or minus any
difference between (i) the actual Principal Services Office Expense incurred by
or on behalf of Practice for such month, as measured in accordance with GAAP
(other than the Principal Services Management Fee) and (ii) Principal Services
Budgeted Office Expense for such month.
(r) Principal Services Monthly Practice Expense. The term "Principal
Services Monthly Practice Expense" shall mean, for any month, the Principal
Services Budgeted Practice Expense for such month, except in the event that
either (i) Principal Services Revenue for such month does not equal Principal
Services Budgeted Revenue for such month or (ii) Principal Services Monthly
Office Expense for such month does not equal Principal Services Budgeted Office
Expense for such month, in which case the term "Principal Services Monthly
Practice Expense" for such month shall mean an amount equal to the product of
(x) the difference between Principal Services Revenue for such month and
Principal Services Monthly Office Expense for such month and (y) a fraction of
which the numerator is Principal Services Budgeted Practice Expense for such
month and the denominator is the difference between Principal Services Budgeted
Revenue and Principal Services Budgeted Office Expense for such month.
(s) Principal Services Office Expense. The term "Principal Services
Office Expense" for any month shall mean all Office Expenses for such month
other than Non-Ophthalmic Business Office Expenses for such month.
6.2 Management Fee. Practice and Business Manager agree to the
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. In the priority established by Section 4.9 hereof,
Business Manager will be paid the following:
(a) the amount of all Office Expense (other than the Non-Ophthalmic
Business Management Fee and the Principal Services Management Fee) paid on
behalf of Practice; and
(b) the Management Fee.
6.3 Reasonable Value. Payment of the Management Fee is not intended to be
and shall not be interpreted or applied as permitting Business Manager to share
in Practice's fees for Medical Services or any other services, but is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the equipment, contract analysis and support, other support
services, purchasing, personnel, office space, management, administration,
strategic management and other items and services furnished by Business Manager
pursuant to this Management Services Agreement, after giving effect to the
nature and volume of the services required and the risks assumed by Business
Manager. The parties agree that it is appropriate to calculate and apply
41
separate fees for the management of the Non-Ophthalmic Business and Principal
Services, due to (i) the amount of Business Manager Expense incurred by Business
Manager in connection with the management of the operations of the Non-
Ophthalmic Business, (ii) the fair market value of the management services
provided by Business Manager with respect to each of the Non-Ophthalmic
Business, and Principal Services, and (iii) the nature and volume of the
services required and the risks assumed by Business Manager with respect to each
of the Non-Ophthalmic Business and Principal Services.
6.4 Payment of Management Fee. To facilitate the payment of the Management
Fee as provided in Section 6.2 hereof, and subject to the priority of payment
methodology set forth in Section 4.9 hereof, Practice hereby expressly
authorizes Business Manager to make withdrawals of the Management Fee from the
Depository Account as such fee becomes due and payable during the Term and
thereafter as provided in Section 8.3 hereof.
6.5 Accounts Receivable. Unless otherwise prohibited by law, to assure
that Practice receives the entire amount of professional fees for its services
and to assist Practice in maintaining reasonable cash flow for the payment of
Office Expense, Practice hereby agrees to sell, and Business Manager hereby
agrees to purchase, with respect to any month during the Term and with recourse
to Practice for the amount of the purchase, accounts receivable of Practice net
of Adjustments (the "Purchased Receivables") (i) in an amount equal to the
difference, if any, between (A) the sum of the Monthly Office Expense and the
Monthly Practice Expense paid by Business Manager for such month and (B) the
amount of cash collections deposited into the Depository Account during such
month and used to pay all or any portion of the Office Expenses and the Monthly
Practice Expense pursuant to this Management Services Agreement, by transferring
such amount into the Depository Account, and (ii) in an amount equal to the
difference, if any, between the Management Fee and the amount of cash
collections deposited into the Depository Account during such month and used to
pay all or any portion of the Management Fee, in satisfaction of Practice's
obligation to pay Business Manager the Management Fee pursuant to this
Management Services Agreement. The consideration paid to Business Manager for
the purchase shall be an amount equal to the Principal Services Revenue and Non-
Ophthalmic Business Revenue with respect to the Purchased Receivables, computed
in accordance with GAAP on an accrual basis (net of Adjustments). Although it is
the intention of the parties that Business Manager purchase and thereby become
the owner of the Purchased Receivables of Practice, in the event such purchase
shall be ineffective for any reason, to secure the payment and performance of
Practice's obligations hereunder, Practice is hereby concurrently and
irrevocably granting, giving, assigning and pledging to Business Manager a
security interest in all of Practice's accounts receivable. This Management
Services Agreement shall constitute a security agreement with respect to
Practice's assets and accounts receivable and may be filed under the Uniform
Commercial Code in each state in which Practice does business. Practice shall
cooperate with Business Manager and shall execute all agreements or documents,
including any Security Agreements and financing statements, in connection with
the granting of such security interest to Business Manager, or at Business
Manager's option, its lenders, that such persons deem necessary or appropriate.
All collections with respect to the Purchased Receivables by Business Manager
shall be received by Business Manager as the agent of Practice and shall be
endorsed to Business Manager and deposited in a bank account at a bank
designated by Business Manager. To the extent Practice comes into
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possession of any payments in respect of the Purchased Receivables, Practice
shall direct such payments to Business Manager for deposit in bank accounts
designated by Business Manager. Without limiting the foregoing, to ensure that a
reasonable cash flow is maintained for the payment of Office Expenses hereunder,
Practice shall not, except as expressly contemplated herein, sell, assign,
transfer, pledge, mortgage or in any way encumber, the accounts receivable of
Practice without the express written consent of Business Manager.
6.6 Disputes Regarding Fees.
-----------------------
(a) It is the parties' intent that any disputes regarding Business
Manager's performance hereunder shall be resolved to the extent possible by good
faith negotiations. To that end, the parties agree that if Practice in good
faith believes that Business Manager has failed to perform its obligations, and
that as a result of such failure, Practice is entitled to a set-off or reduction
in its Management Fees, Practice shall give Business Manager notice of the
perceived failure and request in the notice a set-off or reduction in Management
Fees. Business Manager and Practice shall then negotiate the dispute in good
faith, and if an agreement is reached, the parties shall implement the
resolution without further action.
(b) If the parties cannot reach a resolution within thirty (30) days,
and the amount at issue is $25,000 or less, then the dispute shall be submitted
to the Policy Board. The Policy Board shall then consider, develop and implement
a resolution of such dispute which shall be final and binding upon Practice and
Business Manager.
(c) If the amount in dispute is greater than $25,000, and Business
Manager and Practice fail to resolve the dispute, then such dispute shall be
submitted by either party to binding arbitration as described in Article 7 of
this Management Services Agreement. The parties hereto expressly acknowledge and
agree that any arbitration regarding a dispute under this Section 6.6(c) shall
be limited solely to the determination of the amount of fees due and owing
either party, and shall not address or rule in any manner on matters relating to
any alleged breaches by either party hereto or any potential remedies therefor.
Nothing herein shall preclude the exercise by Practice of any remedies available
at law or equity with respect to matters outside the scope of the arbitration.
ARTICLE 7
MEDIATION AND ARBITRATION
The parties hereto shall negotiate in good faith to resolve any
controversy, dispute, claim or disagreement arising out of or relating to this
Management Services Agreement or the breach of this Management Services
Agreement. Any such dispute, controversy, disagreement or claim (including,
without limitation, tort claims, requests for provisional remedies or other
interim relief, and issues as to arbitrability of any matter) arising from any
provision in this Management Services Agreement which specifically provides for
arbitration as a potential remedy, that cannot be settled through negotiation
shall be settled (a) first, by the parties trying in good faith to settle the
dispute by mediation under the Commercial Mediation Rules of the American
Arbitration Association
43
("AAA") (such mediation session to be held in Chicago, Illinois, and to commence
within fifteen (15) days after the appointment of the mediator by the AAA), and
(b) if the dispute, controversy, disagreement or claim cannot be settled by
mediation, then by arbitration administered by the AAA under its Commercial
Arbitration Rules (such arbitration to be held in Chicago, Illinois before a
single arbitrator mutually agreed upon by the parties hereto and to commence
within fifteen (15) days after the appointment of the arbitrator by the AAA),
and judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The parties acknowledge that all other disputes
arising under this Management Services Agreement, including, without limitation,
any allegations of breach by either party, shall not be subject to arbitration;
rather, unless otherwise mutually agreed upon by the parties hereto, such
disputes will be submitted to the jurisdiction of the courts in accordance with
Section 9.4 hereof.
ARTICLE 8
TERM AND TERMINATION
8.1 Initial and Renewal Term. The Term of this Management Services
Agreement will be for an initial period of thirty-seven (37) years after the
Effective Date, and shall be automatically renewed for successive five (5) year
periods thereafter, provided that neither Business Manager nor Practice shall
have given notice of termination of this Management Services Agreement at least
one hundred twenty (120) days before the end of the initial term or any renewal
term, or unless otherwise terminated sooner as provided in Section 8.2 hereof.
8.2 Termination.
(a) Termination By Business Manager. Business Manager may terminate
this Management Services Agreement upon the occurrence of any one of the
following events which shall be deemed to be for "Business Manager Cause":
(i) The suspension or restriction for more than thirty (30)
consecutive days, or the revocations or cancellations of any three (3)
Physicians' licenses within a single twelve-month period to practice
medicine in the States of Illinois and/or Indiana, as applicable, if, in
the reasonable judgment of the Business Manager, Practice will not be
financially viable after such revocations, suspensions, cancellations or
restrictions;
(ii) Practice's loss or suspension of its Medicare or Medicaid
provider number, and/or Practice's restriction from treating patients of
the Medicare or Medicaid programs for a period of more than thirty (30)
consecutive days if, in the reasonable judgment of Business Manager,
Practice will not be financially viable after such loss or suspension;
(iii) The dissolution of Practice, or the filing by Practice of a
petition in voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily under any state or federal
statute for the protection of debtors;
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(iv) The filing against Practice of an involuntary petition under
any bankruptcy statute, or the appointment of a custodian, receiver,
trustee or assignee for the benefit of creditors, and such condition shall
continue undischarged or undismissed for sixty (60) days; and
(v) Practice materially defaults in the performance of its duties
or obligations hereunder, and shall fail to cure such default within sixty
(60) days after Practice receives notice from Business Manager specifying
the nature of such default.
(b) Termination By Practice. Practice may terminate this Management
Services Agreement upon any of the following occurrences which shall be deemed
to be for "Practice Cause":
(i) In the event that a court of competent jurisdiction makes a
final determination that Business Manager has materially breached a
fiduciary duty owed to Practice, Practice may terminate this Management
Services Agreement upon ten (10) days' notice to Business Manager; or
(ii) With ten (10) days' written notice to Business Manager, in
the event Business Manager (A) intentionally and in bad faith
misappropriates Practice's funds, or (B) misapplies Practice's funds and
fails to correct such misapplication within thirty (30) days of receipt of
notice from Practice describing with particularity the misapplication. Upon
delivery of written notice by Practice pursuant to (A) of this subparagraph
(iii) no funds of Practice may be withdrawn or disbursed by Business
Manager during such ten-day interim period without Practice Consent.
(c) Termination by Agreement. In the event Practice and Business
Manager shall mutually agree in writing, this Management Services Agreement may
be terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change.
(i) In the event there shall be a change in the Medicare or
Medicaid statutes, state or federal statutes, case law, regulations or
general instructions, the interpretation of any of the foregoing, the
adoption of new federal or state legislation, or a change in any third-
party reimbursement system, any of which are reasonably likely to
materially and adversely affect the manner in which either party may
perform or be compensated for its services under this Management Services
Agreement or which shall make this Management Services Agreement unlawful,
the parties shall immediately enter into good faith negotiations regarding
a new service arrangement or basis for compensation for the services
furnished pursuant to this Management Services Agreement that complies with
the law, regulation or policy and that approximates as closely as possible
the economic position of the parties prior to the change. If good faith
negotiations cannot resolve the matter, it shall be submitted to
arbitration in accordance with Article 7 of this Management Services
Agreement; provided, however, that the scope of such arbitration shall be
limited
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to conforming with the purpose and intent of this Section 8.2(d) and the
arbitrator will have no authority to suspend or terminate this Management
Services Agreement. If a court of competent jurisdiction compels or
requires a party hereto to refrain from performing its duties and
obligations hereunder, or a party's performance hereunder shall be directly
violative of a court order directed at such party, then, to the extent
necessary to comply with such court order, this Management Services
Agreement shall be deemed suspended. In no event shall such suspension be
construed to relieve either party's obligation under this Section 8.2(d)
and the parties will immediately commence good faith negotiations regarding
a new service arrangement or compensation structure that is in compliance
with any such court order, which arrangement or structure will allocate the
economic aspects of the relationship between the parties in a manner as
nearly as possible as that intended by this Management Services Agreement.
(ii) Notwithstanding anything herein to the contrary, if Section
6.1 and/or Section 6.2 of this Management Services Agreement are found to
be illegal, unenforceable, void, against public policy or forbidden by law,
they shall be replaced as described in Section 9.12 hereof.
8.3 Effects of Termination. Upon termination of this Management Services
Agreement, as heretofore provided, the "Term," as defined herein shall end, and
neither party shall have any further obligations hereunder except for (i)
obligations accruing prior to the date of termination, including, without
limitation, payment of the Management Fees, Office Expense and Practice Expense
relating to services provided prior to the termination of this Management
Services Agreement, except to the extent determined not to be payable in
connection with such termination, (ii) obligations, promises or covenants set
forth herein that are expressly set forth herein to extend beyond the Term under
the circumstances giving rise to such termination, including, without
limitation, indemnity, confidentiality and noncompetition provisions, which
provisions shall survive the expiration or termination of this Management
Services Agreement by Business Manager for cause, and (iii) the applicable
obligations of Practice and Business Manager described in Section 8.4 or 8.5
hereof. In effectuating the provisions of this Section 8.3, Practice
specifically acknowledges and agrees that Business Manager shall continue to
collect and receive on behalf of Practice all cash collections from accounts
receivable in existence at the time this Management Services Agreement is
terminated, it being understood that such cash collections will be applied in
accordance with Section 4.9 hereof, and will represent, in part, compensation to
Business Manager for management services already rendered and compensation on
accounts receivable purchased by Business Manager. Upon the expiration or
termination of this Management Services Agreement for any reason or cause
whatsoever, Business Manager shall surrender to Practice all books and records
pertaining to Practice's medical practice.
8.4 Repurchase Obligation. Upon termination of this Management Services
Agreement by Business Manager for Business Manager Cause or by Practice without
Practice Cause, Business Manager shall have the right, but not the obligation,
to require Practice to comply with the terms and conditions of this Section 8.4.
In the event Business Manager exercises such right by delivering written notice
to Practice within sixty (60) days of such termination, then Practice shall be
required to:
46
(a) Purchase from Business Manager at the greater of book or fair
market value the intangible assets, deferred charges and all other amounts on
the books of Business Manager relating to the Management Services Agreement and
Predecessor Management Services Agreements, 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 or Offices at the greater of the appraised fair
market value thereof or the then book value thereof. In the event of any
repurchase of real property, the appraised value shall be determined by Business
Manager and Practice, each selecting a duly qualified appraiser, who in turn
will agree on a third appraiser. This agreed-upon appraiser shall perform the
appraisal which shall be binding on both parties. In the event either party
fails to select an appraiser within fifteen (15) days of the selection of an
appraiser by the other party, the appraiser selected by the other party shall
make the selection of the third-party appraiser;
(c) Purchase at the greater of book or fair market value all
improvements, additions, or leasehold improvements that have been made by
Business Manager at any Office and that relate solely to the performance of
Business Manager's obligations under this Management Services Agreement;
(d) Assume all debt and all contracts, payables and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased hereunder as Offices by Business Manager; and
(e) Purchase from Business Manager at the greater of book or fair
market value all of the equipment listed in the Purchase Agreements or the
exhibits thereto, including all replacements and additions thereto made by
Business Manager pursuant to the performance of its obligations under the
Predecessor Management Services Agreements and this Management Services
Agreement, and all other assets, including inventory, supplies, and tangibles
with respect to the Offices, and intangibles, set forth on the books of Business
Manager as adjusted through the last day of the month most recently ended prior
to the date of such termination in accordance with GAAP to reflect operations of
the Offices, depreciation, amortization and other adjustments of assets shown on
the books of Business Manager.
In the event Business Manager exercises its rights pursuant to this Section 8.4,
Practice shall have the obligation to purchase all, and not less than all, of
the items listed in subparagraphs (a) through (e) above. In no event, however,
shall this Section 8.4 be construed as enabling Practice to repurchase any
assets acquired from any Regional Practice pursuant to any applicable Purchase
Agreement, which relate directly or indirectly to the ambulatory surgical
centers owned and operated by Practice immediately prior to the effective date
of the Predecessor Management Services Agreements (collectively, the "ASC
Assets"). The ASC Assets are expressly excluded from the assets enumerated in
subparagraphs (a) through (e) above and Practice shall have no right to
repurchase the ASC Assets under this Section 8.4, unless Business Manager shall
so elect in
47
writing, in which case Practice shall be required to repurchase the ASC Assets
at the greater of the then book or fair market value. For purposes of this
Article 8, "fair market value" of a particular item shall be an amount mutually
agreed upon by Practice and Business Manager. If Practice and Business Manager
are unable to reach agreement on such value after ten (10) days of
deliberations, then such fair market value shall be determined by an
independent, duly qualified appraiser mutually agreed upon by Practice and
Business Manager. If Practice and Business Manager cannot agree upon an
appraiser within ten (10) days, then each party shall select a duly qualified
appraiser, who in turn will select a third appraiser. This agreed-upon appraiser
shall perform the appraisal which shall be binding upon both parties. All
expenses of such appraisal shall be borne fifty percent (50%) by Business
Manager and fifty percent (50%) by Practice.
8.5 Repurchase Option. Upon termination of this Management Services
Agreement by Practice for Practice Cause pursuant to Section 8.2(b) hereof,
Practice shall have the right, but not the obligation, to:
(a) Purchase from Business Manager at the then book value the
intangible assets, deferred charges and all other amounts on the books of
Business Manager relating to the Management Services Agreement and Predecessor
Management Services Agreements, 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 of any real estate owned by
Business Manager and used as an Office or Offices at the then appraised fair
market value thereof. In the event of any repurchase of real property, the
appraised value shall be determined in accordance with the appraisal mechanism
described in Section 8.4 hereof;
(c) Purchase at the then book value all improvements, additions or
leasehold improvements that have been made by Business Manager at any Office or
Offices and that relate solely to the performance of Business Manager's
obligations under this Management Services Agreement;
(d) Assume all debt and all contracts, payables and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased by Business Manager; and
(e) Purchase from Business Manager at the then book value all of the
equipment listed in the Purchase Agreements or an exhibit thereto, including all
replacements and additions thereto made by Business Manager pursuant to the
performance of its obligations under this Management Services Agreement, and all
other tangible assets, including inventory and supplies, set forth on the books
of 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 Offices, depreciation, amortization and other adjustments of
assets shown on the books of Business Manager.
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In the event Practice exercises its rights pursuant to this Section 8.5,
Practice shall have the obligation to purchase all, and not less than all, of
the items listed in subparagraphs (a) through (e). The ASC Assets are expressly
excluded from the assets enumerated in subparagraphs (a) through (e) above and
Practice shall have no right to repurchase the ASC Assets under this Section 8.5
unless Business Manager shall so elect in writing, in which case Practice shall
be required to repurchase the ASC Assets at the greater of the then book or fair
market value. In lieu of paying cash for the items described in this Section
8.5, Practice shall have the option of contributing to Business Manager that
number of shares of Series A Convertible Preferred Stock, par value $.01 per
share ("NovaMed Stock") of NovaMed Eyecare, Inc., the parent company of Business
Manager ("NovaMed Parent"), which, based on the then fair market value of such
shares, determined in accordance with a consistent application of the valuation
procedure established under Section 4.2(b) of the Services Agreement, equals the
cash amount required pursuant to this Section 8.5.
8.6 Closing of Repurchase. Except as expressly provided in Section 8.5
hereof, Practice shall pay cash for the repurchased assets. The amount of the
purchase price shall be reduced by the amount of debt and liabilities of
Business Manager, if any, assumed by Practice. Practice and, if required by law,
any Physician associated with Practice, shall execute such documents as may be
required, (i) for Practice to assume the liabilities set forth in Section 8.4(d)
or 8.5(d) hereof, as applicable, and (ii) for Practice to indemnify or remove
Business Manager from any such assumed liability. Business Manager shall execute
such documents as may be required to convey the assets, free and clear of all
liens (except for those liens securing indebtedness assumed by Practice). The
closing date for the repurchase shall be determined by mutual agreement of
Practice and Business Manager but shall in no event occur later than sixty (60)
days from the date of the notice of termination. The termination of this
Management Services Agreement shall become effective upon the closing of the
sale of the assets under Section 8.4 or 8.5 hereof, as the case may be, and all
parties shall be released from any restrictive covenants provided for in Section
5.7 hereof on such closing date. From and after any termination, each party
shall provide the other party with reasonable access to the books and records
then owned by it to permit such requesting party to satisfy reporting and
contractual obligations that may be required of it.
8.7 Rights and Remedies. In the event of a material breach of this
Management Services Agreement by either party hereunder, the nonbreaching party
shall have, in addition to any other rights and remedies contained in this
Management Services Agreement, all rights and remedies available to such party
at law or equity. Without limiting the generality of the foregoing, the parties
acknowledge and agree that Business Manager entered into this Management
Services Agreement with the understanding that the Term of this Management
Services Agreement would be thirty-seven (37) years. In the event of a material
breach hereunder by Practice, the parties acknowledge and agree that the actual
damages to be suffered by Business Manager will be difficult to ascertain.
Practice recognizes that, in the event Practice shall fail to perform, observe
or discharge any of its duties, obligations or liabilities under this Management
Services Agreement, any remedy at law may prove to be inadequate relief to
Business Manager. Therefore, Practice agrees that, if Business Manager so elects
and in addition to any other remedies available at law or equity, Business
Manager shall be entitled to temporary and permanent injunctive relief in any
49
such case without the necessity of proving actual damages, to specific
performance of any provision hereof.
8.8 Interpretation. The purpose and intent of this Article 8 is to
establish the limited instances in which a party may terminate this Management
Services Agreement. Unless the parties mutually agree to terminate this
Management Services Agreement, neither party shall be entitled to terminate this
Management Services Agreement prior to the expiration of the Term unless a
party's breach gives rise to a termination for Business Manager Cause or
Practice Cause pursuant to Section 8.2(a) or (b) hereof, as the case may be.
Nothing in this Agreement (including Section 8.4 hereof) shall be construed as
permitting Practice to terminate this Agreement without Practice Cause.
ARTICLE 9
MISCELLANEOUS
9.1 Administrative Services Only. Nothing in this Management Services
Agreement is intended or shall be construed to allow Business Manager to
exercise control or direction over the manner or method by which Practice and
its Physicians and Optometrists perform Medical Services or other professional
health care services. The rendition of all Medical Services, including, but not
limited to, the prescription or administration of medicine and drugs shall be
the sole responsibility of Practice and its Physicians and Optometrists, and
Business Manager shall not interfere in any manner or to any extent therewith.
Nothing contained herein shall be construed to permit Business Manager to engage
in the practice of medicine, it being the sole intention of the parties hereto
that the services to be rendered to Practice by Business Manager are solely for
the purpose of providing nonmedical management and administrative services to
Practice to enable Practice to devote its full time and energies to the
professional conduct of its medical practice and provision of Medical Services
to its patients and not to administration or practice management. Practice,
through the Physicians and Optometrists, shall be responsible for and shall have
complete authority, responsibility, supervision and control over the opticians
and other employees of Business Manager providing services in connection with
the Non-Ophthalmic Business, consistent with the requirements necessary to
satisfy the "in-office ancillary service exception" to the Xxxxx Act.
9.2 Status of Contractor. It is expressly acknowledged that the parties
hereto are "independent contractors," and nothing in this Management Services
Agreement is intended and nothing shall be construed to allow either party to
exercise control or direction over the manner or method by which the other party
performs the services that are the subject matter of this Management Services
Agreement; provided that the services to be provided hereunder shall be
furnished in a manner consistent with the standards governing such services and
the provisions of this Management Services Agreement. Each party understands and
agrees that (i) neither party will withhold on behalf of the other party any
sums for income tax, unemployment insurance, social security or any other
withholding pursuant to any law or requirement of any governmental body or make
available any of the benefits afforded to its employees, (ii) all of such
payments, withholdings and benefits, if any, are the sole responsibility of the
party incurring the liability, and
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(iii) each party will indemnify and hold the other harmless from any and all
loss or liability arising with respect to such payments, withholdings and
benefits, if any.
9.3 Notices. Any notice, demand or communication required, permitted or
desired to be given hereunder shall be in writing and shall be served on the
parties at the following respective addresses:
Practice:
Hunkeler Eye Centers-Chicago, L.L.C.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Managers
with a copy to:
Xxxxxxxx & Xxxxxx, Ltd.
00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Business Manager:
NovaMed Eyecare Management, LLC
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
Xxxx X. Xxxxxxxx, Xx.
with a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted or desired to be given hereunder shall be sent
either (a) by hand delivery, in which case notice shall be deemed received when
actually delivered, (b) by prepaid certified or registered first class mail,
51
return receipt requested, in which case notice shall be deemed received five
calendar days after deposit, postage prepaid in the United States Mail, (c) by
facsimile if also delivered by hand, or deposited in the United States Mail,
postage prepaid, registered or certified mail, on or before two (2) business
days after its delivery by facsimile, in which case notice shall be deemed
received one (1) business day after the facsimile transmission, or (d) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after prepaid deposit with such courier.
9.4 Governing Law and Consent to Jurisdiction. This Management Services
Agreement shall be governed by the laws of the State of Illinois applicable to
agreements to be performed wholly within the State of Illinois. Illinois law was
chosen by the parties after negotiation to govern interpretation of this
Management Services Agreement because Xxxx County, Illinois is the seat of
management for Business Manager. The parties hereto agree that if a controversy
or claim between them arises out of or in relation to this Management Services
Agreement and results in any litigation or special proceeding, the state and
federal courts located in Xxxx County, Illinois shall have jurisdiction to hear
and decide such matter, and the parties hereto hereby submit to the jurisdiction
of such courts.
9.5 Assignment. Except as may be herein specifically provided to the
contrary, this Management Services Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective legal representatives,
successors and permitted assigns; provided, however, Practice may not assign
this Management Services Agreement without the prior written consent of Business
Manager, which consent may be withheld in Business Manager's discretion. The
sale, transfer, pledge or assignment of any of the voting interests of Practice
held by any Practice-Owner or the issuance by Practice of common or other voting
interests to any other person, or any combination of such transactions within a
period of one (1) year, such that the existing Practice-Owners in Practice
immediately prior to such transactions or the beginning of the one-year period,
as applicable, fail to maintain a majority of the voting interests in Practice
shall be deemed an attempted assignment by Practice, and shall be null and void
unless consented to in writing by Business Manager prior to any such transfer or
issuance. Any breach of the above provision, whether or not void or voidable,
shall constitute a material breach of this Management Services Agreement, and in
the event of such breach, Business Manager may terminate this Management
Services Agreement upon twenty-four (24) hours' notice to Practice. The rights
and obligations of Business Manager under this Management Services Agreement
shall not be assignable without Practice Consent, which consent shall not be
unreasonably withheld or delayed; provided, however, that Business Manager shall
have the right to assign its rights, duties and obligations hereunder without
Practice Consent, (i) to any Affiliate of Business Manager (provided such
assignment shall not release Business Manager from any of its obligations
hereunder), which Affiliates will include, without limitation, NovaMed Parent or
any direct or indirect majority owned subsidiary of NovaMed Parent; (ii)
pursuant to a reorganization, merger, consolidation or the sale of all or
substantially all of the capital stock or assets of Business Manager (or any
other transaction substantially similar in effect); provided further, however,
that nothing contained herein shall prohibit Business Manager from engaging, in
the ordinary course of business, one or more reputable subcontractors to perform
certain functions of Business Manager; and (iii) as collateral assignment of its
rights (but not its duties) to any financial institution or other entity.
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9.6 Waiver of Breach. The waiver by either party of a breach or violation
of any provision of this Management Services Agreement shall not operate as, or
be construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
9.7 Enforcement. In the event either party resorts to legal action to
enforce or interpret any provision of this Management Services Agreement, the
prevailing party shall be entitled to recover the costs and expenses of such
action so incurred, including, without limitation, reasonable attorneys' fees.
9.8 Gender and Number. Whenever the context of this Management Services
Agreement requires, the gender of all words herein shall include the masculine,
feminine and neuter, and the number of all words herein shall include the
singular and plural.
9.9 Additional Assurances. Except as may be specifically provided herein to
the contrary, the provisions of this Management Services Agreement shall be
self-operative and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute such
additional instruments and take such additional acts as are reasonable, and as
the requesting party may reasonably deem necessary, to effectuate this
Management Services Agreement.
9.10 Consents, Approvals, and Exercise of Discretion. Whenever this
Management Services Agreement requires any consent or approval to be given by
either party, or either party must or may exercise discretion, and except where
specifically set forth to the contrary, the parties agree that such consent or
approval shall not be unreasonably withheld or delayed, and that such discretion
shall be reasonably exercised.
9.11 Force Majeure. Subject to Section 8.2(d) hereof, neither party shall
be liable or deemed to be in default for any delay or failure in performance
under this Management Services Agreement or other interruption of service deemed
to result, directly or indirectly, from acts of God, civil or military
authority, acts of public enemy, war, accidents, explosions, earthquakes,
floods, failure of transportation, strikes or other work interruptions by either
party's employees, or any other similar cause beyond the reasonable control of
either party unless such delay or failure in performance is expressly addressed
elsewhere in this Management Services Agreement.
9.12 Severability.
(a) The parties hereto have negotiated and prepared the terms of this
Management Services Agreement in good faith with the intent that each and
every one of the terms, covenants and conditions herein be binding upon and
inure to the benefit of the respective parties. Accordingly, if any one or
more of the terms, provisions, promises, covenants or conditions of this
Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void
or voidable for any reason whatsoever by a court of competent jurisdiction
or an arbitration tribunal, such provision shall be as narrowly construed
as possible, and each and all of the remaining terms, provisions, promises,
covenants and conditions of this Management
53
Services Agreement or their application to other persons or circumstances
shall not be affected thereby and shall be valid and enforceable to the
fullest extent permitted by law. To the extent this Management Services
Agreement is in violation of applicable law, then the parties agree to
negotiate in good faith to amend the Management Services Agreement, to the
extent possible consistent with its purposes, to conform to law. Without
limiting the foregoing, Business Manager shall not challenge this
Management Services Agreement on the grounds that it violates state law
prohibitions against fee splitting and/or corporate practice of medicine.
(b) In the event (but solely in the event) that Section 6.1 or Section
6.2 of this Management Services Agreement is declared to be illegal,
unenforceable, against public policy, or forbidden by law, by any local,
state or federal agency or department, any court of competent jurisdiction
or arbitration tribunal ("Findings"), the parties shall agree, pursuant to
good faith negotiations as contemplated in Section 9.12(a) hereof, upon an
alternative to Section 6.1 and Section 6.2. Until the parties reach such an
agreement, and perpetually in the event the parties do not reach such an
agreement, Section 6.1 and Section 6.2 and the Management Fee shall be
replaced, effective immediately upon the Findings by a fixed annual
Management Fee, payable in equal monthly installments ("Alternate
Management Fee") on or before the fifteenth (15/th/) business day of each
month from the date of the Findings forward. Said Alternate Management Fee
shall be in an amount per annum equal to the actual aggregate Management
Fee for the most recently completed year prior to the year in which the
Findings occurred (the year during which the Findings occur shall be
referred to herein as the "Base Year"), beginning as of the date of the
Findings (the "Base Fee"), plus any applicable Inflation Adjustment Fee (as
defined below) and any applicable Increased Service Fee (as defined below).
(i) Inflation Adjustment Fee. Beginning with the first annual
anniversary of the date of the Findings, and as of each annual anniversary
thereafter during the Term, the Inflation Adjustment Fee ("Inflation
Adjustment Fee") for the next twelve (12) months will be calculated as
follows:
(a) The Base Fee shall be multiplied by a fraction, the
numerator of which is the increase in the Consumer Price Index ("CPI")
from January of the Base Year through the January immediately
preceding the anniversary of the Findings for which the Inflation
Adjustment Fee is being determined and the denominator of which is the
CPI as of January of the Base Year; and
(b) The amount determined in (a), above, shall be divided by
12 and the resulting quotient shall be the monthly Inflation
Adjustment Fee for the next twelve (12) months. The Inflation
Adjustment Fee may be eliminated for a particular year under Section
9.12(b)(ii)(b).
(ii) Increased Service Fee.
54
(a) Within ninety (90) days after each calendar year
following the Findings, the parties shall determine whether Business
Manager is entitled to receive an additional fee under this Section
9.12(b)(ii) ("Increased Service Fee"). The Increased Service Fee is
paid in recognition of the increase in the level of services provided
by Business Manager over the level of services upon which the Base Fee
is based. The Increased Service Fee is equal to twenty-five percent
(25%) of the excess of the total Office Expense for such year over the
Office Expense for the Base Year (the "Increase Service Fee Base"),
provided that, if the Findings rendered during 1999, the Base Year
Office Expense shall be annualized to give effect to the fact that
this Management Services Agreement was in effect for only part of the
Base Year. The Increase Service Fee is subject to reduction under
Sections 9.12(b)(ii)(b) and (c). The Increased Service Fee, if earned,
shall be paid to Business Manager in nine (9) equal monthly
installments beginning on April 1 of the year following the year for
which the Increased Service Fee is earned. The first year with respect
to which Business Manager is eligible to earn the Increased Service
Fee is the calendar year immediately following the Base Year, payable,
if earned, beginning on April 1 of the second calendar year following
the Base Year.
(b) Each year, the Policy Board shall specify certain
objectives for Business Manager and the amount or percentage by which
the Increased Service Fee will be reduced if one or more of the
objectives are not met. Furthermore, the Policy Board, in its good
faith discretion, may determine whether, in light of the amount of the
Increased Service Fee, the Inflation Adjustment Fee is not
appropriate. Upon such a decision, Business Manager shall not receive
an Inflation Adjustment Fee for that year.
(c) To ensure that Business Manager effectively manages the
Office Expense, the Increased Service Fee otherwise payable with
respect to a given year will be reduced to an amount such that the
Increased Service Fee does not exceed twenty percent (20%) of
Practice's increase in profit for such year over the previous year.
(d) Each year, the Policy Board, in its good faith
discretion may agree that certain items shall be excluded from the
amount of the annual Office Expense or from the Increase Service Fee
Base used to calculate the Increased Service Fee. Without limiting the
foregoing, if Practice makes a capital expenditure that is not
approved by the Policy Board or included in the Budget, all revenues
and costs (including, but not limited to, operating costs and staffing
costs) associated with the asset shall, unless the parties otherwise
agree, be excluded from all calculations relative to the determination
of the Increased Service Fee. To the extent that Practice's net
collected revenues for the Base Year (as annualized, if the Base Year
is 1999) or Office Expense for the Base Year (as annualized, if the
Base Year is 1999) is not fairly representative of Practice's Base
Year operations, then either party can request that a different amount
be used and if the parties cannot agree the amounts shall be
determined pursuant to Article 7 hereof.
55
9.13 Divisions and Headings. The divisions of this Management Services
Agreement into articles, sections and subsections, and the use of captions and
headings in connection therewith is solely for convenience and shall not affect
in any way the meaning or interpretation of this Management Services Agreement.
9.14 Amendments and Management Services Agreement Execution. This
Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of Practice and Business Manager by their
respective duly authorized officers and Representatives. Each multiple copy
shall be deemed an original, but all multiple copies together shall constitute
one and the same instrument. No amendment shall be effective unless signed by
both parties hereto.
9.15 Entire Management Services Agreement. With respect to the subject
matter of this Management Services Agreement, this Management Services Agreement
supersedes all previous contracts, including, without limitation, the
Predecessor Management Services Agreements, and constitutes the entire agreement
between the parties. Notwithstanding the foregoing, execution of this Management
Services Agreement will not impair or otherwise limit the ability of either
party to enforce the provisions of the Predecessor Management Services
Agreements with respect to obligations accruing under the Predecessor Management
Services Agreement prior to the Effective Date of this Management Services
Agreement, including, without limitation, payment of fees and expenses relating
to services provided prior to the Effective Date of this Management Services
Agreement, except to the extent determined not to be payable in connection with
the execution of this Management Services Agreement. Neither party shall be
entitled to benefits other than those specified herein. Except as otherwise
provided herein, no prior oral statements or contemporaneous negotiations or
understandings or prior written material not specifically incorporated herein
shall be of any force and effect, and no changes in or additions to this
Management Services Agreement shall be recognized unless incorporated herein by
amendment as provided herein, such amendment to become effective on the date
stipulated in such amendment. The parties specifically acknowledge that, in
entering into and executing this Management Services Agreement, the parties rely
solely upon the representations and agreements contained in this Management
Services Agreement and no others.
56
IN WITNESS WHEREOF, Practice and Business Manager have caused this
Management Services Agreement to be executed by their duly authorized
representatives, all as of the day and year first above written.
PRACTICE:
HUNKELER EYE CENTERS-CHICAGO, L.L.C.,
a Delaware limited liability company
By: /s/ Xxxx X. Xxxx, M.D.
--------------------------------------
Name: Xxxx X. Xxxx, M.D.
-----------------------------------
Title: Manager
----------------------------------
BUSINESS MANAGER:
NOVAMED EYECARE MANAGEMENT, LLC,
a Delaware limited liability company
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx,
President
TABLE OF EXHIBITS
-----------------
EXHIBIT 1.4 BUDGET
EXHIBIT 1.19 LOCATIONS
EXHIBIT 1.33(b) PHYSICIAN-EMPLOYEES AND OPTOMETRISTS INCLUDED IN PRACTICE
EXPENSE
EXHIBIT 1.33(g) EQUIPMENT
EXHIBIT 1.57 PURCHASE AGREEMENTS
EXHIBIT 1.59(a) FORM OF SERVICES AGREEMENTS
EXHIBIT 1.59(b) LIST OF SERVICES AGREEMENTS
EXHIBIT 3.1(b) MEMBERS OF POLICY BOARD
EXHIBIT 4.8(a) FORM OF BILLING AND COLLECTION AGREEMENT
EXHIBIT 4.8(b) FORM OF POWER OF ATTORNEY
EXHIBIT 5.1A FORM OF EMPLOYMENT AGREEMENT (PHYSICIAN PRACTICE-OWNERS)
EXHIBIT 5.1B LIST OF INITIAL PRACTICE-OWNERS
EXHIBIT 5.2A FORM OF EMPLOYMENT AGREEMENT (PHYSICIAN EMPLOYEES)
EXHIBIT 5.8 PRACTICE D/B/A's
EXHIBIT 1.4
BUDGET
See Attached
Hunkeler Eye Centers - Chicago, L.L.C
_______________________________________________________________________________
1999 MSA Budget
Description Jan Feb Mar Apr May Jun
--------------------------------- ----------------- ----------------- -----------------
Principal Services
Revenue
-------
Principal Services revenue * * * * * *
ASC facility revenue * * * * * *
Optical revenue - glasses * * * * * *
Optical revenue - contacts * * * * * *
Optometric revenue * * * * * *
Other revenue * * * * * *
Contractual adjustments * * * * * *
* * * * * *
* * * * * *
Other Revenue * * * * * *
Principal Services Budgeted Revenue * * * * * *
Expenses
--------
Salaries and Wages:
Center Staff Salaries: * * * * * *
----------------------
Administration * * * * * *
Technician * * * * * *
Nurses * * * * * *
Other salaries * * * * * *
Overtime pay * * * * * *
* * * * * *
Payroll Taxes & Benefits
------------------------
Vacation & leave pay * * * * * *
Bonuses * * * * * *
Incentive compensation * * * * * *
FICA Tax * * * * * *
SUI * * * * * *
FUI * * * * * *
Other payroll taxes * * * * * *
Labor allocation * * * * * *
401k Match * * * * * *
Life & Disability ins. * * * * * *
Employee Health ins. * * * * * *
Benefits %
Total Salaries & Wages * * * * * *
MD/OD Compensation * * * * * *
* * * * * *
Pharmaceuticals and supplies: * * * * * *
Principal Services supplies * * * * * *
ASC - general * * * * * *
ASC - refractive * * * * * *
Pillar point fees * * * * * *
Optical COS - glasses * * * * * *
Optical COS - contacts * * * * * *
Optometric supplies * * * * * *
Total Pharmac. & Supplies * * * * * *
* Confidential portions omitted and filed separately with the commission.
Description Jul Aug Sep Oct Nov Dec Total 1998 %
---------------------------------------------------------------------------------------------- -------------------
Principal Services
Revenue
-------
Principal Services revenue * * * * * * * * * * *
ASC facility revenue * * * * * * * * * * *
Optical revenue - glasses * * * * * * * * * * *
Optical revenue - contacts * * * * * * * * * * *
Optometric revenue * * * * * * * * * * *
Other revenue * * * * * * * * * *
Contractual adjustments * * * * * * * * * *
* * * * * * * * * *
* * * * * * * * * *
Other Revenue * * * * * * * * * *
Principal Services Budgeted Revenue * * * * * * * * * * *
Expenses
--------
Salaries and Wages:
Center Staff Salaries: * * * * * * * * * *
----------------------
Administration * * * * * * * * * *
Technician * * * * * * * * * *
Nurses * * * * * * * * * *
Other salaries * * * * * * * * * *
Overtime pay * * * * * * * * * * #VALUE!
* * * * * * * * * *
Payroll Taxes & Benefits
------------------------
Vacation & leave pay * * * * * * * * * *
Bonuses * * * * * * * * * *
Incentive compensation * * * * * * * * * *
FICA Tax * * * * * * * * * *
SUI * * * * * * * * * *
FUI * * * * * * * * * *
Other payroll taxes * * * * * * * * * *
Labor allocation * * * * * * * * * *
401k Match * * * * * * * * * *
Life & Disability ins. * * * * * * * * * *
Employee Health ins. * * * * * * * * * *
#VALUE!
Benefits % #VALUE!
Total Salaries & Wages * * * * * * * * * * *
MD/OD Compensation * * * * * * * * * * *
* * * * * * * * * * *
Pharmaceuticals and supplies: * * * * * * * * * * *
Principal Services supplies * * * * * * * * * * *
ASC - general * * * * * * * * * * *
ASC - refractive * * * * * * * * * * *
Pillar point fees * * * * * * * * * * *
Optical COS - glasses * * * * * * * * * * *
Optical COS - contacts * * * * * * * * * * *
Optometric supplies * * * * * * * * * * *
Total Pharmac. & Supplies * * * * * * * * * * *
Hunkeler Eye Centers - Chicago, L.L.C
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Principal Services * * * * * * * * *
G&A expenses: * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Office & Administrative: * * * * * * * * *
Office Supplies * * * * * * * * *
Office supplies * * * * * * * * *
Software/computer expense * * * * * * * * *
Food service * * * * * * * * *
Bank charges * * * * * * * * *
Credit card fees * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Postage & freight * * * * * * * * *
Employee & patient programs * * * * * * * * *
Continuing education (1) * * * * * * * * *
Dues and subscriptions * * * * * * * * *
Telephone * * * * * * * * *
Utilities * * * * * * * * *
Printing * * * * * * * * *
Misc. office expense * * * * * * * * *
Total Office & Admin. Expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Marketing: * * * * * * * * *
Advertising * * * * * * * * *
Marketing-Other * * * * * * * * *
Total Marketing * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Professional and Service Fees: * * * * * * * * *
Legal * * * * * * * * *
Accounting * * * * * * * * *
Other prof. consulting * * * * * * * * *
Collection fees * * * * * * * * *
Answering service * * * * * * * * *
Linens & uniforms * * * * * * * * *
Other services * * * * * * * * *
Temporary services * * * * * * * * *
Total Professional Fees * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Rental Expense: * * * * * * * * *
Building rent * * * * * * * * *
Other office rent & parking * * * * * * * * *
Equipment leases * * * * * * * * *
Optical equipment rent * * * * * * * * *
Total Rent Expense * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Repairs & Maintenance: * * * * * * * * *
Building maintenance * * * * * * * * *
Repairs-equipment * * * * * * * * *
Non-capitalized tools * * * * * * * * *
Total Repairs & Maint. * * * * * * * * *
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Principal Services * * * * * * * *
G&A expenses: * * * * * * * *
* * * * * * * *
* * * * * * * *
Office & Administrative: * * * * * * * *
Office Supplies * * * * * * * *
Office supplies * * * * * * * *
Software/computer expense * * * * * * * *
Food service * * * * * * * *
Bank charges * * * * * * * *
Credit card fees * * * * * * * *
* * * * * * * *
* * * * * * * *
Postage & freight * * * * * * * *
Employee & patient programs * * * * * * * *
Continuing education (1) * * * * * * * *
Dues and subscriptions * * * * * * * *
Telephone * * * * * * * *
Utilities * * * * * * * *
Printing * * * * * * * *
Misc. office expense * * * * * * * *
Total Office & Admin. Expenses * * * * * * * *
* * * * * * * *
* * * * * * * *
Marketing: * * * * * * * *
Advertising * * * * * * * *
Marketing-Other * * * * * * * *
Total Marketing * * * * * * * *
* * * * * * * *
* * * * * * * *
Professional and Service Fees: * * * * * * * *
Legal * * * * * * * *
Accounting * * * * * * * *
Other prof. consulting * * * * * * * *
Collection fees * * * * * * * *
Answering service * * * * * * * *
Linens & uniforms * * * * * * * *
Other services * * * * * * * *
Temporary services * * * * * * * *
Total Professional Fees * * * * * * * *
* * * * * * * *
* * * * * * * *
Rental Expense: * * * * * * * *
Building rent * * * * * * * *
Other office rent & parking * * * * * * * *
Equipment leases * * * * * * * *
Optical equipment rent * * * * * * * *
Total Rent Expense * * * * * * * *
* * * * * * * *
* * * * * * * *
Repairs & Maintenance: * * * * * * * *
Building maintenance * * * * * * * *
Repairs-equipment * * * * * * * *
Non-capitalized tools * * * * * * * *
Total Repairs & Maint. * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
Hunkeler Eye Centers - Chicago, L.L.C
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Principal Services * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Taxes and insurance: * * * * * * * * *
MalPrincipal Services * * * * * * * * *
Liability & casualty * * * * * * * * *
Workers' compensation ins. * * * * * * * * *
D&O * * * * * * * * *
Key Man Life * * * * * * * * *
Other insurance * * * * * * * * *
Property tax * * * * * * * * *
Sales & Use tax * * * * * * * * *
Property tax * * * * * * * * *
Other taxes * * * * * * * * *
Total Taxes & Ins. * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Other Expenses: * * * * * * * * *
Travel & entertainment (1) * * * * * * * * *
Recruitment & relocation * * * * * * * * *
Auto & Van * * * * * * * * *
Contracted patient transport. * * * * * * * * *
Donations and gifts * * * * * * * * *
Allocated IT/Computing costs * * * * * * * * *
Other * * * * * * * * *
Total Other Expense * * * * * * * * *
* * * * * * * * *
Total G&A expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Depreciation & Amortization: * * * * * * * * *
Building depreciation * * * * * * * * *
Equipment depreciation * * * * * * * * *
Goodwill amortization * * * * * * * * *
Other intangible amortization * * * * * * * * *
Amortization of deferred charges * * * * * * * * *
* * * * * * * * *
Total Depr. and Amortization * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Interest (income) and expense: * * * * * * * * *
Depository Interest * * * * * * * * *
Investment Income * * * * * * * * *
Bank Line Interest Expense * * * * * * * * *
Cap. Lease Interest Expense * * * * * * * * *
Other Interest Expense * * * * * * * * *
* * * * * * * * *
Total Interest (income)/expense * * * * * * * * *
Principal Services Budgeted Office Expense * * * * * * * * *
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Principal Services * * * * * * * *
* * * * * * * *
* * * * * * * *
Taxes and insurance: * * * * * * * *
MalPrincipal Services * * * * * * * *
Liability & casualty * * * * * * * *
Workers' compensation ins. * * * * * * * *
D&O * * * * * * * *
Key Man Life * * * * * * * *
Other insurance * * * * * * * *
Property tax * * * * * * * *
Sales & Use tax * * * * * * * *
Property tax * * * * * * * *
Other taxes * * * * * * * *
Total Taxes & Ins. * * * * * * * *
* * * * * * * *
* * * * * * * *
Other Expenses: * * * * * * * *
Travel & entertainment (1) * * * * * * * *
Recruitment & relocation * * * * * * * *
Auto & Van * * * * * * * *
Contracted patient transport. * * * * * * * *
Donations and gifts * * * * * * * *
Allocated IT/Computing costs * * * * * * * *
Other * * * * * * * *
Total Other Expense * * * * * * * *
* * * * * * * *
Total G&A expenses * * * * * * * *
* * * * * * * *
* * * * * * * *
Depreciation & Amortization: * * * * * * * *
Building depreciation * * * * * * * *
Equipment depreciation * * * * * * * *
Goodwill amortization * * * * * * * *
Other intangible amortization * * * * * * * *
Amortization of deferred charges * * * * * * * *
* * * * * * * *
Total Depr. and Amortization * * * * * * * *
* * * * * * * *
* * * * * * * *
Interest (income) and expense: * * * * * * * *
Depository Interest * * * * * * * *
Investment Income * * * * * * * *
Bank Line Interest Expense * * * * * * * *
Cap. Lease Interest Expense * * * * * * * *
Other Interest Expense * * * * * * * *
* * * * * * * *
Total Interest (income)/expense * * * * * * * *
Principal Services Budgeted Office Expense * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
Hunkeler Eye Centers - Chicago, L.L.C
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Principal Services * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Principal Services Budgeted * * * * * * * * *
Practice Expense * * * * * * * * *
* * * * * * * * *
Principal Services Monthly Fee * * * * * * * * *
* * * * * * * * *
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Principal Services * * * * * * * *
* * * * * * * *
* * * * * * * *
Principal Services Budgeted * * * * * * * *
Principal Expense * * * * * * * *
* * * * * * * *
Principal Services Monthly Fee * * * * * * * *
* * * * * * * *
* Confidential portions omitted and filed separately with the commission.
Hunkeler Eye Centers - Chicago, L.L.C.
________________________________________________________________________________
1999 MSA Budget
Description Jan Feb Mar Apr May Jun
--------------------------------- -------------------------------------------------------
Non-Ophthalmic Business * * * * * *
* * * * * *
Revenue * * * * * *
------- * * * * * *
Practice revenue * * * * * *
ASC facility revenue * * * * * *
Optical revenue * * * * * *
Optometric revenue * * * * * *
Alliance revenue * * * * * *
Research & Consulting * * * * * *
Other revenue * * * * * *
* * * * * *
* * * * * *
Laboratory revenue * * * * * *
* * * * * *
Non-Ophthalmic Business Budgeted Revenue * * * * * *
* * * * * *
Expenses * * * * * *
-------- * * * * * *
Salaries and Wages: * * * * * *
Center Staff Salaries: * * * * * *
----------------------
Administration * * * * * *
Technician/Nurses * * * * * *
PSR/Front Desk * * * * * *
Other salaries * * * * * *
Overtime pay * * * * * *
* * * * * *
Payroll Taxes & Benefits * * * * * *
------------------------
Vacation & leave pay * * * * * *
Bonuses * * * * * *
Incentive compensation * * * * * *
FICA Tax * * * * * *
SUI * * * * * *
FUI * * * * * *
Other payroll taxes * * * * * *
Labor allocation * * * * * *
401k Match * * * * * *
Life & Disability ins. * * * * * *
Employee Health ins. * * * * * *
* * * * * *
Benefits % * * * * * *
Total Salaries & Wages * * * * * *
* * * * * *
MD/OD Compensation * * * * * *
* * * * * *
* * * * * *
Pharmaceuticals and supplies: * * * * * *
Medical Supplies * * * * * *
COS - Glasses * * * * * *
COS - Contacts * * * * * *
COS - adjustments * * * * * *
Laboratory fees * * * * * *
Discounts & allowances * * * * * *
Optical - Other * * * * * *
Total Pharmac. & Supplies * * * * * *
Description Jul Aug Sep Oct Nov Dec Total 1998 %
--------------------------------- ----------------------------------------------------- -------------------
Non-Ophthalmic Business * * * * * * * * * * *
* * * * * * * * * * *
Revenue * * * * * * * * * * *
------- * * * * * * * * * * *
Practice revenue * * * * * * * * * * *
ASC facility revenue * * * * * * * * * * *
Optical revenue * * * * * * * * * * *
Optometric revenue * * * * * * * * * * *
Alliance revenue * * * * * * * * * * *
Research & Consulting * * * * * * * * * * *
Other revenue * * * * * * * * * * *
* * * * * * * * * * *
* * * * * * * * * * *
Laboratory revenue * * * * * * * * * * *
* * * * * * * * * * *
Non-Ophthalmic Business Budgeted Revenue * * * * * * * * * * *
* * * * * * * * * * *
Expenses * * * * * * * * * * *
-------- * * * * * * * * * * *
Salaries and Wages: * * * * * * * * * * *
Center Staff Salaries: * * * * * * * * * * *
----------------------
Administration * * * * * * * * * * *
Technician/Nurses * * * * * * * * * * *
PSR/Front Desk * * * * * * * * * * *
Other salaries * * * * * * * * * * *
Overtime pay * * * * * * * * * * *
* * * * * * * * * * *
Payroll Taxes & Benefits * * * * * * * * * * *
------------------------
Vacation & leave pay * * * * * * * * * * *
Bonuses * * * * * * * * * * *
Incentive compensation * * * * * * * * * * *
FICA Tax * * * * * * * * * * *
SUI * * * * * * * * * * *
FUI * * * * * * * * * * *
Other payroll taxes * * * * * * * * * * *
Labor allocation * * * * * * * * * * *
401k Match * * * * * * * * * * *
Life & Disability ins. * * * * * * * * * * *
Employee Health ins. * * * * * * * * * * *
* * * * * * * * * * *
Benefits % * * * * * * * * * * *
Total Salaries & Wages * * * * * * * * * * *
* * * * * * * * * * *
MD/OD Compensation * * * * * * * * * * *
* * * * * * * * * * *
* * * * * * * * * * *
Pharmaceuticals and supplies: * * * * * * * * * * *
Medical Supplies * * * * * * * * * * *
COS - Glasses * * * * * * * * * * *
COS - Contacts * * * * * * * * * * *
COS - adjustments * * * * * * * * * * *
Laboratory fees * * * * * * * * * * *
Discounts & allowances * * * * * * * * * * *
Optical - Other * * * * * * * * * * *
Total Pharmac. & Supplies * * * * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
5
Hunkeler Eye Centers - Chicago, L.L.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Non-Ophthalmic Business * * * * * * * * *
G&A expenses: * * * * * * * * *
* * * * * * * * *
Office & Administrative: * * * * * * * * *
Office Supplies * * * * * * * * *
Office supplies * * * * * * * * *
Software/computer expense * * * * * * * * *
Food service * * * * * * * * *
Bank charges * * * * * * * * *
Credit card fees * * * * * * * * *
* * * * * * * * *
Postage & freight * * * * * * * * *
Employee & patient programs * * * * * * * * *
Continuing education * * * * * * * * *
Dues and subscriptions * * * * * * * * *
Telephone * * * * * * * * *
Utilities * * * * * * * * *
Printing * * * * * * * * *
Misc. office expense * * * * * * * * *
Total Office & Admin. Expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Marketing: * * * * * * * * *
Advertising * * * * * * * * *
Marketing - Other * * * * * * * * *
Total Marketing * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Professional and Service Fees: * * * * * * * * *
Legal * * * * * * * * *
Accounting * * * * * * * * *
Other prof. consulting * * * * * * * * *
Collection fees * * * * * * * * *
Answering service * * * * * * * * *
Linens & uniforms * * * * * * * * *
Other services * * * * * * * * *
Temporary services * * * * * * * * *
Total Professional Fees * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Rental Expense: * * * * * * * * *
Building rent * * * * * * * * *
Other office rent & parking * * * * * * * * *
Equipment leases * * * * * * * * *
Optical equipment rent * * * * * * * * *
Total Rent Expense * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Repairs & Maintenance: * * * * * * * * *
Building maintenance * * * * * * * * *
Repairs - equipment * * * * * * * * *
Non-capitalized tools * * * * * * * * *
Total Repairs & Maint. * * * * * * * * *
Hunkeler Eye Centers - Chicago, L.L.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Non-Ophthalmic Business * * * * * * * *
G&A expenses: * * * * * * * *
* * * * * * * *
Office & Administrative: * * * * * * * *
Office Supplies * * * * * * * *
Office supplies * * * * * * * *
Software/computer expense * * * * * * * *
Food service * * * * * * * *
Bank charges * * * * * * * *
Credit card fees * * * * * * * *
* * * * * * * *
Postage & freight * * * * * * * *
Employee & patient programs * * * * * * * *
Continuing education * * * * * * * *
Dues and subscriptions * * * * * * * *
Telephone * * * * * * * *
Utilities * * * * * * * *
Printing * * * * * * * *
Misc. office expense * * * * * * * *
Total Office & Admin. Expenses * * * * * * * *
* * * * * * * *
Marketing: * * * * * * * *
Advertising * * * * * * * *
Marketing - Other * * * * * * * *
Total Marketing * * * * * * * *
* * * * * * * *
* * * * * * * *
Professional and Service Fees: * * * * * * * *
Legal * * * * * * * *
Accounting * * * * * * * *
Other prof. consulting * * * * * * * *
Collection fees * * * * * * * *
Answering service * * * * * * * *
Linens & uniforms * * * * * * * *
Other services * * * * * * * *
Temporary services * * * * * * * *
Total Professional Fees * * * * * * * *
* * * * * * * *
* * * * * * * *
Rental Expense: * * * * * * * *
Building rent * * * * * * * *
Other office rent & parking * * * * * * * *
Equipment leases * * * * * * * *
Optical equipment rent * * * * * * * *
Total Rent Expense * * * * * * * *
* * * * * * * *
* * * * * * * *
Repairs & Maintenance: * * * * * * * *
Building maintenance * * * * * * * *
Repairs - equipment * * * * * * * *
Non-capitalized tools * * * * * * * *
Total Repairs & Maint. * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
6
Hunkeler Eye Centers - Chicago, L.L.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Non-Ophthalmic Business * * * * * * * * *
* * * * * * * * *
Taxes and Insurance: * * * * * * * * *
Malpractice * * * * * * * * *
Liability & casualty * * * * * * * * *
Workers' compensation ins. * * * * * * * * *
D&O * * * * * * * * *
Key Man Life * * * * * * * * *
Other insurance * * * * * * * * *
Property tax * * * * * * * * *
Sales & Use tax * * * * * * * * *
Property tax * * * * * * * * *
Other taxes * * * * * * * * *
Total Taxes & Ins. * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Other Expenses: * * * * * * * * *
Travel & entertainment * * * * * * * * *
Recruitment & relocation * * * * * * * * *
Auto & Van * * * * * * * * *
Contracted patient transport. * * * * * * * * *
Donations and gifts * * * * * * * * *
Allocated IT/Computing costs * * * * * * * * *
Other * * * * * * * * *
Total Other Expense * * * * * * * * *
* * * * * * * * *
Total G&A expenses * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Depreciation & Amortization: * * * * * * * * *
Building depreciation * * * * * * * * *
Equipment depreciation * * * * * * * * *
Goodwill amortization * * * * * * * * *
Other intangible amortization * * * * * * * * *
Amortization of deferred charges * * * * * * * * *
* * * * * * * * *
Total Depr. and Amortization * * * * * * * * *
* * * * * * * * *
* * * * * * * * *
Interest (Income) and expense: * * * * * * * * *
Depository Interest * * * * * * * * *
Investment Income * * * * * * * * *
Bank Line Interest Expense * * * * * * * * *
Cap. Lease Interest Expense * * * * * * * * *
Other Interest Expense * * * * * * * * *
* * * * * * * * *
Total Interest (Income)/expense * * * * * * * * *
* * * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * * *
* * * * * * * * *
Office Expense * * * * * * * * *
Hunkeler Eye Centers - Chicago, L.L.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Non-Ophthalmic Business * * * * * * * *
* * * * * * * *
Taxes and Insurance: * * * * * * * *
Malpractice * * * * * * * *
Liability & casualty * * * * * * * *
Workers' compensation ins. * * * * * * * *
D&O * * * * * * * *
Key Man Life * * * * * * * *
Other insurance * * * * * * * *
Property tax * * * * * * * *
Sales & Use tax * * * * * * * *
Property tax * * * * * * * *
Other taxes * * * * * * * *
Total Taxes & Ins. * * * * * * * *
* * * * * * * *
* * * * * * * *
Other Expenses: * * * * * * * *
Travel & entertainment * * * * * * * *
Recruitment & relocation * * * * * * * *
Auto & Van * * * * * * * *
Contracted patient transport. * * * * * * * *
Donations and gifts * * * * * * * *
Allocated IT/Computing costs * * * * * * * *
Other * * * * * * * *
Total Other Expense * * * * * * * *
* * * * * * * *
Total G&A expenses * * * * * * * *
* * * * * * * *
* * * * * * * *
Depreciation & Amortization: * * * * * * * *
Building depreciation * * * * * * * *
Equipment depreciation * * * * * * * *
Goodwill amortization * * * * * * * *
Other intangible amortization * * * * * * * *
Amortization of deferred charges * * * * * * * *
* * * * * * * *
Total Depr. and Amortization * * * * * * * *
* * * * * * * *
* * * * * * * *
Interest (Income) and expense: * * * * * * * *
Depository Interest * * * * * * * *
Investment Income * * * * * * * *
Bank Line Interest Expense * * * * * * * *
Cap. Lease Interest Expense * * * * * * * *
Other Interest Expense * * * * * * * *
* * * * * * * *
Total Interest (Income)/expense * * * * * * * *
* * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * *
* * * * * * * *
Office Expense * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
7
Hunkeler Eye Centers - Chicago, L.L.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------- -----------------------------------------------------------
Non-Ophthalmic Business * * * * * * * * *
* * * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * * *
Practice Expense * * * * * * * * *
* * * * * * * * *
Non-Ophthalmic Business Monthly Fee * * * * * * * * *
Hunkeler Eye Centers - Chicago, L.L.C.
------------------------------------------------------------------------------------------------------------
1999 MSA Budget
Description Oct Nov Dec Total 1998 %
---------------------------------- ----------------- -------------------
Non-Ophthalmic Business * * * * * * * *
* * * * * * * *
Non-Ophthalmic Business Budgeted * * * * * * * *
Practice Expense * * * * * * * *
* * * * * * * *
Non-Ophthalmic Business Monthly Fee * * * * * * * *
* Confidential portions omitted and filed separately with the commission.
8
EXHIBIT 1.19
LOCATIONS
. 0000 Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxx
(Xx. Xxxxx)
TABLE OF EXHIBITS EXHIBIT 1.33(b)
PHYSICIAN-EMPLOYEES AND OPTOMETRISTS INCLUDED
IN PRACTICE EXPENSE
Xxxxxx X. Xxxxxxxx, M.D.
EXHIBIT 1.33(g)
EQUIPMENT
None.
EXHIBIT 1.57
PURCHASE AGREEMENTS
NovaMed EyeCare Management, L.L.C., entered into a Purchase Agreement with
each of the following entities for purchase of such entities' nonmedical assets,
with each of the Purchase Agreements being effective as of January 1, 1996:
Xxxxxxxxx - Xxxxxxxx Eye Institute, P.C.
Xxxxxxxxx Eye Care, P.C.
Xxxxxx X. Xxxxx, Ph.D., M.D., X.X.
Xxxx Eye Center, S.C.
Northshore Eye Associates, Ltd.
Northwest Ophthalmology Associates, S.C.
EXHIBIT 1.59(a)
FORM OF SERVICES AGREEMENTS
See Attached
EXHIBIT 1.59(b)
LIST OF SERVICES AGREEMENTS
Each Services Agreement is of even date herewith, unless otherwise noted.
Practice is a party to a Services Agreement with each of the following entities:
Xxxxxxxxx-Xxxxxxxx Eye Institute, P.C.
Xxxxxxxxx Eye Care, P.C.
Xxxxxx X. Xxxxx, Ph.D., M.D., S.C.
Xxxx Eye Center, S.C.
S. Xxxx, S.C.
Northshore Eye Associates, Ltd.
Xxxxxxxx X. Xxxxxxxxx, M.D., S.C.
Northwest Ophthalmology Associates, S.C.
Xxxxxxxx X. Xxxxx, M.D., S.C.
EXHIBIT 3.1(b)
MEMBERS OF POLICY BOARD
Practice-Owner Representatives
------------------------------
Xxxx X. Xxxx, M.D.
Xxxxxx X Xxxxx, Ph.D., M.D.
Business Manager Representatives
--------------------------------
E. Xxxxxxx Xxxxxxx
Xxxxx Xxxxxxxx
EXHIBIT 4.8(a)
FORM OF BILLING AND COLLECTION AGREEMENT
See Attached
EXHIBIT 4.8(b)
FORM OF POWER OF ATTORNEY
See Attached
EXHIBIT 5.1A
FORM OF EMPLOYMENT AGREEMENT (PHYSICIAN PRACTICE-OWNERS)
See Attached
EXHIBIT 5.1B
LIST OF INITIAL PRACTICE-OWNERS
Xxxxxxxxx-Xxxxxxxx Eye Institute, P.C.
Xxxxxxxxx Eye Care, P.C.
Xxxxxx X. Xxxxx, Ph.D., M.D., S.C.
Xxxx Eye Center, S.C.
S. Xxxx, S.C.
Northwest Ophthalmology Associates, S.C.
Xxxxxxxx X. Xxxxxxxxx, M.D., S.C.
Northshore Eye Associates, Ltd.
Xxxxxxxx X. Xxxxx, M.D., S.C.
Xxx X. Xxxxxxxx, M.D.
EXHIBIT 5.1C
FORM EMPLOYMENT AGREEMENT
(PHYSICIAN SHAREHOLDERS OF PRACTICE-OWNERS)
EXHIBIT 5.2A
FORM OF EMPLOYMENT AGREEMENT (PHYSICIAN EMPLOYEES)
See Attached
EXHIBIT 5.8
PRACTICE D/B/A's
Xxxxxxxxx-Xxxxxxxx Eye Institute, P.C.
Xxxxxxxxx Eye Care, P.C.
Xxxxxx X. Xxxxx, Ph.D., M.D., S.C.
Xxxx Eye Center, S.C.
S. Xxxx, S.C.
Northshore Eye Associates, Ltd.
Northwest Ophthalmology Associates, S.C.
Xxxxxxxx X. Xxxxx, M.D., S.C.
