THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO
S.C. CODE XXX. ss.15-48-10 ET SEQ. AS MODIFIED HEREIN
BUSINESS SERVICE AGREEMENT
Between
INTEGRAMED AMERICA, INC.
And
SOUTHEASTERN FERTILITY CENTERS, P.A.
THIS BUSINESS SERVICE AGREEMENT ("Agreement") is dated April 24, 2008,
("Effective Date") by and between IntegraMed America, Inc., a Delaware
corporation, with its principal place of business at Two Xxxxxxxxxxxxxx Xxxx,
Xxxxxxxx, Xxx Xxxx 00000 ("IntegraMed") and Southeastern Fertility Centers,
P.A., a South Carolina professional association, with its principal place of
business at 0000 Xxxxxxxx Xxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx 00000 ("SEFC").
IntegraMed and SEFC are individually referred to herein as a "Party" and
jointly, as "Parties."
RECITALS:
SEFC specializes in gynecological services, treatment of human
infertility encompassing the provision of in vitro fertilization and other
assisted reproductive services ("Infertility Services"). SEFC provides
Infertility Services through Xxxxx Xxxxxx, M.D. and Xxxx Xxxxxxx, M.D., the
shareholders of SEFC. Drs. Xxxxxx and Xxxxxxx are collectively referred to as
"Physicians." SEFC also contemplates providing Infertility Services through
other physician employees. Physicians have entered or will enter into employment
agreements with SEFC on or about the date of execution of this Agreement.
IntegraMed is in the business of making available to medical providers
such as SEFC certain assets (principally, facilities and equipment) and support
services, primarily consisting of (i) financial management; (ii) administrative
systems; (iii) clinical and laboratory organization and function; (iv) marketing
and (v) operations management. Such support services and the provision of
certain fixed assets are collectively referred to as "Business Services."
SEFC believes the Business Services will benefit its medical practice
and desires IntegraMed's assistance with various aspects of SEFC's medical
practice through the utilization of the Business Services as more particularly
set forth herein. SEFC acknowledges and agrees that the Business Services being
made available to SEFC require SEFC's cooperation and collaboration, and that
IntegraMed, in making the Business Services available, makes no warranty or
representation that the Business Services will achieve SEFC's desired goals and
objectives except as expressly provided in this Agreement.
In addition, SEFC desires access to capital for funding its growth and
development, and IntegraMed desires to provide such capital or access to capital
as provided herein.
NOW THEREFORE, in consideration of the above recitals which the parties
incorporate into this Agreement, the mutual covenants and agreements herein
contained and other good and valuable consideration, SEFC hereby agrees to
purchase from IntegraMed the Business Services and IntegraMed agrees to provide
the Business Services to SEFC on the terms and conditions provided herein.
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
1.1.1 "Adjustments" shall mean adjustments for refunds,
discounts, contractual adjustments, professional courtesies, and other
activities that do not generate a collectible fee as reasonably
determined by IntegraMed and SEFC. Adjustments shall not include Bad
Debt.
1.1.2 "Additional Service Fee" shall mean a monthly fee paid
by SEFC to IntegraMed in an amount equal to a percentage of SEFC's
monthly PDE.
1.1.3 "Assets" shall mean those fixed assets utilized in
connection with the operation of SEFC's medical practice, including,
but not limited to, fixed assets and leasehold improvements.
1.1.4 "Bad Debt" shall mean all or a portion of an account,
loan or note receivable considered to be uncollectible in accordance
with Generally Accepted Accounting Principles ("GAAP"),
1.1.5 "Base Service Fee" shall mean a monthly fee paid by SEFC
to IntegraMed in an amount equal to a percentage of SEFC's monthly
Physician and Other Professional Revenues.
1.1.6 "Business Services" shall mean IntegraMed making
available certain personnel and assets (including, without limitation,
all facilities and equipment necessary to operate SEFC's medical
practice for the provision of Infertility Business Services) and
support services, primarily consisting of (i) financial management;
(ii) administrative systems; (iii) clinical and laboratory organization
and function; (iv) marketing and (v) operations management, all as more
fully set forth in Article 3.
1.1.7 "Cost of Services" shall have the meaning set forth in
Article 2.
Page 2 of 34
1.1.8 "Facilities" shall mean the medical offices and clinical
spaces of SEFC, including any satellite locations, related businesses
and all medical group business operations of SEFC, which are utilized
by SEFC in its medical practice.
1.1.9 "Fiscal Year" shall mean the 12-month period beginning
January 1 and ending December 31 of each year.
1.1.10 "Infertility Services" shall mean gynecological
services, treatment of human infertility encompassing the provision of
in vitro fertilization and other assisted reproductive services
provided by SEFC or any Physician Employee and Other Professional
Employee.
1.1.11 "IntegraMed Overhead" shall mean salaries, bonuses,
payroll taxes and benefits for IntegraMed corporate office employees,
rent and expenses related to the operation of the IntegraMed corporate
office, travel and entertainment expenses for corporate employees.
1.1.12 "Other Professional Employee" shall mean a
non-physician individual who provides services, including nurse
anesthetists, physician assistants, nurse practitioners, psychologists,
and other such professional employees who generate professional
charges, but shall not include Technical Employees.
1.1.13 "Physician-Employee" shall mean an individual,
including any SEFC physician owner and any other physician who is an
employee of SEFC or is under contract with SEFC, including physicians
employed by entities with whom SEFC has contracted, to provide
Infertility Services to SEFC's patients and is duly licensed as a
physician in the where SEFC provides Infertility Services.
1.1.14 "Physician and Other Professional Revenues" shall mean
all fees, whether received or accrued, and actually recorded each month
(net of Adjustments) by or on behalf of SEFC as a result of
professional medical and laboratory services furnished to patients by
Physicians and Physician-Employees and Other Professional Employees
and, except as described in the next succeeding sentence, other fees or
income earned in their capacity as professionals, whether rendered in
an inpatient or outpatient setting, including but not limited to,
medical director fees or technical fees from medical ancillary
services, consulting fees, ultrasound fees from businesses owned or
operated by Physicians and, including, but not limited to,
contributions by pharmaceutical and other companies for marketing and
research activities). Physician and Other Professional Revenues shall
not include (i) board attendance fees and other compensation in
connection with board memberships; provided, the compensation for board
related activities does not exceed $5,000 in the aggregate, annually,
per Physician, (ii) other services where Physician does not provide
professional medical services such as testimony and consultation for
litigation-related proceedings, lectures, passive investments,
fundraising, or writing ("Permitted Services"; the compensation from
Permitted Services may be retained by a Physician or Physician-Employee
without limit, subject to Section 4.7.5 hereof; (iii) fees and income
recorded by SEFC prior to June 15, 2008 with respect to an IVF research
Page 3 of 34
study sponsored by Duramed that SEFC became involved with as of January
15, 2008; and (iv) compensation paid to Drs. Xxxxxxx and Xxxxxxxxx (and
any other doctors of the practice) with respect to their academic
affiliation with Medical University of South Carolina. Physician and
Other Professional Revenues are sometimes referred to herein as
"Revenues."
1.1.15 "Pre-distribution Earnings" ("PDE") shall mean (i)
Physician and Other Professional Revenues, less (ii) Cost of Services
and the Base Service Fee.
1.1.16 "Receivables" shall mean and include all rights to
payment for services rendered or goods sold, including, without
limitation, accounts receivables, contract rights, chattel paper,
documents, instruments and other evidence of patient indebtedness to
SEFC, policies and certificates of insurance relating to any of the
foregoing, and all rights to payment, reimbursement or settlement or
insurance or other medical benefit payments assigned to SEFC by
patients or pursuant to any Preferred Provider, HMO, capitated payment
agreements or other agreements between SEFC and a payer, recorded each
month (net of Adjustments).
1.1.17 "Technical Employees" shall mean embryologists and
other laboratory personnel, ultrasonographers, phlebotomists and
technicians who provide services to SEFC.
ARTICLE 2
COST OF SERVICES
2.1 "Cost of Services" shall mean all ordinary and necessary expenses
of SEFC and all direct ordinary and necessary operating expenses, without
xxxx-up, of IntegraMed, exclusive of IntegraMed Overhead, incurred in connection
with products and/or services that are specific to SEFC or customized for SEFC
or that are related to volume-based usage by SEFC, including, without
limitation, the following costs and expenses, whether incurred by IntegraMed or
SEFC:
2.1.1 Salaries and fringe benefits of all IntegraMed and other
employees employed at SEFC Facilities, along with payroll taxes or all
other taxes and charges now or hereafter applicable to such personnel,
and services of independent contractors;
2.1.2 Marketing expenses incurred by or on behalf of SEFC,
such as costs of printing marketing materials, media placements, and
consumer seminars;
2.1.3 Any sales and use taxes assessed against SEFC related to
the operation of SEFC's medical practice;
2.1.4 Lease payments, depreciation expense (determined
according to GAAP), taxes and interest directly relating to the
Facilities and equipment, and other expenses of the Facilities
described in Section 3.2 below;
Page 4 of 34
2.1.5 Legal fees paid by IntegraMed or SEFC to outside counsel
in connection with matters specific to the operation of SEFC such as
regulatory approvals required as a result of the parties entering into
this Agreement; provided, however, legal fees incurred by the parties
relative to the execution or performance of this Agreement or as a
result of a dispute between the parties under this Agreement shall be
borne by each party and shall not be considered a Cost of Services; and
provided, further any cost related to disputes between or among
Physicians shall not be considered Cost of Services and are outside the
scope of this Agreement.
2.1.6 Health benefits provided to Physicians and
Physician-Employees, including health and life insurance and long-term
disability;
2.1.7 All insurance necessary to operate SEFC including fire,
theft, general liability professional liability and malpractice
insurance for Physicians and Physician-Employees of SEFC, and Other
Professional and Technical Employees provided by IntegraMed;
2.1.8 Professional licensure fees and board certification fees
of Physician- Employees, and Other Professional Employees rendering
Infertility Services on behalf of SEFC;
2.1.9 Membership in professional associations and continuing
professional education for Physicians and Physician-Employees and Other
Professional Employees;
2.1.10 Risk Management Program described in Section 3.8
herein;
2.1.11 Cost of filing fictitious name permits pursuant to this
Agreement;
2.1.12 Cost of supplies, medical and administrative, and all
direct general and administrative expenses, including but not limited
to travel and entertainment expenses, dues and subscriptions, and other
business related expenses, such as cellular telephone, relative to
SEFC; and
2.1.13 Such other costs and expenses directly incurred by
IntegraMed related to SEFC's operations which are included in the
annual operation budget referred to in Section 5.2.1 or otherwise
approved by SEFC in writing.
2.1.14 Cost incurred by IntegraMed with respect to specific
requests for services from SEFC that are outside those provided for in
this Agreement. For such requested services, IntegraMed and SEFC will
mutually determine how such specific requests will be carried out, as
well as how charges and costs, including, but not limited to travel,
will be applied.
2.1.15 SEFC's Bad Debt.
Page 5 of 34
2.1.16 Costs incurred by IntegraMed with respect to Business
Services related to a specific activity requested by SEFC that are in
excess of those Business Services typically provided to other medical
providers for the same activity, including, but not limited to
additional travel and staffing.
2.1.17 Such costs charged by third-party vendors that are, in
turn, allocated among network practices. For example, and not by way of
limitation, costs to install and maintain telecommunication lines
linking SEFC to the IntegraMed data center; annual software license
maintenance fees and hardware maintenance fees related to MISYS Optimum
and software license and maintenance fees associated with all other
software applications utilized by SEFC, including but not limited to
HRIS/ON-core, Goldmine, MAS500, Centrix, HelpSTAR, Secure ID/RSA token
and spam reduction services provided by IntegraMed; insurance premiums
for professional liability and other insurance coverages, and; any
other cost or expense that is allocated among the network practices
based on volume usage.
2.1.18 Such additional training that SEFC may request from
IntegraMed beyond basic training for such applications as ARTworks or
in connection with basic Marketing and Sales training.
2.1.19 Base salary up to $250,000 for two years for two new
physicians employed by SEFC; provided, however, each such new hire must
be approved by the Practice Management Board and provided, further, (i)
"new physician" shall mean a physician whose hiring is not to replace a
physician who has left SEFC within 12 months prior to the employment of
the new physician, but whose hiring increases SEFC's full-time
equivalent ("FTE") physicians to a number greater than SEFC's FTE
physicians for the previous 12 months; and (ii) "new physician" shall
not mean a physician providing Infertility Services to patients in
"Territory" during the 12-month period immediately preceding employment
by SEFC. No more than one of the two new physicians shall qualify for
this Cost of Services treatment at the same time unless the main
offices from which the physicians are working are located at least 50
miles from each other.
2.2 Notwithstanding anything to the contrary contained herein, Cost of
Services shall not include costs of the following:
2.2.1 Any federal or state income taxes of SEFC or IntegraMed
other than as provided above;
2.2.3 The Base Service Fee;
2.2.4 Except as set forth in Section 2.1.19, any amount paid
to or on behalf of any Physician or Physician-Employee including
salary, payroll taxes, draw or pension contributions (all of which come
out of SEFC's share of PDE);
2.2.5 IntegraMed's cash outlay to acquire capital assets for
which depreciation expense is to be charged as a Cost of Services under
Section 2.1.4.
Page 6 of 34
2.2.6 IntegraMed Overhead;
ARTICLE 3
DUTIES AND RESPONSIBILITIES OF INTEGRAMED
3.1 BUSINESS SERVICES AND ADMINISTRATION.
3.1.1 SEFC hereby engages IntegraMed to provide the Business
Services within the Counties of Aiken, Allendale, Bamberg, Barnwell,
Beaufort, Berkeley, Xxxxxxx, Charleston, Clarendon, Colleton,
Darlington, Dillon, Dorchester, Edgefield, Xxxxxxxxx, Xxxxxxxx,
Georgetown, Hampton, Horry, Jasper, Kershaw, Lee, Lexington, Marion,
Newberry, Orangeburg, Richland, Saluda, Sumter, Richland and
Williamsburg in the State of South Carolina and the Counties of
Chatham, Columbia and Richmond in Georgia (the "Territory"), and SEFC
agrees to limit its use of the Business Services to the Territory,
without prior written consent from IntegraMed. Additionally, IntegraMed
will provide the Business Services to SEFC, on a non-exclusive basis,
in the counties of Brunswick, Columbus and New Hanover in North
Carolina.
None of the Business Services made available to SEFC include
any physician medical functions.
3.1.2 IntegraMed will, on behalf of SEFC and as directed by
SEFC, bill patients timely and collect professional fees for
Infertility Business Services rendered by SEFC at the Facilities,
outside the Facilities for SEFC's hospitalized patients, and for all
other Infertility Business Services rendered by any Physician- Employee
or Other Professional Employees. SEFC hereby appoints IntegraMed for
the term hereof to be its true and lawful attorney-in-fact, for the
following purposes: (i) xxxx patients in SEFC's name and on its behalf;
(ii) collect Receivables resulting from such xxxxxxxx in SEFC's name
and on its behalf (recognizing that successfully collecting Receivables
may be dependent on SEFC's participation and cooperation, SEFC will
reasonably cooperate with respect to IntegraMed's collection efforts,
and policies and procedures established by the Practice Management
Board governing the collection of Receivables); (iii) receive payments
from insurance companies, prepayments from health care plans, and all
other third-party payers; (iv) take possession of and endorse in the
name of SEFC (and/or in the name of any Physician Employee or Other
Professional Employee rendering Infertility Business Services to
patients of SEFC) any notes, checks, money orders, and other
instruments received in payment of Receivables; and (v) at SEFC's
request, initiate the institution of legal proceedings in the name of
SEFC, with SEFC's cooperation, to collect any accounts and monies owed
to SEFC, to enforce the rights of SEFC as creditor under any contract
or in connection with the rendering of any service by SEFC, and to
contest adjustments and denials by governmental agencies (or its fiscal
intermediaries) as third-party payers.
3.1.3 IntegraMed will provide the administrative services
function of supervising and maintaining (on behalf of SEFC) all files
and records relating to the operations of the Facilities, including but
Page 7 of 34
not limited to accounting and billing records, including for billing
purposes, patient medical records, and collection records. Patient
medical records shall at all times be and remain the property of SEFC
and shall be located at the Facilities and be readily accessible for
patient care. IntegraMed's management of all files and records shall
comply with all applicable state and federal laws and regulations,
including without limitation, those pertaining to confidentiality of
patient records. The medical records of each patient shall be expressly
deemed confidential and shall not be made available to any third party
except in compliance with all applicable laws, rules and regulations.
IntegraMed shall have access to such records in order to provide the
Business Services hereunder, to perform billing functions, and to
prepare for the defense of any lawsuit in which those records may be
relevant. The obligation to maintain the confidentiality of such
records shall survive termination of this Agreement. SEFC shall have
unrestricted access to all of its records at all times.
3.1.4 IntegraMed will provide, as requested by SEFC, all
reasonably necessary clerical, accounting, bookkeeping and computer
services, printing, postage and duplication services, medical
transcribing services, and any other necessary or appropriate
administrative services reasonably necessary for the efficient
operation of SEFC's medical practice at the Facilities.
3.1.5 With SEFC's cooperation, and participation IntegraMed
will design and assist with implementing an appropriate marketing
program for SEFC. SEFC's participation is essential in developing such
marketing program and accordingly, will designate one or more
physicians to work with IntegraMed in designing and implementing such
marketing program.
3.1.6 IntegraMed, upon request of SEFC, will assist SEFC in
recruiting additional physicians, including IntegraMed providing such
administrative functions as advertising for and identifying potential
candidates, checking credentials, and arranging interviews; provided,
however, SEFC shall interview and make the ultimate decision as to the
suitability of any physician to become associated with SEFC. All
physicians recruited by IntegraMed and accepted by SEFC shall be
employees of or independent contractors to SEFC.
3.1.7 IntegraMed will assist SEFC in negotiating any managed
care contracts to which SEFC desires to become a party. IntegraMed will
provide administrative assistance to SEFC in fulfilling its obligations
under any such contract.
3.1.8 IntegraMed will arrange, in consultation with SEFC, for
legal and accounting services as may otherwise be reasonably required
in the ordinary course of SEFC's operation.
3.2 FACILITIES. SEFC shall determine the nature and extent of the
facilities reasonably needed for SEFC' medical practice and IntegraMed will
assist SEFC in obtaining such Facilities, including providing administrative
support, effort and resources in obtaining the Facilities, including all
furniture, equipment and furnishings necessary for the Facilities, all repairs,
Page 8 of 34
maintenance and improvements thereto, utility (telephone, electric, gas, water)
services, customary janitorial services, refuse disposal and all other services
reasonably necessary in conducting SEFC's medical practice at the Facilities.
IntegraMed will arrange for the cleaning of the Facilities, and timely
maintenance and cleanliness of the equipment, furniture and furnishings located
therein. IntegraMed will advise, counsel and collaborate with SEFC regarding the
condition, use and needs for the Facilities, the improvements thereto, equipment
and services.
3.3 EXECUTIVE DIRECTOR AND OTHER PERSONNEL.
3.3.1 EXECUTIVE DIRECTOR. IntegraMed will employ an Executive
Director, approved by the Practice Management Board, as defined in
Section 5.1, to manage and administer all of the day-to-day business
functions of the Facilities. The Executive Director's compensation and
benefits shall be approved by Practice Management Board. SEFC agrees
not to offer any compensation or benefits to the Executive Director
other than those approved by the Practice Management Board.
3.3.2 PERSONNEL. IntegraMed will provide, as requested by
SEFC, Other Professional Employees, Technical Employees, support and
administrative personnel, clerical, secretarial, bookkeeping and
collection personnel reasonably necessary for the efficient operation
of SEFC at the Facilities. Such personnel must be approved by SEFC, but
will be under the direction and supervision of the Executive Director,
except that Technical Employees and Other Professional Employees
subject to the professional supervision of SEFC. The compensation of
such personnel shall be approved by SEFC and SEFC may request that any
of such personnel be terminated in its reasonable discretion and in
such event, all cost and expenses associated with such termination
shall be a Cost of Services.
3.4 FINANCIAL PLANNING AND GOALS. IntegraMed, in collaboration with
SEFC, will prepare, for the approval of the Practice Management Board, an annual
capital and operating budget (the "Budget") reflecting the anticipated Revenues
and Cost of Services, sources and uses of capital for growth of SEFC' practice
and for the provision of Infertility Services at the Facilities. IntegraMed will
present the Budget to the Practice Management Board for its approval at least
thirty (30) days prior to the commencement of the Fiscal Year. If the Practice
Management Board can not agree on the Budget for any Fiscal Year during the term
of this Agreement, the Budget for the preceding Fiscal Year will serve as the
Budget until such time as a new Budget is approved.
3.5 FINANCIAL STATEMENTS. IntegraMed will deliver to SEFC monthly
financial statements ("Financial Statements") within thirty (30) days after the
end of each calendar month. Such Financial Statements will comprise, on a
monthly and year-to-date basis, a statement of SEFC' Revenues and Cost of
Services and PDE, as hereinafter defined.
3.6 TAX PLANNING AND TAX RETURNS. IntegraMed will not be responsible
for any tax planning or tax return preparation for SEFC, but will provide
Page 9 of 34
support documentation in connection with the same. Such support documentation
will not be destroyed without SEFC' consent.
3.7 INVENTORY AND SUPPLIES. For the account of SEFC, IntegraMed shall
order and purchase inventory and supplies, and such other materials which are
requested by SEFC to enable SEFC to deliver Infertility Services in a
cost-effective quality manner.
3.8 RISK MANAGEMENT. IntegraMed shall assist SEFC in the development
of a Risk Management Program and in meeting the standards of such Program.
3.9 PERSONNEL POLICIES AND PROCEDURES. IntegraMed shall develop, in
cooperation with SEFC, personnel policies, procedures and guidelines, governing
office behavior, protocol and procedures which will aid in compliance with
applicable laws and guidelines related to employment and human resources
management.
3.10 LICENSES AND PERMITS. IntegraMed will coordinate and assist SEFC
in its application for and efforts to obtain and maintain all federal, state and
local licenses, certifications and regulatory permits required for or in
connection with the operations of SEFC and equipment located at the Facilities,
other than those relating to the practice of medicine or the administration of
drugs by Physicians and Physician-Employees.
3.11 SUBCONTRACTED BUSINESS SERVICES. Subject to prior approval of
SEFC, which approval shall not be unreasonably withheld, IntegraMed is expressly
authorized to subcontract with other persons or entities for any of the services
that IntegraMed is required to perform pursuant to this Agreement ("Authorized
Subcontractors"). Provided, however, that IntegraMed shall disclose any term of
this Agreement to any subcontractor or potential subcontractor of IntegraMed who
does or will perform services to SEFC to the extent the subcontractor or
potential subcontractor will perform significant or continuing functions for
SEFC which are specific obligations of IntegraMed hereunder and shall
incorporate such terms into such subcontract, including but not limited to the
restrictive provisions of Section 3.1.1 hereof. No such subcontract will limit
the overall responsibility of IntegraMed for compliance with the terms and
provisions of this Agreement unless SEFC specifically agrees in writing. Nothing
in this Section 3.11 shall apply to contracts entered into by IntegraMed that
relate to services not required to be performed directly by IntegraMed such as
payroll services.
3.12 ACCESS TO PROTECTED HEALTH INFORMATION. In connection with the
Business Services provided by IntegraMed pursuant to this Agreement, IntegraMed
and its employees, representatives and agents will have access to protected
health information ("PHI") maintained by SEFC. In connection with such PHI,
IntegraMed contemporaneous with entering into this Agreement will enter into a
Business Associate Agreement with SEFC, substantially in the form of Exhibit
3.12, in accordance with the regulations promulgated under the Health Insurance
Portability & Accountability Act of 1996.
Page 10 of 34
ARTICLE 4
DUTIES AND RESPONSIBILITIES OF SEFC
4.1 TIMELY PERFORMANCE. SEFC, in engaging IntegraMed to provide the
Business Services described in this Agreement, acknowledges that SEFC's timely
performance of its duties and responsibilities as delineated in this Article 4
are material to this Agreement and to IntegraMed's interest.
4.2 PROFESSIONAL SERVICES. SEFC shall use its best efforts to cause its
Physicians and Physician-Employees to provide Infertility Services to SEFC'
patients in compliance at all times with ethical standards, laws and regulations
applying to the practice of medicine in the applicable jurisdiction which such
Physician or Physician-Employee provides Infertility Services on behalf of SEFC.
SEFC shall ensure that each Physician, Physician-Employee, any Other
Professional Employee employed by SEFC, and any other professional provider
associated with SEFC is duly licensed to provide the Infertility Services being
rendered within the scope of such provider's practice. In addition, SEFC shall
require each Physician and Physician-Employee to maintain a DEA number and
appropriate medical staff privileges as determined by SEFC during the term of
this Agreement. In the event that any disciplinary actions or medical
malpractice actions are initiated against any Physician, Physician-Employee or
other professional provider, SEFC shall promptly inform the Executive Director
and provide the underlying facts and circumstances of such action, and the
proposed course of action to resolve the matter. Periodic updates, but not less
than monthly, shall be provided to IntegraMed.
4.3 MEDICAL PRACTICE. SEFC shall use and occupy the Facilities
exclusively for the purpose of providing Gynecology, Infertility Services, and
related services and activities and shall use its best efforts to comply with
all applicable laws and regulations and all applicable standards of medical
care, including, but not limited to, those established by the American Society
of Reproductive Medicine. The medical practice conducted at the Facilities shall
be conducted solely by Physicians employed by SEFC and Physician-Employees
employed by or serving as independent contractors to SEFC, and Other
Professional Employees employed by SEFC. No other physician or medical
practitioner shall be permitted to use or occupy the Facilities without the
prior written consent of IntegraMed, except in the case of a medical emergency,
in which event, notification shall be provided to IntegraMed as soon after such
use or occupancy as possible.
4.4 EMPLOYMENT OF PHYSICIAN AND OTHER PROFESSIONAL EMPLOYEES. In the
event SEFC shall determine that additional physicians are necessary, SEFC shall
undertake and use its best efforts to select physicians who, in SEFC's judgment,
possess the credentials and expertise necessary to enable such physician
candidates to become affiliated with SEFC for the purpose of providing
Infertility Services. SEFC shall cause each Physician-Employee to enter into an
employment or service agreement with SEFC or their respective professional
association which is a partner of SEFC ("Physician Employment Agreement") in
such form as is mutually and reasonably acceptable to SEFC and IntegraMed. Upon
SEFC' request, IntegraMed shall consult with and advise SEFC respecting the
hiring, compensation, supervision, evaluation and termination of
Physician-Employees.
Page 11 of 34
4.5 CONTINUING MEDICAL EDUCATION SEFC shall require its
Physician-Employees to participate in such continuing medical education as SEFC
deems to be reasonably necessary for such physicians to remain current in the
provision of Infertility Services.
4.6 PROFESSIONAL INSURANCE.
4.6.1 SEFC shall maintain professional liability coverage at
all times during the Term, in limits of not less than $1,000,000.00 per
occurrence, $3,000,000.00 in the aggregate, unless the Practice
Management Board determines that such limits can be lowered or should
be increased. If possible, under the terms of the insurance coverage,
SEFC shall use its best efforts to cause IntegraMed to be named an
additional named insured to the extent reasonably available at no
additional cost or expense. Upon request of IntegraMed, evidence of
such coverage shall be provided to IntegraMed.
4.6.2 IntegraMed, in conjunction with practices in the
IntegraMed network, maintains a malpractice captive insurance company,
ARTIC, Ltd. ("ARTIC"). As a member of the IntegraMed network, in lieu
of maintaining professional liability coverage as provided for in
Section 4.6.1, SEFC is eligible to become a member of ARTIC provided it
meets the underwriting requirements and pays applicable premiums and
fees. As an ARTIC member, SEFC is required to participate in the
IntegraMed Risk Management Program.
4.7 DIRECTION OF PRACTICE SEFC, as a continuing condition of
IntegraMed's obligations under this Agreement, shall at all time during the Term
be and remain legally organized and operated to provide Infertility Services in
a manner consistent with state and federal laws. SEFC, through its physicians,
is expected to provide leadership in its market area and reasonably cooperate
with IntegraMed in IntegraMed's efforts to make the Business Services available
to SEFC. In furtherance of which:
4.7.1 SEFC shall operate and maintain at the Facilities a
full-time practice of medicine specializing in the provision of
Infertility Services and shall maintain and enforce the Physician
Employment Agreements or in such other form as is mutually and
reasonably agreed to by SEFC and IntegraMed in writing. SEFC covenants
that it shall not employ any physician, or have any physician as a
shareholder, unless said physician shall sign the Physician Employment
Agreement prior to assuming the status as employee and/or shareholder.
SEFC covenants that should a physician become a shareholder of SEFC,
that a condition precedent to the issuance of the shares shall be the
ratification of this Service Agreement. The relationship between SEFC
and physicians who independently contract with SEFC to provide services
shall be in such other form as is mutually and reasonably agreed to by
SEFC and IntegraMed in writing.
4.7.2 SEFC shall not terminate the Physician Employment
Agreement(s) of any Physician, except in accordance with the Physician
Employment Agreement(s). SEFC shall not amend or modify the Physician
Employment Agreements in any material manner, nor waive any material
rights of SEFC thereunder without the prior written approval of
Page 12 of 34
IntegraMed, which approval will not be unreasonably withheld, and it
shall be deemed unreasonable for IntegraMed to withhold consent of an
amendment or modification mandated by the necessity of compliance with
applicable law. SEFC covenants to enforce the terms of each Physician
Employment Agreement, including but not limited to any terms confirming
a Physician-Employee's commitment to practice medicine solely through
SEFC for a specified number of years. Attached hereto as Exhibit 4.7.2
are copies of all Physician Employment Agreement.
4.7.3 Recognizing that IntegraMed would not have entered into
this Agreement but for SEFC's covenant to maintain and enforce the
Physician Employment Agreements with any physician now employed or
physicians who may hereafter become employees of SEFC, and in reliance
upon such Physician-Employee's observance and performance of the
non-competition and non-solicitation obligations under the Physician
Employment Agreements, any damages, liquidated damages, compensation,
payment or settlement received by SEFC from a physician whose
employment is terminated shall be considered to be Physician and Other
Professional Revenues.
4.7.4 SEFC shall retain that number of Physician-Employees as
are reasonably necessary and appropriate for the provision of
Infertility Services. Each Physician-Employee shall hold and maintain a
valid and unrestricted license to practice medicine in the applicable
jurisdiction where such Physician-Employee provides Infertility
Services on behalf of SEFC, and all full-time Physician-Employees shall
be board eligible in the practice of gynecology, with training in the
subspecialty of infertility and assisted reproductive medicine. SEFC
shall be responsible for paying the compensation and benefits, as
applicable, for all Physician-Employees, and for withholding, as
required by law, any sums for income tax, unemployment insurance,
social security, or any other withholding required by applicable law.
IntegraMed, at the request of SEFC, will establish and administer the
compensation with respect to such Physician-Employees in accordance
with the written agreement between SEFC and each Physician Employee.
IntegraMed shall neither control nor direct any Physician in the
performance of Infertility Services for patients, and IntegraMed will
not unreasonably interfere with the employer-employee relationship
between SEFC and its Physician-Employees.
4.7.5 SEFC and its Physician-Employees shall provide patient
care and clinical backup as required for the proper provision of
Infertility Services to patients of SEFC at SEFC' Facilities. SEFC
shall require that its full-time Physician-Employees devote
substantially all of their professional time, effort and ability to
SEFC's practice, including the provision of Infertility Services and
the development of such practice, and that Permitted Services, of any
Physician-Employee do not interfere with such Physician-Employees full
time practice of Infertility Services at SEFC' Facilities.
4.7.6 SEFC shall obtain and maintain necessary licenses and
operate its clinical laboratory and tissue bank services in accordance
with all applicable laws and regulations. SEFC agrees that the Medical
Director or Tissue Bank Director, if applicable, shall be
Physician-Employees or Other Professional Employees, if applicable, of
SEFC who meet the qualifications required by applicable State law or
Page 13 of 34
regulation, and that should there be a vacancy in any such position,
SEFC will cause another Physician-Employee or Other Professional
Employee, if applicable, to fill such vacancy in accordance with
applicable State law.
4.7.7 SEFC acknowledges that it bears all medical obligations
to patients treated at the Facilities and covenants that it is
responsible for all tissue, specimens, embryos or biological material
("Biological Materials") kept at the Facilities on behalf of the
patients (or former patients) of SEFC, except for the negligence,
willful or intentional misconduct of IntegraMed's employees; provided,
however, this shall not apply to circumstances where an IntegraMed
employee is acting under the direction or supervision of a
Physician-Employee. In the event of a termination or dissolution of
SEFC, or the termination of this Agreement for any reason, SEFC and the
Physicians will have the obligation to account to patients and to
arrange for the storage or disposal of such Biological Materials in
accordance with patient consent and the ethical guidelines of the
American Society of Reproductive Medicine ("Relocation Program").
IntegraMed, in such event, will, at the request of SEFC, assist in the
administrative details of such a Relocation Program for so long as SEFC
shall request and an appropriate fee shall be paid during that time.
These obligations shall survive the termination of this Agreement.
4.7.8 SEFC will designate certain physicians to (i) work with
IntegraMed in designing and implementing marketing plans, (ii)
participate in marketing strategy sessions, and (iii) identify targeted
referral sources and managed care opportunities.
4.8 PRACTICE DEVELOPMENT, COLLECTION EFFORTS AND NETWORK INVOLVEMENT.
SEFC agrees that during the term of this Agreement, SEFC covenants for itself
and will use reasonable efforts to cause its Physician-Employees to:
4.8.1 Execute such documents and take such steps reasonably
necessary to assist billing and collecting for patient services
rendered by SEFC and its Physician-Employees;
4.8.2 Promote SEFC's medical practice and participate in
marketing efforts developed by IntegraMed and approved by SEFC;
4.8.3 Reasonably cooperate with respect to IntegraMed's
collection efforts, and policies and procedures governing the
collection of Receivables; and
4.8.4 Comply with all applicable laws and regulations,
federal, state and local.
4.8.5 Participate in IntegraMed network activities and
programs, including, but not limited to, the Council of Physicians and
Scientists, using best efforts in offering IntegraMed Pharmaceutical
Services and the IntegraMed Shared Risk(R) Refund Program to patients
and participating in other product and service offerings IntegraMed has
in effect from time to time.
Page 14 of 34
ARTICLE 5
JOINT DUTIES AND RESPONSIBILITIES
5.1 FORMATION AND OPERATION OF PRACTICE MANAGEMENT BOARD. IntegraMed
and SEFC will establish a practice management board ("Practice Management
Board"), which will be responsible, to assist SEFC, in developing management and
administrative policies for the overall operation of SEFC. The Practice
Management Board will consist of designated representatives from IntegraMed as
determined by IntegraMed, designated representatives of SEFC as determined by
SEFC, the Executive Director and the Medical Director. It is the intent and
objective of IntegraMed and SEFC that they agree on the overall provision of the
Business Services to SEFC. In the case of any matter requiring a formal vote,
SEFC shall have one (1) vote and IntegraMed shall have one (1) vote; provided,
however, the determination with respect to adding Shareholders, or hiring or
firing of Physician-Employees shall be determined solely by SEFC. The desire is
that IntegraMed and SEFC agree on matters of operations and that, if they
disagree, they will have to work cooperatively to resolve any disagreement. The
Practice Management Board shall meet at least three (3) times per calendar year
and will maintain minutes of all meetings, which minutes shall, among other
things, reflect all decisions of the Practice Management Board.
5.2 DUTIES AND RESPONSIBILITIES OF THE PRACTICE MANAGEMENT Board. With
the assistance of IntegraMed, the Practice Management Board shall have, among
others, the following duties and responsibilities:
5.2.1 ANNUAL BUDGETS AND PROFITABILITY. Review and approve
annual capital and operation budgets prepared by IntegraMed. The
parties covenant and agree to use their respective best efforts to
assist the Practice Management Board in achieving the projected
budgets. SEFC and IntegraMed agree that, recognizing changes in
circumstances, annual budgets and forecast are subject to revisions.
Accordingly, the Practice Management Board may, from time to time,
propose to modify the annual budgets, as needed, including without
limitation, staff reductions, so that SEFC operates in a profitable
mode which means that PDE is positive on a monthly basis. SEFC's
approval of such modifications shall not be unreasonably withheld and
shall become part of the Budget. Further, SEFC agrees that in the event
SEFC incurs operational losses at any point during the term of this
Agreement, nothing herein shall obligate IntegraMed to incur losses
under this Agreement in order to sustain SEFC's operations. For
example, IntegraMed may take appropriate steps to reduce its Cost of
Services in order to avoid negative PDE at any point.
5.2.2 CAPITAL IMPROVEMENTS AND EXPANSION.Except as otherwise
provided herein, any renovation and expansion plans, and capital
equipment expenditures with respect to SEFC shall be reviewed and
approved by the Practice Management Board and shall be based upon the
best interests of SEFC, and shall take into account capital priorities,
economic feasibility, physician support, productivity and then current
market and regulatory conditions.
Page 15 of 34
5.2.3 MARKETING BUDGET.SEFC shall assist in the development of
an annual marketing budget and plan prepared by IntegraMed for approval
by the Practice Management Board. All annual advertising and other
marketing budgets prepared by IntegraMed shall be subject to the
review, amendment, approval and disapproval of the Practice Management
Board.
5.2.4 STRATEGIC PLANNING. The Practice Management Board shall
develop long-term strategic plans.
5.2.5 PHYSICIAN HIRING.Make recommendations regarding the
number and type of physicians required for the efficient operation of
SEFC; provided, the final determination on physician hiring shall be
made by SEFC.
5.2.6 EXECUTIVE DIRECTOR. The Practice Management Board will
direct the day-to-day functions of the Executive Director in
implementing the policies agreed by the Practice Management Board. The
Executive Director shall meet with the Medical Director on a regular
basis as reasonably requested by either party to discuss issues
pertaining to SEFC. Salary and fringe benefits paid to the Executive
Director shall be approved by the Practice Management Board. The
Practice Management Board will conduct an annual evaluation of such
individual's performance.
.
ARTICLE 6
FINANCIAL ARRANGEMENTS
6.1 COMPENSATION. The compensation set forth in this Article 6 is being
paid to IntegraMed in consideration of the substantial commitment made, capital
provided and services to be rendered by IntegraMed hereunder and is fair and
reasonable. IntegraMed shall be paid the following amounts (collectively
"Compensation"):
6.1.1 an amount reflecting all Cost of Services (whether
incurred by IntegraMed or SEFC) paid or accrued by IntegraMed pursuant
to the terms of this Agreement.
6.1.2 during each year of this Agreement commencing with the
Effective Date , a Base Service Fee, paid monthly but reconciled to
annual Revenues, of an amount equal to six percent (6%) of the first
$8.0 million of SEFC' Revenues; five percent (5%) of SEFC' Revenues
over $8.0 million, but less than $12 million; and four percent (4%) of
SEFC' Revenues of $12 million or more.
6.1.3 commencing with the Effective Date, an additional
service fee ("Additional Service Fee") paid monthly but reconciled to
Fiscal Year operating results of SEFC, equal to fifteen percent (15%)
of PDE.
It is understood and agreed that the Additional Service Fee is paid to
IntegraMed in the event SEFC achieves positive PDE. Nothing herein shall be
interpreted to mean that if PDE is negative, IntegraMed makes a contribution to
SEFC to cover any such operating losses.
Page 16 of 34
6.2 ACCOUNTS RECEIVABLE.
6.2.1 On or before the 20th business day of each month,
commencing with the first month following the Effective Date,
IntegraMed shall reconcile the Receivables of SEFC arising during the
previous calendar month. Subject to the terms and conditions of this
Agreement, SEFC hereby sells and assigns to IntegraMed as absolute
owner, and IntegraMed hereby purchases from SEFC all Receivables
hereafter owned by or arising in favor of SEFC on or before the 20th
business day of each month. IntegraMed shall transfer or pay such
amount of funds to SEFC equal to the Receivables less Compensation due
IntegraMed pursuant to Section 6.1. SEFC shall cooperate with
IntegraMed and execute all necessary documents in connection with the
purchase and assignment of such Receivables to IntegraMed or at
IntegraMed's option, to its lenders. All collections in respect of such
Receivables shall be deposited in a bank account at a bank designated
by IntegraMed. To the extent SEFC comes into possession of any payments
in respect of such Receivables, SEFC shall direct such payments to
IntegraMed for deposit in bank accounts designated by IntegraMed.
6.2.2 Any Medicare or Medicaid Receivables due to SEFC shall
be excluded from the operation of Section 6.2.1 hereof. Any such
Receivables shall be subject to agreement of SEFC and IntegraMed with
respect to the collection thereof.
6.2.3 SEFC will be charged monthly interest at an annualized
rate equal to the Prime Rate charged by IntegraMed's primary bank on
Receivables with average days sales outstanding ("DSO") greater than 60
days for a trailing three-month period. For example, if prime is 6% and
SEFC's Revenues are $1,385,000 for a three-month period, the average
Revenues per day (assuming 90 days in such three-month period) equals
$15,389. If on the last day of that same three-month period SEFC's
Receivables are $1.5 million, then SEFC's DSO equal 97 days ($1.5
million divided by $15,389), resulting in interest being charged for
the month on $569,393.00 of SEFC's Receivables ($15,389 times 37 days)
at a rate of 0.5% ( 6% prime rate divided by 12), or a $2,846.97
interest charge. Any application of this Section 6.2.3 shall exclude
Bad Debt from the determination of Receivables subject to an interest
payment.
6.2.4 On or before the 20th business day of each month,
commencing with the month following the Effective Date, IntegraMed
shall remit to SEFC the PDE generated for the previous calendar month.
6.3 ADVANCES. IntegraMed may advance necessary funds for SEFC
to meet Cost of Services and, to meet Physician distributions (through their
respective professional associations), and Physician-Employee salaries;
provided, however, nothing herein shall obligate IntegraMed to incur Cost of
Services and Physician salary Advances in excess of Revenues under this
Agreement in order to sustain SEFC' operations. As security for such Advances,
SEFC shall deliver to IntegraMed with the execution of this Agreement a Security
Agreement in the form of Exhibit 6.3 hereto giving IntegraMed a collateral
interest in all Receivables of SEFC and PDE payable to SEFC Shareholders.
Page 17 of 34
IntegraMed shall, in its sole discretion, be entitled to take any and all
necessary action to prevent financial losses, in the form of Cost of Services on
behalf of SEFC, to IntegraMed in the event SEFC's Cost of Services exceed SEFC'
Revenues at any point during the Term of this Agreement. Notwithstanding
anything herein to the contrary, no Advances will be made by IntegraMed to
satisfy Physician-Employee draws, salaries or pension contributions, unless
requested by SEFC.
6.3.1 Any Advance hereunder shall be a debt owed to IntegraMed
by SEFC and shall be repaid in twelve equal installments plus accrued
interest on the first day of each month following any Advance. To the
extent PDE is available for distribution to Physicians for a particular
month; IntegraMed is authorized to deduct any outstanding Advance from
the PDE prior to distribution to the Physicians to pay any installment
then due.
6.3.2 Interest expense will be charged on an Advance and will
be computed at the Prime Rate charged by IntegraMed's primary bank.
6.3.3 In addition to Security Agreement provided for in
Section 6.3, SEFC agrees to enter into a Continuing General Limited
Security Agreement in the form of Exhibit 6.3.3 with IntegraMed's
current bank, Bank of America, in connection with assigning to Bank of
America, the Receivables identified in Section 6.2 that are otherwise
assigned to IntegraMed pursuant to the Security Agreement identified in
Section 6.3.
6.4 BUILD OUT AND CAPITAL COMMITMENT.
IntegraMed agrees to invest sufficient capital to build, equip and
supply appropriate office and laboratory space for SEFC to conduct its medical
practice at the Facilities. As an expression of IntegraMed's commitment to the
growth of SEFC' practice, IntegraMed agrees to maintain, during the term of this
Agreement, an on-going investment in the Facilities and equipment, of an amount
up to $600,000.00 ("Capital Commitment") without an interest charge. Any amount
invested by IntegraMed in SEFC's medical Facilities in excess of $600,000.00
will be charged to SEFC as a capital cost at an interest rate equal to the Prime
Rate charged by IntegraMed's primary bank.
ARTICLE 7
TERM, SERVICE RIGHTS, PAYMENTS, AND OTHER COMMITMENTS
7.1 This Agreement shall begin on the Effective Date and shall continue
for twenty-five years (the "Term"). Not less than one (1) year prior to the end
of the Term, SEFC and IntegraMed shall discuss the terms and conditions of any
renewal to this Agreement including the length of the Renewal Term.
7.2 In consideration of the considerable investment of time and
resources in SEFC expected by IntegraMed, SEFC grants to IntegraMed the
exclusive right to provide the Business Services to SEFC in consideration of the
Page 18 of 34
payment of $950,000.00 ("Exclusive Right to Service Fee"). Five-Hundred Seventy
Thousand Dollars ($570,000.00) of the Exclusive Right to Service Fee shall be
paid upon execution of this Agreement and the balance of Three-Hundred Eighty
Thousand Dollars ($380,000.00) shall be paid in four (4) equal installments on
each succeeding anniversary date of this Agreement for the next four (4) years
in the amount of Ninety-Five Thousand Dollars ($95,000.00), together with
interest thereon at the Prime Rate charged by IntegraMed's primary bank.
7.3 In the event SEFC merges with or acquires another fertility
practice in the Territory during the Term, IntegraMed will pay SEFC, at the
closing of each such merger or acquisition, an additional Right to Service Fee
in the amount of $100,000.00.
ARTICLE 8
TERMINATION OF THE AGREEMENT
8.1 TERMINATION
This Agreement may be terminated by either party in the event
of the following:
8.1.1 INSOLVENCY. If a receiver, liquidator or trustee of any
party shall be appointed by court order, or a petition to reorganize shall be
filed against any party under any bankruptcy, reorganization or insolvency law,
and shall not be dismissed within 90 days, or any party shall file a voluntary
petition in bankruptcy or make assignment for the benefit of creditors, then
either of the other parties may terminate this Agreement upon 10 days prior
written notice to the other parties.
8.1.2 MATERIAL BREACH. If either party believes that the other
party has materially breached its obligations hereunder, then the non-breaching
party ("Accuser") shall give notice ("Breach Notice") to the breaching party
("Accused"), setting forth in detail the basis for the belief ("Accusation") and
indicating that the Accused must cure said breach within 30 days ("Cure
Period").
(a) If the Accused, in good faith denies the Accusation, then
the Accused shall give notice within the Cure Period to the Accuser demanding an
arbitration of whether there has been a material breach of this Agreement. Such
arbitration shall be conducted in accordance with Section 11.7 hereof and the
parties agree, in good faith, to commence the arbitration within 60 days of the
Breach Notice and participate in the arbitration in a "time is the essence of
the arbitration" basis.
(b) If the Accused agrees with the Breach Notice and cures the
Material Breach within the Cure Period, no further action will be required by
either party.
(c) If the Accused agrees with the Breach Notice, but the
breach is not curable within the Cure Period and the Accused is making diligent
efforts to cure the breach during the Cure Period ("Good Faith Cure Efforts"),
the parties shall continue to operate under the terms and conditions of this
Page 19 of 34
Agreement. If after the exercise of such Good Faith Cure Efforts, the Accused
shall be unable to cure the breach within 60 days from the Breach Notice, the
Accuser shall, in good faith, extend the time in which to cure the breach, upon
request of the Accused. In the event the Accuser does not extend the time in
which to cure the breach, the Accused shall be entitled to arbitrate pursuant to
Section 11.7 whether the Accused is entitled to an extension in order to cure
the breach.
(d) It is the intent of the parties that in the event of a
material breach hereunder, the Accused shall the have the opportunity to a full
determination of whether there was a material breach, before this Agreement
terminates. If as a result of arbitration, there is a finding ("Finding") of a
material breach, the Accuser shall be entitled to terminate this Agreement and
the applicable section of Article 9 shall govern.
8.2 TERMINATION BY INTEGRAMED FOR PROFESSIONAL DISCIPLINARY ACTIONS.
SEFC shall be obligated to suspend a physician whose authorization to practice
medicine is suspended, revoked or not renewed. IntegraMed may terminate this
Agreement upon 10 days prior written notice to SEFC if a Physician's
authorization to practice medicine is suspended, revoked or not renewed and SEFC
has failed to suspend such physician; provided, however, such action may not be
taken until SEFC has been given 30 days to resolve such physician's
authorization to practice medicine. SEFC shall notify IntegraMed within five (5)
days of a notice that a physician's authorization to practice medicine is
suspended, revoked or not renewed or that formal disciplinary action has been
taken against a physician which could reasonably lead to a suspension,
revocation or non-renewal of a physician's license.
8.3 TERMINATION BY SEFC AFTER FIVE (5) YEARS. SEFC shall have the right
at any time after this Agreement has been in effect for five (5) years, to
terminate this Agreement without cause by giving IntegraMed twelve (12) months'
prior written notice (the "Termination Notice") of SEFC's intent to terminate.
8.4 TERMINATION AT THE EXPIRATION OF A TERM OR RENEWAL TERM. In the
event either party gives not less than one (1) year's prior written notice of
its intent not to renew at the expiration of the Term or a Renewal Term, this
Agreement shall automatically expire at the end of the Term or Renewal Term.
ARTICLE 9
PURCHASE OF ASSETS - OBLIGATIONS AND OPTIONS
9.1 TERMINATION BY INTEGRAMED. If IntegraMed terminates this Agreement
due to the insolvency of SEFC (Section 8.1.1), or for a Finding of material
breach by SEFC (Section 8.1.2), or SEFC fails to suspend a physician whose
license is suspended, revoked or not renewed (Section 8.2), the following shall
apply:
9.1.1 On the closing date (the "Closing Date") for purposes of
consummating the termination, SEFC shall:
Page 20 of 34
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to SEFC by
IntegraMed;
(b) Pay to IntegraMed in immediately available funds, an
amount equal to the uncollected accounts receivable purchased from SEFC
immediately prior to the Closing Date which have not been charged to
SEFC as a Bad Debt under Cost of Services;
(c) Pay to IntegraMed, in immediately available funds, an
amount equal to the to the Exclusive Right to Service Fee specified in
Section 7.2, as increased due to SEFC merging with or acquiring another
fertility practice in the Territory.
(d) Provide to IntegraMed a Consent to Assignment from each
landlord of real estate leased by IntegraMed for the benefit of SEFC to
the extent each landlord is willing to provide such consent. The
parties shall endeavor to obtain a consent that includes a release of
IntegraMed from any further obligations or liability under the leases
as of the Closing Date, except for liabilities accruing prior to the
Closing Date, and shall satisfy any requirements provided for in the
assignment provisions of the applicable leases;
(e) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
(f) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances
(g) Execute such documents and perform such acts as
may be reasonably necessary to accomplish the
transactions required to effect the termination.
For purposes of Sections 9.1, 9.2 9.3 and 9.4 the Closing Date shall
mean 90 days following termination of this Agreement.
9.2 TERMINATION BY SEFC In the event this Agreement is
terminated by SEFC as a result of the insolvency of IntegraMed (8.1.1) or a
Finding of a material breach by IntegraMed (8.1.2), the following shall apply:
9.2.1 On the Closing Date for purposes of consummating the
termination, SEFC shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to SEFC by
IntegraMed, in the event SEFC opts to acquire the Assets;
(b) Pay to IntegraMed in immediately available funds, an
amount equal to the uncollected accounts receivable purchased from SEFC
immediately prior to the Closing Date which have not been charged to
SEFC as a Bad Debt under Cost of Services;
Page 21 of 34
(c) Have the option of assuming leases for office and
equipment used directly for the operation of SEFC's business. In such
event, a Consent to Assignment from each landlord of real estate leased
by IntegraMed for the benefit of SEFC to the extent each landlord is
willing to provide such consent shall be obtained. SEFC shall endeavor
to obtain a consent that include a release of IntegraMed from any
further obligations or liability under the leases as of the Closing
Date, except for liabilities accruing prior to the Closing Date and
shall satisfy any requirements provided for in the assignment
provisions of the applicable leases ;
(d) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
(e) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances
(f) Execute such documents and perform such acts as may be
reasonably necessary to accomplish the transactions required to effect
the termination.
9.3 TERMINATION UNDER SECTION 8.3 BY SEFC. In the event SEFC elects to
terminate this Agreement pursuant to Section 8.3 hereof, the following shall
apply:
9.3.1 On the Closing Date for purposes of consummating the
termination, SEFC shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to SEFC by
IntegraMed;
(b) Pay to IntegraMed in immediately available funds, an
amount equal to the uncollected accounts receivable purchased from SEFC
immediately prior to the Closing Date which have not been charged to
SEFC as a Bad Debt under Cost of Services;
(c) If the average growth per year of SEFC's PDE for the last
three calendar years prior to the delivery of the Termination Notice is
equal to or greater than 5% per year, SEFC shall pay to IntegraMed an
amount equal to the Exclusive Right to Service Fee plus $475,000; and
if the average growth per year of SEFC's PDE during for the last three
calendar years prior to the delivery of the Termination Notice is less
than 5% per year, then SEFC shall pay to IntegraMed an amount equal to
the Exclusive Right to Service Fee plus $150,000.
(d) A Consent to Assignment from each landlord of real estate
leased by IntegraMed for the benefit of SEFC to the extent each
landlord is willing to provide such consent. SEFC shall endeavor to
obtain a consent that includes a release of IntegraMed from any further
obligations or liability under the leases as of the Closing Date,
Page 22 of 34
except for liabilities accruing prior to the Closing Date and shall
satisfy any requirements provided for in the assignment provisions of
the applicable leases ;
(e) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
(f) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances
(g) Execute such documents and perform such acts as may be
reasonably necessary to accomplish the transactions required to effect
the termination.
9.4 EXPIRATION OF THE TERM OR A RENEWAL TERM. In the event this
Agreement expires at the end of the Term or a Renewal Term, the following shall
apply:
9.4.1 On the last day of the Term, SEFC shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to SEFC by
IntegraMed;
(b) Pay to IntegraMed in immediately available funds, an
amount equal to the uncollected accounts receivable purchased from SEFC
immediately prior to the Closing Date which have not been charged to
SEFC as a Bad Debt under Cost of Services;
(c) Pay to IntegraMed, in immediately available funds, an
amount equal to the to the Exclusive Right to Service Fee specified in
Section 7.2, as increased due to SEFC merging with or acquiring another
fertility practice in the Territory.
(d) Provide to IntegraMed a Consent to Assignment from each
landlord of real estate leased by IntegraMed for the benefit of SEFC to
the extent each landlord is willing to provide such consent. The
parties shall endeavor to obtain a consent that include a release of
IntegraMed from any further obligations or liability under the leases
as of the Closing Date, except for liabilities accruing prior to the
Closing Date, and shall satisfy any requirements provided for in the
assignment provisions of the applicable leases;
(e) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
for payments owed to Employees for services rendered after the Closing
Date.
(f) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances
(g) Execute such documents and perform such acts as
may be reasonably necessary to accomplish the
transactions required to effect the termination
Page 23 of 34
9.5 TRANSFER OF OWNERSHIP
Upon receipt of payments due under this Article 9 and other payments
due, IntegraMed shall transfer ownership and possession of the Assets, and
assign all right, title and interest in and to and obligations under the
Lease(s) to SEFC and return to SEFC all security deposits. SEFC shall have the
option of receiving full credit on the payments due under this Article 9 for all
liens, encumbrances or security interest, or of having IntegraMed transfer
ownership of the Assets free and clear of all liens, encumbrances or security
interests thereon.
9.6 Nothing in this Article 9 shall be construed to provide for
IntegraMed for an amount greater than the original Right to Service Fee, except
for the repayment of the Exclusive Right to Service Fee provided for in Section
9.3.1(c).
ARTICLE 10
INSURANCE
10.1 SEFC shall carry professional liability insurance, covering itself
and its employees providing Infertility Services under this Agreement in
accordance with Section 4.6 hereof.
10.2 IntegraMed, through ARTIC, maintains professional liability
insurance, covering itself and its employees providing patient care under this
Agreement in the minimum amount of $1 million per incident, $3 million in the
aggregate, which shall be a Cost of Services as provided for in Section 2.1.7.
IntegraMed shall also carry a policy of public liability and property damage
insurance, which shall be a Cost of Services as provided for in Section 2.1.7,
with respect to the Facilities under which the insurer agrees to indemnify
IntegraMed and SEFC against all cost, expense and/or liability arising out of or
based upon any and all claims, accidents, injuries and damages customarily
included within the coverage of such policies of insurance available for
IntegraMed. The minimum limits of liability of such insurance shall be $1
million combined single limit covering bodily injury and property damage.
IntegraMed shall obtain and maintain in full force and effect during the term of
this Agreement, appropriate workers' compensation insurance coverage on all
employees of IntegraMed, to the extent required by law. Certificates of
Insurance evidencing such policies and additional insured status shall be
presented to SEFC upon request of SEFC.
10.3 SEFC and IntegraMed shall provide written notice to the other at
least thirty (30) days in advance of the effective date of any reduction,
cancellation or termination of the insurance required to be carried by each
hereunder.
ARTICLE 11
MISCELLANEOUS
11.1 INDEPENDENT CONTRACTOR. IntegraMed and SEFC are independent
contracting parties. In this regard, the parties agree that:
Page 24 of 34
11.1.1 The relationship between IntegraMed and SEFC is that of
an independent supplier of non-medical services and a medical practice,
respectively, and, unless otherwise provided herein, nothing in this
Agreement shall be construed to create a principal-agent,
employer-employee, or master-servant relationship between IntegraMed
and SEFC;
11.1.2 Notwithstanding the authority granted to IntegraMed
herein, IntegraMed and SEFC agree that SEFC shall retain the full
authority to direct all of the medical, professional, and ethical
aspects of its medical practices;
11.1.3 Any powers of SEFC not specifically vested in
IntegraMed by the terms of this Agreement shall remain with SEFC;
11.1.4 SEFC shall, at all times, be the sole employer of the
Physician-Employees, the Other Professional Employees required by law
to be employees of SEFC and all other professional personnel engaged by
SEFC in connection with the operation of its medical practice at the
Facilities, and shall be solely responsible for the payment of all
applicable federal, state or local withholding or similar taxes and
provision of workers' compensation and disability insurance for such
professional personnel that are employees of SEFC;
11.1.5 No party shall have the right to participate in any
benefits, employment programs or plans sponsored by the other party on
behalf of the other party's employees, including, but not limited to,
workers' compensation, unemployment insurance, tax withholding, health
insurance, life insurance, pension plans or any profit sharing
arrangement;
11.1.6 In no event shall any party be liable for the debts or
obligations of any other party except as otherwise specifically
provided in this Agreement; and
11.1.7 Matters involving the internal agreements and finances
of SEFC, including but not limited to the distribution of professional
fee income among Physician Employees and, if applicable, Other
Professional Employees who are providing professional services to
patients of SEFC, and other employees of SEFC, disposition of SEFC
property and stock, accounting, tax preparation, tax planning, and
pension and investment planning, hiring and firing of physicians,
decisions and contents of reports to regulatory authorities governing
SEFC and licensing, shall remain the sole responsibility of SEFC and
the individual Physicians.
11.2 FORCE MAJEURE. No party shall be liable to the other parties for
failure to perform any of the services required under this Agreement in the
event of a strike, lockout, calamity, act of God, unavailability of supplies, or
other event over which such party has no control, for so long as such event
continues and for a reasonable period of time thereafter, and in no event shall
such party be liable for consequential, indirect, incidental or like damages
caused thereby.
Page 25 of 34
11.3 EQUITABLE RELIEF. Without limiting other possible remedies
available to a non-breaching party for the breach of the covenants contained
herein, including the right of IntegraMed to cause SEFC to enforce any and all
provisions of the Physician Employment Agreements described in Section 4.3
hereof, injunctive or other equitable relief shall be available to enforce those
covenants, such relief to be without the necessity of posting bond, cash or
otherwise. If any restriction contained in said covenants is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and remaining restrictions therein shall be enforced independently of
each other.
11.4 PRIOR AGREEMENTS; AMENDMENTS. This Agreement supersedes all prior
agreements and understandings between the parties as to the subject matter
covered hereunder including the Former Agreement, and this Agreement may not be
amended, altered, changed or terminated orally. No amendment, alteration, change
or attempted waiver of any of the provisions hereof shall be binding without the
written consent of all parties, and such amendment, alteration, change,
termination or waiver shall in no way affect the other terms and conditions of
this Agreement, which in all other respects shall remain in full force.
11.5 ASSIGNMENT; BINDING EFFECT. This Agreement and the rights and
obligations hereunder may not be assigned without the prior written consent of
all of the parties, and any attempted assignment without such consent shall be
void and of no force and effect, except that IntegraMed may assign this
Agreement to any affiliate, which for purposes of this Agreement, shall include
any parent or subsidiary of IntegraMed, without the consent of SEFC, provided
IntegraMed shall remain liable for its obligations hereunder. The provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties' respective heirs, legal representatives, successors and permitted
assigns.
11.6 WAIVER OF BREACH. The failure to insist upon strict compliance
with any of the terms, covenants or conditions herein shall not be deemed a
waiver of such terms, covenants or conditions, nor shall any waiver or
relinquishment of any right at any one or more times be deemed a waiver or
relinquishment of such right at any other time or times.
11.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina irrespective of the
principal place of business of the parties hereto. Any and all claims, disputes,
or controversies arising under, out of, or in connection with this Agreement or
any beach thereof, except for equitable relief sought pursuant to Section 11.3
hereof, shall be determined by binding arbitration in the State of South
Carolina, City of Charleston (hereinafter "Arbitration"). The party seeking
determination shall subject any such dispute, claim or controversy to the
American Arbitration Association, and the rules of commercial arbitration
thereof shall govern. The Arbitration shall be conducted and decided by a single
arbitrator, unless the parties mutually agree, in writing at the time of the
Arbitration, to three arbitrators. In reaching a decision, the arbitrator(s)
shall have no authority to change or modify any provision of this Agreement,
including any liquidated damages provision. Each party shall bear its own
expenses and one-half the expenses and costs of the arbitrator(s). Any
application to compel Arbitration, confirm or vacate an arbitral award or
otherwise enforce this Section 11.7 shall be brought in the Courts of the State
Page 26 of 34
of South Carolina or the United States District Court for the Division of
Charleston, to whose jurisdiction for such purposes SEFC and IntegraMed hereby
irrevocably consent and submit.
11.8 SEPARABILITY. If any portion of the provisions hereof shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such portion or provisions in circumstances other than those in
which it is held invalid or unenforceable, shall not be affected thereby, and
each portion or provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law, but only to the extent the same continues to
reflect fairly the intent and understanding of the parties expressed by this
Agreement taken as a whole.
11.9 HEADINGS. Section and paragraph headings are not part of this
Agreement and are included solely for convenience and are not intended to be
full or accurate descriptions of the contents thereof.
11.10 NOTICES. Any notice or other communication required by or which
may be given pursuant to this Agreement shall be in writing and mailed,
certified or registered mail, postage prepaid, return receipt requested, or
overnight delivery service, such as FedEx or DHL Express, prepaid, and shall be
deemed given when received. Any such notice or communication shall be sent to
the address set forth below:
11.10.1 If for IntegraMed:
Xxx Xxxxxx., President & CEO
IntegraMed America, Inc.
Two Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
With a copy to:
Xxxxxx X. Xxxxx, General Counsel
IntegraMed America, Inc.
Two Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
11.10.2 If for SEFC:
Southeastern Fertility Center, P.A.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: President
Page 27 of 34
With a copy to:
J. Xxxxxxxx Xxxxx, Esq.
Xxxxx Xxxxx Xxxxxx XxXxx P.A.
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
Any party hereto, by like notice to the other parties, may designate
such other address or addresses to which notice must be sent.
11.11 ENTIRE AGREEMENT. This Agreement and all attachments hereto
represent the entire understanding of the parties hereto with respect to the
subject matter hereof and thereof, and cancel and supersede all prior agreements
and understandings among the parties hereto, including the Former Agreement,
whether oral or written, with respect to such subject matter.
11.12 NO MEDICAL PRACTICE BY INTEGRAMED. IntegraMed will not engage in
any activity that constitutes the practice of medicine, and nothing contained in
this Agreement is intended to authorize IntegraMed to engage in the practice of
medicine or any other licensed profession.
11.13 CONFIDENTIAL INFORMATION.
11.13.1 During the initial term and any renewal term(s) of
this Agreement, the parties may have access to or become acquainted
with each other's trade secrets and other confidential or proprietary
knowledge or information concerning the conduct and details of each
party's business ("Confidential Information"). At all times during and
after the termination of this Agreement, no party shall directly or
indirectly, communicate, disclose, divulge, publish or otherwise
express to any individual or governmental or non-governmental entity or
authority (individually and collectively referred to as "Person") or
use for its own benefit, except in connection with the performance or
enforcement of this Agreement, or the benefit of any Person any
Confidential Information, no matter how or when acquired, of another
party. Each party shall cause each of its employees to be advised of
the confidential nature of such Confidential Information and to agree
to abide by the confidentiality terms of this Agreement. No party shall
photocopy or otherwise duplicate any Confidential Information of
another party without the prior express written consent of the such
other party except as is required to perform services under this
Agreement. All such Confidential Information shall remain the exclusive
property of the proprietor and shall be returned to the proprietor
immediately upon any termination of this Agreement.
11.13.2 Confidential Information shall not include information
which (i) is or becomes known through no fault of a party hereto; (ii)
is learned by a party from a third-party legally entitled to disclose
such information; or (iii) was already known to a party at the time of
disclosure by the disclosing party.
Page 28 of 34
11.13.3 In order to minimize any misunderstanding regarding
what information is considered to be Confidential Information,
IntegraMed or SEFC will designate at each others request the specific
information which IntegraMed or SEFC considers to be Confidential
Information.
11.14 INDEMNIFICATION.
11.14.1 IntegraMed agrees to indemnify and hold harmless SEFC,
its directors, officers, employees and servants from any suits, claims,
actions, losses, liabilities or expenses (including reasonable
attorney's fees) arising out of or in connection with any act or
failure to act by IntegraMed related to the performance of its duties
and responsibilities under this Agreement. The obligations contained in
this Section 11.14.1 shall survive termination of this Agreement. This
indemnification provision shall apply to both third-party claims and
second-party claims, including, but not limited to, claims, actions,
damages, losses, expenses, or costs (including, but not limited to,
reasonable attorneys' fees and court costs) incurred by one party to
this Agreement as a result of an act, or omission to act, on the part
of the other party, its agents, or employees pursuant to this Agreement
11.14.2 SEFC agrees to indemnify and hold harmless IntegraMed,
its shareholders, directors, officers, employees and servants from any
suits, claims, actions, losses, liabilities or expenses (including
reasonable attorney's fees) arising out of or in connection with any
act or failure to act by SEFC related to the performance of its duties
and responsibilities under this Agreement. The obligations contained in
this Section 11.14.2 shall survive termination of this Agreement. This
indemnification provision shall apply to both third-party claims and
second-party claims, including, but not limited to, claims, actions,
damages, losses, expenses, or costs (including, but not limited to,
reasonable attorneys' fees and court costs) incurred by one party to
this Agreement as a result of an act, or omission to act, on the part
of the other party, its agents, or employees pursuant to this Agreement
11.14.3 In the event of any claims or suits in which
IntegraMed and/or SEFC and/or their directors, officers, employees and
servants are named, each of IntegraMed and SEFC for their respective
directors, officers, employees agree to cooperate in the defense of
such suit or claim; such cooperation shall include, by way of example
but not limitation, meeting with defense counsel (to be selected by the
respective party hereto), the production of any documents in his/her
possession for review, response to subpoenas and the coordination of
any individual defense with counsel for the respective parties hereto.
The respective party shall, as soon as practicable, deliver to the
other copies of any summonses, complaints, suit letters, subpoenas or
legal papers of any kind, served upon such party, for which such party
seeks indemnification hereunder. This obligation to cooperate in the
defense of any such claims or suits shall survive the termination, for
whatever reason, of this Agreement.
Page 29 of 34
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
SOUTHEASTERN FERTILITY CENTER, P.A.
By: /s/Xxxxx X. Xxxxxx, M.D.
----------------------------------
Xxxxx X. Xxxxxx, M.D., President
By: /s/Xxxx X. Xxxxxxx, M.D.
----------------------------------
Xxxx X. Xxxxxxx, M.D., Vice President
INTEGRAMED AMERICA, INC.
By: /s/Xxx Xxxxxx
----------------------------
Xxx Xxxxxx, President & CEO
Page 30 of 34
Exhibit 3.12
Business Associate Agreement
Page 31 of 34
Exhibit 4.7.2
Physician Employment Agreements
Page 32 of 34
Exhibit 6.3
Security Agreement
Page 33 of 34
Exhibit 6.3.3
Continuing Limited Security Agreement
Page 34 of 34
