SERVICE AGREEMENT
between
INTEGRAMED AMERICA, INC.
and
Seattle Reproductive Medicine, Inc., P.S.
THIS SERVICE AGREEMENT ("Agreement") is dated January 1, 2004 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 Seattle Reproductive Medicine, Inc. P.S., a Washington
professional service corporation, with a business address at 00000 XX 00xx,
Xxxxxxxx, Xxxxxxxxxx 00000 ("PC"). IntegraMed and PC are individually referred
to herein as a "Party" and jointly, as "Parties."
RECITALS:
PC will specialize in gynecological services, treatment of human
infertility encompassing the provision of in vitro fertilization and other
assisted reproductive services ("Infertility Services"). PC will provide
Infertility Services through Xxxxx X. Xxxxx, M.D., Xxxx X. Xxx, M.D., Xxxxxxx X.
Xxxxxx, M.D. and Xxxxxx X. Xxxxx, M.D., the shareholders of PC. Drs. Klein, Lin,
Xxxxxx and Thyer_are collectively referred to herein as "Shareholders" or
"Physicians." PC also contemplates providing Infertility Services through other
physician employees. Shareholders have entered or will enter into employment
agreements with PC on or about the date of execution of this Agreement.
IntegraMed is in the business of making available to medical providers
such as PC 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 "Services."
PC believes the Services will benefit its medical practice and desires
IntegraMed's assistance with various aspects of PC's medical practice through
the utilization of the Services as more particularly set forth herein. PC
acknowledges and agrees that the Services being made available to PC require
PC's cooperation and collaboration, and that IntegraMed, in making the Services
available, makes no warranty or representation that the Services will achieve
PC's desired goals and objectives.
In addition, PC desires access to capital for funding its growth and
development, and IntegraMed desires to provide such capital or access to capital
as provided herein.
1
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 , PC hereby agrees to
purchase from IntegraMed the services ("Services") herein described and
IntegraMed agrees to provide the Services 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 PC.
1.1.2 "Additional Service Fee" shall mean a monthly fee paid
by PC to IntegraMed in an amount equal to a percentage of PC's monthly
PDE."
1.1.3 "Assets" shall mean those fixed assets utilized in
connection with the operation of PC's medical practice, including, but
not limited to, fixed assets and leasehold improvements.
1.1.4 "Base Service Fee" shall mean a monthly fee paid by PC
to IntegraMed in an amount equal to a percentage of PC's monthly
Physician and Other Professional Revenues.
1.1.5 "Facilities" shall mean the medical offices and clinical
spaces of PC, including any satellite locations, related businesses and
all medical group business operations of PC, which are utilized by PC
in its medical practice.
1.1.6 "Fiscal Year" shall mean the 12-month period beginning
January 1 and ending December 31 of each year.
1.1.7 "Infertility Services" shall mean gynecological
services, reproductive endocrinology, treatment of human infertility
encompassing the provision of all acceptable means according to
national standards of care, also including in vitro fertilization and
other assisted reproductive services provided by PC or any Physician
Employee and Other Professional Employee.
1.1.8 "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.
2
1.1.9 "Physician-Employee" shall mean an individual including
Physicians and any other physician who is an employee of PC or is
otherwise under contract with PC to provide professional services to PC
patients and is duly licensed as a physician in the State of
Washington.
1.1.10 "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 PC 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 and
ultrasound fees from businesses owned or operated by Physicians.
Physician and Other Professional Revenues shall not include (i) board
attendance fees and other compensation in connection with board
memberships; provided, that such board-related compensation is in
connection with PC or any other board so long as substantially all of
any such Physician's professional time is devoted to PC and PC's
activities that generate Physician and Other Professional Revenues and
(ii) other services where Physician does not provide professional
medical services such as testimony and consultation for
litigation-related proceedings, lectures, passive investments,
royalties, 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.
Physician and Other Professional Revenues are sometimes referred to
herein as "Revenues."
1.1.11 "Pre-distribution Earnings" ("PDE") shall mean (i)
Physician and Other Professional Revenues, less (ii) Cost of Services
and the Base Service Fee.
1.1.12 "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
PC, 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 PC by patients
or pursuant to any Preferred Provider, HMO, capitated payment
agreements or other agreements between PC and a payer, recorded each
month (net of Adjustments).
1.1.13 "Services" shall mean IntegraMed making available
certain assets (including, without limitation, all facilities and
equipment necessary to operate PC's medical practice of the provision
of Infertility 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 Section 3.1.
3
1.1.14 "Technical Employees" shall mean embryologists and
other laboratory personnel, ultrasonographers, phlebotomists and
technicians who provide services to PC.
ARTICLE 2
COST OF SERVICES AND BASE SERVICE FEE
2.1 "Cost of Services" shall mean all ordinary and necessary expenses
of PC and all direct ordinary and necessary operating expenses of IntegraMed,
exclusive of IntegraMed overhead costs, without xxxx-up, incurred in connection
with the Services provided to PC, including, without limitation, the following
costs and expenses, whether incurred by IntegraMed or PC:
2.1.1 Salaries and fringe benefits of all IntegraMed and other
employees employed at PC 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 Expenses incurred in the recruitment of additional
physicians for PC, including, but not limited to employment agency
fees, relocation and interviewing expenses and any actual out-of-pocket
expenses of IntegraMed personnel in connection with such recruitment
effort;
2.1.3 Direct marketing expenses of PC, such as direct costs of
printing marketing materials prepared by IntegraMed;
2.1.4 Any sales, use and business and occupation taxes
assessed against PC related to the operation of PC's medical practice;
2.1.5 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;
2.1.6 Legal fees paid by IntegraMed or PC to outside counsel
in connection with matters specific to the operation or internal
affairs of PC 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 not be considered a Cost of Services; and
provided, further any disputes between or among Physicians shall not be
considered Cost of Services.
2.1.7 Health benefits provided to Physicians and
Physician-Employees, including health and life insurance, and long-term
disability;
4
2.1.8 All insurance necessary to operate PC including fire,
theft, general liability professional liability and malpractice
insurance for Physicians and Physician-Employees of PC, and Other
Professional and Technical Employees provided by IntegraMed;
2.1.9 Professional licensure fees and board certification fees
of Physician- Employees, and Other Professional Employees rendering
Infertility Services on behalf of PC;
2.1.10 Membership in professional associations and continuing
professional education for Physicians and Physician-Employees and Other
Professional Employees;
2.1.11 Quality Improvement Program described in Section 3.8
herein;
2.1.12 Cost of filing fictitious name permits pursuant to this
Agreement;
2.1.13 Cost of supplies, medical and administrative, and all
direct general and administrative expenses, including but not limited
to travel and entertainment expenses, car allowances (including car
leases), dues and subscriptions, car and other business related
expenses, such as cellular telephone, relative to PC; and
2.1.14 Such other costs and expenses directly incurred by
IntegraMed related to PC's operations.
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 PC or IntegraMed
other than as provided above;
2.2.3 The Base Service Fee;
2.2.4 Any amount paid to or on behalf of any Physician or
Physician-Employee including salary, draw or pension contributions (all
of which come out of PC's share of PDE);or
2.2.5 Any proportion of IntegraMed's costs attributable to its
operation of its corporate offices or payment of its officers or
employees who work out of its corporate offices.
5
ARTICLE 3
DUTIES AND RESPONSIBILITIES OF INTEGRAMED
3.1 SERVICES AND ADMINISTRATION.
3.1.1 PC hereby engages IntegraMed for the Services.
IntegraMed agrees to provide the Services only in the State of
Washington (the "Territory"), and PC agrees to limit its use of the
Services to the Territory, without prior written consent from
IntegraMed. During the term of this Agreement, IntegraMed agrees not to
enter into a service agreement with any other medical practice to
provide the Services in the Territory. None of the Services made
available to PC include any physician medical functions. IntegraMed
acknowledges that its timely performance of its duties and
responsibilities as delineated in this Article 3 are material to this
Agreement and to PC's interest. The Services, as more particularly
described in this Agreement and the "INTEGRAMED 2004 RESOURCES,
PRODUCTS AND SERVICES TO PARTNER PRACTICES", attached hereto as Exhibit
3.1.1, shall be made available to PC. Additionally, such other services
as IntegraMed from time to time make available to its network of
infertility practitioners shall be provided to PC. IntegraMed reserves
the right to alter, modify or cease any Service; provided, however,
IntegraMed will use its best efforts to avoid materially altering PC's
ability to continue its business based on any decision to alter, modify
or cease any Service. PC shall have a right of first refusal for
IntegraMed to provide the Services in the State of Alaska. Nothing
herein is intended to restrict current or future referral relationships
between PC and other physicians.
3.1.2 IntegraMed will, on behalf of PC and as directed by PC,
xxxx patients timely and collect professional fees for Infertility
Services rendered by PC at the Facilities, outside the Facilities for
PC's hospitalized patients, and for all other Infertility Services
rendered by any Physician- Employee or Other Professional Employee. PC
hereby appoints IntegraMed for the term hereof to be its true and
lawful attorney-in-fact, for the following purposes: (i) xxxx patients
in PC's name and on its behalf; (ii) collect Receivables resulting from
such xxxxxxxx in PC's name and on its behalf; (iii) receive payments
from insurance companies, prepayments from health care plans, and all
other third-party payors; (iv) take possession of and endorse in the
name of PC (and/or in the name of any Physician Employee or Other
Professional Employee rendering Infertility Services to patients of PC)
any notes, checks, money orders, and other instruments received in
payment of Receivables; and (v) at PC's request, initiate the
institution of legal proceedings in the name of PC, with PC's
cooperation, to collect any accounts and monies owed to PC, to enforce
the rights of PC as creditor under any contract or in connection with
the rendering of any service by PC, and to contest adjustments and
denials by governmental agencies (or its fiscal intermediaries) as
third-party payors.
3.1.3 IntegraMed will provide the administrative services
function of supervising and maintaining (on behalf of PC) all files and
records relating to the operations of the Facilities, including but not
6
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 PC 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
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. PC shall have unrestricted
access to all of its records at all times.
3.1.4 IntegraMed will provide, as requested by PC, 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 PC's medical practice at the Facilities.
3.1.5 With PC's cooperation and participation, IntegraMed will
design and assist with implementing an appropriate marketing program
for PC. PC's participation is essential in developing such marketing
program and accordingly, will designate one or more physicians and
staff to work with IntegraMed in designing and implementing such
marketing program.
3.1.6 IntegraMed, upon request of PC, will assist PC in
recruiting additional physicians, including IntegraMed providing such
administrative functions as advertising for and identifying potential
candidates, checking credentials, and arranging interviews; provided,
however, PC shall interview and make the ultimate decision as to the
suitability of any physician to become associated with PC. All
physicians recruited by IntegraMed and accepted by PC shall be
employees of or independent contractors to PC.
3.1.7 IntegraMed will assist PC in negotiating any managed
care contracts to which PC desires to become a party. IntegraMed will
provide administrative assistance to PC in fulfilling its obligations
under any such contract.
3.1.8 IntegraMed will arrange, in consultation with PC, for
legal and accounting services as may be reasonably required in the
ordinary course of PC's operation.
3.2 FACILITIES. After the Practice Management Board, as defined in
Section 5.1, determines the nature and extent of the facilities needed for PC's
medical practice, IntegraMed will assist PC 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, maintenance and improvements thereto, utility
(telephone, electric, gas, water) services, customary janitorial services,
refuse disposal and all other services reasonably necessary in conducting PC'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 PC regarding the condition, use and needs for the Facilities,
the improvements thereto, equipment and services.
7
3.3 EXECUTIVE DIRECTOR AND OTHER PERSONNEL.
3.3.1 EXECUTIVE DIRECTOR. IntegraMed will employ an Executive
Director, selected 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 Practice Management Board will direct
the day-to-day functions of the Executive Director in implementing the
policies agreed upon by the Practice Management Board. Salary and
fringe benefits paid to the Executive Director shall be determined by
the Practice Management Board.
3.3.2 PERSONNEL. IntegraMed will provide, as requested by PC,
Other Professional Employees, Technical Employees, support and
administrative personnel, clerical, secretarial, bookkeeping and
collection personnel reasonably necessary for the efficient operation
of PC at the Facilities. Such personnel will be under the direction and
supervision of the Executive Director, with Technical Employees and
Other Professional Employees subject to the professional supervision of
PC.
3.4 FINANCIAL PLANNING AND GOALS. IntegraMed, in collaboration with PC,
will prepare, for the approval of the Practice Management Board (as defined in
Section 5.1), an annual capital and operating budget (the "Budget") reflecting
the anticipated Revenues and Cost of Services, sources and uses of capital for
growth of PC's 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 PC's 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 PC 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 PC's 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 PC, but will provide support
documentation in connection with the same. Such support documentation will not
be destroyed without PC's consent.
3.7 INVENTORY AND SUPPLIES. IntegraMed shall order and purchase
inventory and supplies, and such other materials which are requested by PC to
enable PC to deliver Infertility Services in a cost-effective quality manner.
3.8 QUALITY IMPROVEMENT. IntegraMed shall assist PC in fulfilling its
obligations to maintain a Quality Improvement Program and in meeting the goals
and standards of such program.
8
3.9 RISK MANAGEMENT. IntegraMed shall assist PC in the development
of a Risk Management Program and in meeting the standards of such
Program.
3.10 PERSONAL POLICIES AND PROCEDURES. IntegraMed shall develop
personnel policies, procedures and guidelines, governing office behavior,
protocol and procedures, which, with PC's cooperation, will aid in compliance
with applicable laws and guidelines related to employment and human resources
management.
3.11 LICENSES AND PERMITS. IntegraMed will coordinate and assist PC 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 PC 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.
3.12 ACCESS TO PROTECTED HEALTH INFORMATION.. In connection with the
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 PC. In connection with such PHI, IntegraMed
contemporaneous with entering into this Agreement will enter into a Business
Associate Agreement with PC in accordance with the regulations promulgated under
the Health Insurance Portability & Accountability Act of 1996.
ARTICLE 4
DUTIES AND RESPONSIBILITIES OF PC
4.1 TIMELY PERFORMANCE. PC, in engaging IntegraMed to provide the
Services described in this Agreement, acknowledges that PC'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. PC shall use its best efforts to cause its
Physicians and Physician-Employees to provide Infertility Services to PC's
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 PC.
PC shall ensure that each Physician, Physician-Employee, any Other Professional
Employee employed by PC, and any other professional provider associated with PC
is duly licensed to provide the Infertility Services being rendered within the
scope of such provider's practice. In addition, PC shall require each Physician
and Physician-Employee to maintain a DEA number and appropriate medical staff
privileges as determined by PC 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, PC
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.
9
4.3 MEDICAL PRACTICE. PC 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 PC or serving as independent
contractors to PC, and Other Professional Employees employed by PC. No other
physician or medical practitioner shall be permitted to use or occupy the
Facilities without the prior written notice to 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. It is understood and
agreed that PC will utilize the services of other physicians and professionals,
including, but not limited to, Urologists, Counsellors, Acupuncturists and
Nutritionists, for the benefit of PC's patients.
4.4 EMPLOYMENT OF PHYSICIAN AND OTHER PROFESSIONAL EMPLOYEES. In the
event PC shall determine that additional physicians are necessary, PC shall
undertake and use its best efforts to select physicians who, in PC's judgment,
possess the credentials and expertise necessary to enable such physician
candidates to become affiliated with PC for the purpose of providing Infertility
Services. PC shall cause each Physician-Employee to enter into an employment or
service agreement with PC or their respective professional association which is
a partner of PC ("Physician Employment Agreement") in such form as is mutually
acceptable to PC and IntegraMed. Except as otherwise provided in Sections 4.7.4
and 5.2.5 of this Agreement, PC shall have complete control of and
responsibility for the hiring, compensation, supervision, evaluation and
termination of its Physician-Employees, although at the request of PC,
IntegraMed shall consult with and advise PC respecting such matters. Within 90
days of the execution of this Agreement, PC shall cause Shareholders to enter
into employment agreements substantially in the form of Exhibit 4.4 hereto.
4.5 CONTINUING MEDICAL EDUCATION . PC shall require its
Physician-Employees to participate in such continuing medical education as PC
deems to be reasonably necessary for such physicians to remain current in the
provision of Infertility Services.
4.6 PROFESSIONAL INSURANCE . PC shall maintain professional liability
coverage at all times in limits of not less than $1 million per occurrence, $3
million in the aggregate. In the event PC desires to be made an additional
insured under IntegraMed's professional liability coverage as provided for in
Section 11.2, PC shall cooperate in the obtaining and retaining of professional
liability insurance by assuring that its Physicians and Physician-Employees and
Other Professional Employees, if applicable, are insurable and participating in
an on-going Risk Management Program in cooperation with IntegraMed.
4.7 DIRECTION OF PRACTICE PC and its Physicians, 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. PC,
through its physicians, is expected to provide leadership in its market area and
fully cooperate with IntegraMed in IntegraMed's efforts to make the Services
available to PC as determined by the Practice Management Board. In furtherance
of which:
10
4.7.1 PC 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 agreed to by
PC and IntegraMed in writing. PC 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. PC covenants that
should a physician become a shareholder of PC, that a condition
precedent to the issuance of the shares shall be the ratification of
this Service Agreement.
4.7.2 PC shall not terminate the Physician Employment
Agreement(s) of any Physician, except in accordance with the Physician
Employment Agreement(s), or amend or modify the Physician Employment
Agreements in any material manner, nor waive any material rights of PC
thereunder. PC 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
PC for a specified number of years.
4.7.3 Recognizing that IntegraMed would not have entered into
this Agreement but for PC's covenant to maintain and enforce the
Physician Employment Agreements with any physician now employed or
physicians who may hereafter become employees of PC, and in reliance
upon such Physician-Employee's observance and performance of all of the
obligations under the Physician Employment Agreements, any damages,
liquidated damages, compensation, payment or settlement received by PC
from a physician whose employment is terminated, shall be paid to
IntegraMed in proportion to IntegraMed's loss or damages.
4.7.4 PC 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 PC, 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. PC
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 PC, will establish and administer the
compensation with respect to such Physician-Employees in accordance
with the written agreement between PC 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 PC and its Physician-Employees.
4.7.5 PC shall insure that Physician-Employees provide patient
care and clinical backup as required to insure the proper provision of
Infertility Services to patients of PC at PC's Facilities. PC shall
insure that its full-time Physician-Employees devote substantially all
of their professional time, effort and ability to PC's practice,
including the provision of Infertility Services and the development of
such practice, and that Permitted Services, of any Physician-Employee
11
do not interfere with such Physician-Employees full time practice of
Infertility Services at PC's Facilities.
4.7.6 PC covenants to obtain necessary licenses and operate
clinical laboratory and tissue bank services in accordance with all
applicable laws and regulations. PC agrees that the Medical Director or
Tissue Bank Director, if applicable, shall be Physician-Employees or
Other Professional Employees, if applicable, of PC who meet the
qualifications required by applicable State law or regulation, and that
should there be a vacancy in any such position, PC will cause another
Physician-Employee or Other Professional Employee, if applicable, to
fill such vacancy in accordance with applicable State law.
4.7.7 PC 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 PC. In the event of a termination or dissolution of PC, or
the termination of this Agreement for any reason, PC 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 PC, assist in the administrative details
of such a Relocation Program for so long as PC shall request and an
appropriate fee shall be paid during that time. These obligations shall
survive the termination of this Agreement.
4.7.8 Except for circumstances outside the control of PC or
the Physicians, PC covenants not to terminate or dissolve as a
professional services corporation except on six months prior written
notice to IntegraMed. PC covenants that such a restriction will be
contained either in PC's by-laws or shareholder agreement among PC's
shareholders. In the event that such termination or dissolution occurs
without the requisite prior written notice, for a reason other than the
death or disability of all of the shareholders, or any successor entity
fails to continue the medical practice of PC substantially in the form
contemplated by this Agreement, PC and its individual shareholders,
shall indemnify IntegraMed for: (i) the actual costs of maintaining the
Facilities and any reasonably necessary Other Professional Employees
during and relating to a Relocation Program (Section 4.7.7); (ii) legal
costs for re-licensing; (iii) recruitment of other physicians to assume
the Practice; and (iv) any damages, costs, liabilities, including
reasonable attorneys fees, arising from claims, suits, causes of action
or proceedings, brought by a patient of PC having an interest in any
Biological Materials kept at the Facilities. These obligations shall
survive the termination of this Agreement.
4.7.9 PC 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. Recognizing that
successfully collecting Receivables is dependent on PC's participation
and cooperation, PC will cooperate fully with respect to IntegraMed's
collection efforts, and policies and procedures established by the
Practice Management Board governing the collection of Receivables.
12
4.8 PRACTICE DEVELOPMENT, COLLECTION EFFORTS AND NETWORK
INVOLVEMENT. PC agrees that during the term of this Agreement, PC
covenants for itself and will use its best 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 PC and its Physician-Employees;
4.8.2 Promote PC's medical practice and participate in
marketing efforts developed by IntegraMed; and
4.8.3 Participate in IntegraMed network activities and
programs, including, but not limited to, using best efforts in offering
IntegraMed Pharmaceutical Services and the IntegraMed Shared Risk
Refund Program to patients and participating in other product and
service offerings IntegraMed has in effect from time to time.
4.9 PERSONNEL POLICIES PC covenants for itself and will use its best
efforts to cause its Physician-Employees and any other employees to comply with
reasonable personnel policies and guidelines developed for the PC by IntegraMed
and/or the Practice Management Board, which shall include administrative
protocols and policies designed to insure that the Facilities comply with all
applicable laws and regulations, federal, state and local.
ARTICLE 5
JOINT DUTIES AND RESPONSIBILITIES
5.1 FORMATION AND OPERATION OF PRACTICE MANAGEMENT BOARD. IntegraMed
and PC will establish a practice management board ("Practice Management Board"),
which will be responsible for developing management and administrative policies
for the overall operation of PC. The Practice Management Board will consist of
designated representatives from IntegraMed, one or more PC owners, as determined
by PC, such other PC physicians, as appropriate and determined by PC, and the
Executive Director. It is the intent and objective of IntegraMed and PC that
they agree on the overall provision of the Services to PC. In that connection,
IntegraMed will serve in an advisory capacity to the Practice Management Board
with the expectation that IntegraMed will counsel and advise the Practice
Management Board as to the provision of the Services. It is understood and
agreed that nothing herein shall obligate IntegraMed to provide Services that
are commercially unreasonable, beyond IntegraMed's economic ability to do so or
inconsistent with the spirit and intent of this Agreement.
5.2 DUTIES AND RESPONSIBILITIES OF THE PRACTICE MANAGEMENT Board. The
Practice Management Board shall have, among others, the following duties and
responsibilities:
13
5.2.1 ANNUAL BUDGETS AND PROFITABILITY. All annual capital and
operation budgets prepared by IntegraMed shall be subject to the
review, amendment, approval and disapproval of the Practice Management
Board. The parties covenant and agree to use their respective best
efforts to assist the Joint Management Board in achieving the projected
budgets. PC and IntegraMed agree that, recognizing changes in
circumstances, annual budgets and forecast are subject to revisions
and, accordingly, they agree from time to time the Practice Management
Board will need to modify the annual budgets, as needed, including
without limitation, staff reductions, to ensure that PC operates in a
profitable mode which means that PDE is positive on a monthly basis.
Further, PC agrees that in the event PC 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 PC'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 PC shall be reviewed and
approved by the Practice Management Board and shall be based upon the
best interests of PC, and shall take into account capital priorities,
economic feasibility, physician support, productivity and then current
market and regulatory conditions.
5.2.3 MARKETING BUDGET.PC shall assist in the development of
an annual marketing budget and plan. 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, from time to time.
5.2.5 PHYSICIAN HIRING.The Practice Management Board shall
determine, the number and type of physicians required for the efficient
operation of PC.
5.2.6 EXECUTIVE DIRECTOR. The Practice Management Board will
direct the day-to-day functions of the Executive Director employed by
IntegraMed pursuant to Section 3.3.1.
ARTICLE 6
LICENSE OF INTEGRAMED NAME
6.1 GRANT OF LICENSE. IntegraMed hereby grants to PC a revocable,
non-exclusive and non-assignable license for the term of this Agreement to use
the name REPRODUCTIVE SCIENCE CENTER(R) and a revocable, non-exclusive and
non-assignable license with respect to any other service names, trademark names
and logos of IntegraMed (the "Trade Names") in conjunction with the provision of
Infertility Services by PC at the Facilities within the Territory.
14
6.2 FICTITIOUS NAME PERMIT. If necessary, PC shall file or cause to be
filed an original, amended or renewal application with an appropriate regulatory
agency to obtain a fictitious name permit which allows PC to practice at the
Facilities under the Trade Names and shall take any other actions reasonably
necessary to procure protection of or protect IntegraMed's rights to the Trade
Names. IntegraMed shall cooperate and assist PC in obtaining any such original,
amended or renewal fictitious name permit.
6.3 RIGHTS OF INTEGRAMED. PC acknowledges IntegraMed's exclusive right,
ownership, title and interest in and to the Trade Names and will not at any time
do or cause to be done any act or thing contesting or in any way impairing or
tending to impair any part of such right, title and interest. In connection with
the use of the Trade Names, PC shall not in any manner represent that it has any
ownership interest in the Trade Names, and PC's use shall not create in PC's
favor any right, title, or interest in or to the Trade Names other than the
right of use granted hereunder, and all such uses by PC shall inure to the
benefit of IntegraMed. PC shall notify IntegraMed immediately upon becoming
aware of any claim, suit or other action brought against it for use of the Trade
Names or the unauthorized use of the Trade Names by a third party. PC shall not
take any other action to protect the Trade Names without the prior written
consent of IntegraMed. IntegraMed, if it so desires, may commence or prosecute
any claim or suit in its own name or in the name of PC or join PC as a party
thereto. PC shall not have any rights against IntegraMed for damages or other
remedy by reason of any determination of IntegraMed not to act or by reason of
any settlement to which IntegraMed may agree with respect to any alleged
infringements, imitations or unauthorized use by others of the Trade Names, nor
shall any such determination of IntegraMed or such settlement by IntegraMed
affect the validity or enforceability of this Agreement.
6.3.1 IntegraMed will defend, indemnify, and hold PC harmless from any
claim, suit, action or expense (including reasonable attorney's fees)
alleging that PC's use of the trade name "REPRODUCTIVE SCIENCE CENTER"
or any of the other Trade Names infringe or violate any rights of third
parties.
6.4 RIGHTS UPON TERMINATION.
6.4.1 Upon termination of this Agreement, PC shall within 30
days of the termination (i) cease using the Trade Names in all respects
and refrain from making any reference on its letterhead, consents or
other information or material to its former relationship with
IntegraMed and (ii) return to IntegraMed all Proprietary Materials as
defined herein including, but not limited to, consents, policy and
procedure manuals, Risk Management and Clinical Standards Review
Manuals. Additionally PC will take any and all actions required to make
the Trade Names available for use by any other person or entity
designated by IntegraMed.
6.4.2 PC's failure (except as otherwise provided herein) to
cease using the Trade Names at the termination or expiration of this
Agreement will result in immediate and irreparable damage to IntegraMed
and to the rights of any licensee of IntegraMed. There is no adequate
remedy at law for such failure. In the event of such failure,
15
IntegraMed shall be entitled to equitable relief by way of injunctive
relief and such other relief as any court with jurisdiction may deem
just and proper. Additionally, pending such a hearing and the decision
on the application for such permanent injunction, IntegraMed shall be
entitled to a temporary restraining order relating to PC's failure to
cease using the Trade Names, without prejudice to any other remedy
available to IntegraMed. All such remedies hereunder shall be at the
expense of PC and shall not be a Cost of Services.
ARTICLE 7
FINANCIAL ARRANGEMENTS
7.1 COMPENSATION. The compensation set forth in this Article 7 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"):
7.1.1 during the period from the Effective Date, as defined in
Section 8.1, to and including the Opening Date, as defined in Section
8.3, a monthly development fee in the amount of Twenty-Five Thousand
Dollars ($25,000.00) (the "Development Fee"). In the event the
Effective and Opening Dates are other than the first day of a month,
the Development Fee for said month shall be prorated based on a 30-day
month.
7.1.2 an amount reflecting all Cost of Services (whether
incurred by IntegraMed or PC) paid or accrued by IntegraMed pursuant to
the terms of this Agreement;
7.1.3 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 the greater of $25,000 or six
percent (6%) of the first $8.0 million of PC's Revenues; five percent
(5%) of PC's Revenues over $8.0 million, but less than $12 million; and
four percent (4%) of PC's Revenues of $12 million or more.
7.1.4 during each year of this Agreement, commencing with the
Effective Date, an additional service fee ("Additional Service Fee")
paid monthly but reconciled to annual operating results of PC, equal to
twenty (20%) of PDE.
7.1.5 In the event that either Section 7.1.3 or 7.1.4 of this
Agreement is found to be illegal, unenforceable, against public policy,
or forbidden by law, by any local, state or federal agency or
department, or any court of competent jurisdiction ("Findings"), then
Section 7.1.3 and/or 71.4 and/or the Base and Additional Service Fees
shall be replaced, effective immediately and retroactive to the date of
this Agreement, by a fixed annual Service Fee, payable in equal monthly
installments ("Alternate Service Fee") on or before the 15th business
day of each month. Said Alternate Service Fee shall be in an amount
16
mutually agreed upon, within thirty days time from the Findings,
between IntegraMed and PC, but in no event shall be less than
$700,000.00 for the first 12 months after the Opening Date and in no
event less than $950,000.00 after the first 12 months after the Opening
Date. In the event of a Finding which causes the Alternate Service Fee
to become operative, the parties shall, within sixty days of the
Finding, account for all payments made prior to the date of the
Finding, and recalculate such amounts pursuant to the formula provided
in the Alternate Service Fee. Any overpayment to IntegraMed resulting
from the prior application of Section 7.1.3 and/or 7.1.4 shall be
applied so as to satisfy 50% of each future monthly Alternate Service
Fee until the aggregate of such overpayment is fully paid by
IntegraMed. Any underpayment to IntegraMed resulting from the prior
application of Section 7.1.3 and/or 7.1.4 shall be paid to IntegraMed
commencing on the first day of the next full month following the date
of the Finding, in eighteen (18) equally monthly installments. For all
fiscal years after such Finding, the parties shall, not less than 60
days prior to January 1 of each year, negotiate in good faith the
annual Alternate Service Fee. In the event the parties are unable to
reach agreement prior to January 1, the then current Alternate Service
Fee shall continue in effect until such time as the parties reach an
agreement to be effective as of January 1.
7.1.6 The right of termination provided for in Section 9.1.3
of this Agreement, if based on the fact that either Section 7.1.3 or
7.1.4 of this Agreement has been found to be illegal, unenforceable,
void, against public policy or forbidden by law, shall only be
exercisable in the event that both (i) Sections 7.1.3 and 7.1.4 and
(ii) the Alternate Service Fee have been so found by a local, state or
federal agency or department, or any court of competent jurisdiction.
7.2 ACCOUNTS RECEIVABLE.
7.2.1 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 PC arising during the
previous calendar month. Subject to the terms and conditions of this
Agreement, PC hereby sells and assigns to IntegraMed as absolute owner,
and IntegraMed hereby purchases from PC all Receivables hereafter owned
by or arising in favor of PC on or before the 20th business day of each
month. IntegraMed shall transfer or pay such amount of funds to PC
equal to the Receivables less Compensation due IntegraMed pursuant to
Section 7.1. PC 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 PC comes into possession of any payments in respect of such
Receivables, PC shall direct such payments to IntegraMed for deposit in
bank accounts designated by IntegraMed.
7.2.2 Any Medicare or Medicaid Receivables due to PC shall be
excluded from the operation of Section 7.2.1 hereof. Any such
Receivables shall be subject to agreement of PC and IntegraMed with
respect to the collection thereof.
7.2.3 PC will be charged monthly interest at an annualized
rate of prime plus 2% on Receivables with an average days sales
outstanding ("DSO") greater than 60 days for a trailing three-month
17
period. For example, if prime is 6% and PC'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 PC's Receivables are $1.5 million, then
PC's DSO equal 97 days ($1.5 million divided by $15,389), resulting in
interest being charged for the month on $569,393 of PC's Receivables
($15,389 times 37 days) at a rate of 0.67% ( 6% prime plus 2% divided
by 12), or a $3,814.93 interest charge.
7.2.4 On or before the 20th business day of each month,
commencing with the month following the Opening Date, IntegraMed shall
remit to PC the PDE generated for the previous calendar month.
7.3 ADVANCES.
7.3.1 Tax Payment Advances. IntegraMed agrees to advance up to
$480,000 ("Tax Payment Advance") to PC and/or Shareholders in order for
PC and/or Shareholders to satisfy tax obligations with respect to the
Right to Service Fee payment made pursuant to Section 8.2. Such Tax
Payment Advance will be evidenced by promissory notes from PC and/or
Shareholders in form acceptable to IntegraMed.
7.3.2 Post-Opening Advances. IntegraMed agrees to advance
necessary funds for PC 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
PC's operations, except during the period of the first 12 months after
the Opening Date, IntegraMed agrees to make Advances up to $700,000.00
("Post-Opening Advances") to fund post-opening operating losses
irrespective of PC's Revenues. As security for such Advances, PC shall
deliver to IntegraMed with the execution of this Agreement a Security
Agreement in the form of Exhibit 7.3 hereto giving IntegraMed a
collateral interest in all Receivables of PC and PDE payable to PC
Shareholders. 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 PC, to IntegraMed in the event
PC's Cost of Services exceed PC's 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.
7.3.3 Any Advance hereunder shall be a debt owed to IntegraMed
by PC and shall be repaid within 60 days after the Advance, except for
the Post-Opening Advances which shall be repaid, monthly, from 50% of
PC's PDE in excess of Shareholders' draw of $50,000.00 per month. So
long as the Post-Opening Advances remain outstanding, PC agrees not to
increase the aggregate Shareholders' draw above $50,000.00 per month.
Upon request of PC, IntegraMed will consider repayment of Advances
other than the Post-Opening Advances in installments. 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.
18
7.3.4 Interest expense will be charged on an Advance and will
be computed at the Prime Rate plus two (2%) used by IntegraMed's
primary bank.
7.3.5 PC acknowledges and understands that IntegraMed's bank
has a security interest in PC's accounts receivable purchased by
IntegraMed. In that connection, IntegraMed's bank requires that the
various medical practices with which IntegraMed enters into a Service
Agreement, executes and delivers to such bank a Continuing General
Limited Security Agreement in the form of Exhibit 7.3.5 attached
hereto, which PC has executed and delivered to IntegraMed.
7.4 BUILD OUT AND CAPITAL COMMITMENT.
IntegraMed agrees to invest sufficient capital to build, equip and
supply appropriate office and laboratory space for PC to conduct its medical
practice at the Facilities. As an expression of IntegraMed's commitment to the
growth of PC's practice, IntegraMed agrees to maintain, during the term of this
Agreement, an on-going investment in the Facilities and equipment, without an
interest charge to PC, of an amount up to $2.0 million ("Capital Commitment").
Any amounts invested by IntegraMed in PC's medical practice in excess of the
Capital Commitment provided for this Section will be charged to PC as a capital
cost at an interest rate of prime plus two (2%) percent.
ARTICLE 8
TERM, SERVICE RIGHT, PAYMENTS, AND OTHER COMMITMENTS
8.1 The term of this Agreement shall begin on the date first above
written ("Effective Date") and shall expire fifteen (15) years after such date
(the "Term") unless earlier terminated pursuant to Article 9, below.
8.2 In consideration of the considerable investment of time and
resources in PC expected by IntegraMed and the payment of One Million Two
Hundred Thousand Dollars ($1,200,000.00) ("Right to Service Fee") by IntegraMed
to PC, PC grants to IntegraMed the exclusive right to provide the Services to PC
during the Term. In consideration of the benefit to the Shareholders of the
Right to Service Fee paid to PC, each of Physicians, pursuant to a Personal
Responsibility Agreement will agree to remit to IntegraMed such Physician's
prorata share of unamortized Right to Service Fees if this Agreement or such
Physician's employment by PC terminates within five (5) years from the Effective
Date.
8.2.1 The Right to Service Fee shall, commencing with the
execution of this Agreement, be disbursed as needed to meet any and all
expenses of PC leading up to the Opening Date that would be considered
Cost of Services, if such expenses were incurred after the Opening Date
(such expenses being defined as "Pre-Opening Expenses"). Until the
Right to Service Fee is fully disbursed, PC shall earn interest thereon
at a rate of two (2%) percent per annum, pro-rated.
19
8.2.2 IntegraMed shall provide PC with monthly statements
commencing on or before the 20th business day of February 2004 with
respect to PC's expenses and disbursements of the Right to Service Fee.
8.2.3 Within 30 days after the Opening Date, IntegraMed shall
disburse to PC any balance of the Right to Service Service, together
with interest thereon, not utilized for Pre-Opening Expenses.
8.3 Upon execution of this Agreement, IntegraMed, PC and Shareholders
agree to work cooperatively towards (i) identifying a location and negotiating a
lease for the Facility, (ii) identifying and hiring an Executive Director for
the Facility, (ii) identifying and hiring a Marketing Director, a Laboratory
Director and all other personnel necessary for PC to conduct its medical
practice, and (iii) all other activities necessary to accomplish the purposes
set forth herein. For purposes of this Agreement, the date that the Facility is
functional and PC can provide Infertility Sevices to patients shall be the
"Opening Date."
ARTICLE 9
TERMINATION OF THE AGREEMENT
9.1 TERMINATION
This Agreement may be terminated by either party in the event
of the following:
9.1.1 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.
9.1.2 MATERIAL BREACH. If either party shall materially breach
its obligations hereunder, then the other party may terminate this Agreement by
providing 30 days prior written notice to the breaching party detailing the
nature of the breach and providing the breaching party with the opportunity to
cure the breach. If the breach is not cured within such 30-day period, this
Agreement shall terminate, provided however, that if the breach is not curable
within such 30-day period and the breaching party is making diligent efforts to
cure the breach during such 30-day period ("Good Faith Cure Efforts"), this
Agreement shall not terminate. If after the exercise of such Good Faith Cure
Efforts, the breaching party shall be unable to cure the breach within 60 days
from the notice of breach from the non-breaching party, the non-breaching party
in its sole discretion may extend the time in which to cure the breach, upon
request of the breaching party. In the event the non-breaching party does not
extend the time in which to cue the breach, this Agreement will terminate at the
expiration of 60 days from the original notice of breach from the non-breaching
party.
20
9.1.3 ILLEGALITY. Any party may terminate this Agreement
immediately upon receipt of notification of a final order issued by any local,
state or federal agency or court of competent jurisdiction that the conduct
contemplated by this Agreement is forbidden by law; provided, however, that if
such finding is based upon the nature or method of compensation to IntegraMed,
it specifically finds the Alternative Service Fee is forbidden by law.
Notwithstanding the foregoing, this Agreement shall not terminate during such
period of time as either party contests such order or finding in good faith
("Challenge") and during any such Challenge, this Agreement shall remain in full
force and effect. If any governing regulatory agency asserts that the services
provided by IntegraMed under this Agreement are unlawful or that the practice of
medicine by PC as contemplated by this Agreement requires a certificate of need,
and any such assertion is not the subject of a Challenge, or if the subject of
Challenge, the agency's assertion is found to be correct by a court of competent
jurisdiction and no appeal is taken, or if any appeals are taken and the same
are unsuccessful), this Agreement shall thereupon be deemed terminated and the
provisions of Section 10.1 shall apply.
9.2 TERMINATION BY INTEGRAMED FOR PROFESSIONAL DISCIPLINARY ACTIONS. PC
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 PC if a Physician's authorization
to practice medicine is suspended, revoked or not renewed and PC has failed to
suspend such physician; provided, however, such action may not be taken until PC
has been given 30 days to resolve such physician's authorization to practice
medicine. PC 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.
9.3 TERMINATION BY PC AFTER FIVE (5) YEARS. PC shall have the option,
after this Agreement has been in effect for five (5) years to terminate this
Agreement without cause by giving IntegraMed twelve months' prior written notice
of PC's intent to terminate.
ARTICLE 10
PURCHASE OF ASSETS - OBLIGATIONS AND OPTIONS
10.1 TERMINATION BY INTEGRAMED. If IntegraMed terminates this Agreement
due to the insolvency of PC (Section 9.1.1), for a material breach by PC
(Section 9.1.2), or PC fails to suspend a physician whose license is suspended,
revoked or not renewed (Section 9.2), or this Agreement terminates pursuant to
Section 9.1.3, PC agrees, within 90 days of the date of termination of this
Agreement, at IntegraMed's option, to purchase from IntegraMed the assets
utilized directly by PC in the operation of PC business (the "Assets") as set
forth in Sections 10.1.1 and 10.1.2 below:
10.1.1 The purchase price of the Assets will be the net book
value determined in accordance with GAAP, consistently applied, as at
the date of the termination.
21
10.1.2 If a purchase is completed under Section 10.1, closing
shall occur within 90 days of the date the option is exercised. PC
shall assume all leases for offices and equipment used directly for the
management and operation of PC's business and may hire such employees
from IntegraMed as it determines are necessary to operate the medical
practice and business. In such event, PC shall be obligated to
indemnify IntegraMed for any and all severance or termination
obligations to IntegraMed employees utilized directly in providing the
Services.
10.2 TERMINATION BY PC In the event this Agreement is terminated by PC
as a result of the insolvency of IntegraMed (9.1.1) or material breach by
IntegraMed (9.1.2), IntegraMed agrees, within 90 days of the date of
termination, at PC's option, to sell to PC the Assets as set forth in Sections
10.1.1 together with leasehold improvements. In the event this Agreement is
terminated pursuant to Section 9.3 then the provisions of Section 10.3 shall be
applicable.
10.2.1 If a termination occurs under this Section 10.2, PC
shall have the option of assuming leases for offices and equipment used
directly for the operation of PC's business and may hire such employees
from IntegraMed as it determines are necessary to operate the medical
practice and business.
10.2.2 In the event PC exercise the option set forth in this
Section 10.2, closing shall occur within 90 days of the date the option
is exercised. In the event PC does not exercise the option within 90
days of termination, PC shall have relinquished its right and interest
to the Assets and IntegraMed shall be free to use or dispose of the
Assets as it determines with neither party having any further
obligations to the other.
10.3 TERMINATION BY PC PURSUANT TO SECTION 9.3. In the event this
Agreement is terminated pursuant to Section 9.3, PC shall be obligated to
perform the following acts and make the following payments to IntegraMed:
10.3.1 PC shall assume all office and equipment leases in
IntegraMed's name for the benefit of PC. In assuming such
leases, PC shall be obligated to have IntegraMed released from
any further liability under all such leases.
10.3.2 PC shall be obligated to repurchase from IntegraMed all
uncollected Accounts Receivables purchased from PC by
IntegraMed.
10.3.3 PC shall be obligated to purchase from IntegraMed all
Fixed Assets reflected on IntegraMed's books and records for
the benefit of PC at the net book value as of the last day of
the month preceding the closing date of the transactions
occurring pursuant to Section 10.3
10.3.4 PC shall be obligated to pay IntegraMed the unamortized
amount of the Right to Service Fee provided for in Section 8.2
which amount is amortized by IntegraMed in accordance with
GAAP.
22
10.3.5 PC shall be obligated to pay IntegraMed the unpaid
balance on any and all Advances or loans owed to IntegraMed as
of the closing date of the transactions provided for in
Section 10.3.
10.3.6 PC shall hire such IntegraMed employees deployed
directly in providing services to PC as of the closing of the
transactions occurring pursuant to Section 10.3 as PC shall
determine. PC shall indemnify and hold IntegraMed harmless for
any and all out-of-pocket expenses or losses incurred by
IntegraMed with respect to any claim, including, but not
limited to unemployment compensation claims, against
IntegraMed by or on behalf of any employee not hired by PC
pursuant to this Section 10.3.6.
10.3.7 PC shall be obligated to pay IntegraMed liquidated
damages in the amount equal to two times the trailing 12
months Base and Additional Service Fee paid to IntegraMed by
PC.
10.3.8 The closing of the transactions provided for in
Sections 10.3.1 to 10.3.7 shall take place within two weeks
prior to the expiration of the twelve-month notification
provided for in Section 9.3
10.4 TRANSFER OF OWNERSHIP
Upon receipt of payment of the purchase price 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 PC and
return to PC all security deposits. PC shall have the option of receiving full
credit on the purchase price 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.
ARTICLE 11
INSURANCE
11.1 PC shall carry professional liability insurance, covering itself
and its employees providing Infertility Services under this Agreement in the
minimum amount of $1 million per incident, $3 million in the aggregate, at its
own expense. If possible under the terms of the insurance coverage, PC shall use
its best efforts to cause IntegraMed to be named an additional insured on such
policies. Evidence of such policies shall be presented to IntegraMed upon
execution of this Agreement.
11.2 IntegraMed shall use its best efforts to cause PC to be made an
additional insured under IntegraMed's professional liability coverage; provided,
however, conditions for being made an additional insured shall be (i) PC
utilizing patient informed consent forms supplied by IntegraMed, provided such
forms are consistent with law and any guidelines issued by the American Society
23
of Reproductive Medicine and (ii) PC complying with requirements of IntegraMed's
insurance company. IntegraMed shall also carry a policy of public liability and
property damage insurance with respect to the Facilities under which the insurer
agrees to indemnify IntegraMed and PC 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.
Certificates of Insurance evidencing such policies and additional insured status
shall be presented to PC within thirty (30) days after such coverage is in
effect.
11.3 PC 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 12
MISCELLANEOUS
12.1 INDEPENDENT CONTRACTOR. IntegraMed and PC are independent
contracting parties. In this regard, the parties agree that:
12.1.1 The relationship between IntegraMed and PC 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 PC;
12.1.2 Notwithstanding the authority granted to IntegraMed
herein, IntegraMed and PC agree that PC shall retain the full authority
to direct all of the medical, professional, and ethical aspects of its
medical practices;
12.1.3 Any powers of PC not specifically vested in IntegraMed
by the terms of this Agreement shall remain with PC;
12.1.4 PC shall, at all times, be the sole employer of the
Physician-Employees, other than the Physicians, the Other Professional
Employees required by law to be employees of PC and all other
professional personnel engaged by PC 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 PC;
12.1.5 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;
24
12.1.6 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
12.1.7 Matters involving the internal agreements and finances
of PC, 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 PC, and other employees of PC, disposition of PC 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 PC and
licensing, shall remain the sole responsibility of PC and the
individual Physicians, except with respect to the number of physicians
PC hires which will be based upon recommendations of the Practice
Management Board.
12.2 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.
12.3 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 PC 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.
12.4 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.
12.5 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 PC, 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.
25
12.6 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.
12.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington 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 breach thereof, except for equitable relief sought pursuant to Section 6.4
or Section 12.3 hereof, shall be determined by binding arbitration in the State
of Washington, City of Seattle (hereinafter "Arbitration"). The party seeking
determination shall subject any such dispute, claim or controversy to either (i)
JDR LLC or (ii) JAMS/Endispute, and the rules of commercial arbitration of the
selected entity shall govern. The Arbitration shall be conducted and decided by
three (3) arbitrators, unless the parties mutually agree, in writing at the time
of the Arbitration, to fewer arbitrators. In reaching a decision, the
arbitrators 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 arbitrators. Any
application to compel Arbitration, confirm or vacate an arbitral award or
otherwise enforce this Paragraph shall be brought in the Courts of the State of
Washington or the United States District Court for the District of Washington,
to whose jurisdiction for such purposes PC and IntegraMed hereby irrevocably
consent and submit.
12.8 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.
12.9 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.
12.10 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 Airborne Express, prepaid, and
shall be deemed given when received. Any such notice or communication shall be
sent to the address set forth below:
26
12.10.1 If for IntegraMed:
Xxxxxxx Xxxxx, President
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 0000
12.10.2 If for PC:
Xxxxxxx Xxxxxx, MD, President
Seattle Reproductive Medicine, Inc., P.S.
00000 XX 00xx
Xxxxxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxxxx Xxxxxx & Xxxxxxxx, PLLC
0000 Xxx Xxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Any party hereto, by like notice to the other parties, may designate
such other address or addresses to which notice must be sent.
12.11 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, whether oral or written, with
respect to such subject matter.
12.12 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.
27
12.13 CONFIDENTIAL INFORMATION.
12.13.1 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.
12.13.2 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.
12.13.3 In order to minimize any misunderstanding regarding
what information is considered to be Confidential Information,
IntegraMed or PC will designate at each others request the specific
information which IntegraMed or PC considers to be Confidential
Information.
12.14 INDEMNIFICATION.
12.14.1 IntegraMed agrees to indemnify and hold harmless PC,
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 IntegraMed related to the performance of its
duties and responsibilities under this Agreement. The obligations
contained in this Section 12.14.1 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
28
12.14.2 PC 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 PC related to the performance of its duties
and responsibilities under this Agreement. The obligations contained in
this Section 12.14.2 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
12.14.3 In the event of any claims or suits in which
IntegraMed and/or PC and/or their directors, officers, employees and
servants are named, each of IntegraMed and PC 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.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
INTEGRAMED AMERICA, INC.
By: /s/Xxx Xxxxxx
---------------------------------
Xxx Xxxxxx, Xx. Vice President
SEATTLE REPRODUCTIVE MEDICINE, INC., P.S.
By: /s/Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx M.D., President
29
Exhibit 3.1.1
2004 Resources, Products and Services to Partner Practices
[Attached]
30
Exhibit 4.4
Form of Shareholder Employment Agreement
[Attached]
31
Exhibit 7.3
Security Agreement
[Attached]
32
Exhibit 7.3.5
Continuing General Limited Security Agreement
[Attached]
