1
CONFIDENTIAL TREATMENT REQUESTED AS TO PORTIONS OF THIS DOCUMENT,
AND SUCH OMITTED INFORMATION HAS BEEN SEPARATELY FILED WTIH THE SECURITIES
AND EXCHANGE COMMISSION. THE LOCATIONS IN THIS DOCUMENT WHERE
INFORMATION HAS BEEN OMITTED ARE MARKED WITH THE SYMBOL "[*]."
SERVICE AGREEMENT
By and Between
PROMEDCO OF CULLMAN, INC.
and
CULLMAN PRIMARY CARE, P.C.
Effective March 6, 1996
2
Table of Contents
Page No.
RECITALS.......................................................... 1
1. RESPONSIBILITIES OF THE PARTIES................................ 2
1.1 General Responsibilities of the Parties..................... 2
1.2 CPC's Matters............................................... 2
1.3 Patient Referrals........................................... 2
2. POLICY COUNCIL................................................. 2
2.1 Formation and Operation of the Policy Council............... 2
2.2 Duties and Responsibilities of the Policy Council........... 2
3. OBLIGATIONS OF PROMEDCO........................................ 4
3.1 Management and Administration............................... 4
3.2 Expansion of Clinic......................................... 6
3.3 Events Excusing Performance................................. 8
3.4 Compliance With Applicable Laws.............................. 8
3.5 Guaranty.................................................... 8
3.6 Minimum Net Worth........................................... 8
4. OBLIGATIONS OF CDC............................................. 9
4.1 Professional Services....................................... 9
4.2 Employment Of Physician Employees........................... 9
4.3 Non-Clinic Expenses......................................... 9
4.4 Medical Practice............................................ 9
4.5 Professional Insurance Eligibility.......................... 9
4.6 Employment Of Non-Physician Employees....................... 9
4.7 Events Excusing Performance................................. 9
4.8 Compliance With Applicable Laws............................. 10
4.9 Restrictions on Use of Clinic Facility...................... 10
4.10 CPC Employee Benefit Plans.................................. 10
4.11 Physician Powers of Attorney................................ 10
4.12 Spokesperson................................................ 10
4.13 Physician Guarantees........................................ 10
5. RECORDS........................................................ 11
5.1 Patient Records............................................. 11
5.2 Other Records............................................... 11
5.3 Access to Records........................................... 11
6. FACILITIES TO BE PROVIDED BY PROMEDCO.......................... 12
6.1 Facilities.................................................. 12
6.2 Use of Facilities........................................... 12
7. FINANCIAL ARRANGEMENTS......................................... 12
7.1 Payments to CPC............................................. 12
7.2 Distribution................................................ 12
7.3 Clinic Expenses............................................. 12
7.4 Accounts Receivable......................................... 12
8. INSURANCE AND INDEMNITY........................................ 13
8.1 Insurance to Be Maintained by ProMedCo...................... 13
8.2 Insurance to Be Maintained by CPC........................... 13
8.3 Tail Insurance Coverage..................................... 13
8.4 Additional Insured.......................................... 14
8.5 Indemnification............................................. 14
3
9. RESTRICTIVE COVENANTS AND LIQUIDATED DAMAGES................... 14
9.1 Restrictive Covenants by CPC................................ 14
9.2 Restrictive Covenants By Current Physician
Shareholders and Physician Employees.................... 14
9.3 Restrictive Covenants By Future Physician Employees......... 15
9.4 Physician Shareholder and Physician Employee Liquidated
Damages................................................. 16
9.5 Restrictive Covenants of ProMedCo........................... 16
9.6 Enforcement................................................. 16
9.7 Termination of Restrictive Covenants........................ 17
10. TERM; RENEWAL; TERMINATION................................... 17
10.1 Term and Renewal............................................ 17
10.2 Termination by CPC.......................................... 17
10.3 Termination by ProMedCo..................................... 19
10.4 Actions After Termination................................... 19
11. DEFINITIONS
11.1 Net Clinic Revenues......................................... 22
11.2 Distribution Funds.......................................... 22
11.3 ProMedCo Distribution....................................... 22
11.4 Clinic...................................................... 22
11.5 Clinic Facility............................................. 22
11.6 Clinic Expenses............................................. 22
11.7 Clinic Expenses shall not include........................... 23
11.8 Risk Pool Surpluses......................................... 23
11.9 Opening Balance Sheet....................................... 24
11.10 Technical Employees......................................... 24
11.11 Physician Shareholders...................................... 24
11.12 Physician Employees......................................... 24
11.13 CPC Employees............................................... 24
11.14 Effective Date.............................................. 24
11.15 Physician Extenders......................................... 24
11.16 Adjustments................................................. 24
12. GENERAL PROVISIONS............................................ 24
12.1 Independent Contractor...................................... 24
12.2 Proprietary Property........................................ 25
12.3 Cooperation................................................. 25
12.4 Licenses, Permits and Certificates.......................... 25
12.5 Compliance with Rules, Regulations and Laws................. 25
12.6 Generally Accepted Accounting Principles (GAAP)............. 26
12.7 Notices..................................................... 26
12.8 Attorneys' Fees............................................. 26
12.9 Severability................................................ 27
12.10 Arbitration................................................. 27
12.11 Construction of Agreement................................... 27
12.12 Assignment and Delegation................................... 27
12.13 Confidentiality............................................. 27
12.14 Waiver...................................................... 27
12.15 Headings.................................................... 27
12.16 No Third Party Beneficiaries................................ 27
12.17 Time is of the Essence...................................... 27
12.18 Modifications of Agreement for Prospective Legal Events..... 27
12.19 Whole Agreement; Modification............................... 28
4
SERVICE AGREEMENT
This Service Agreement ("Agreement") dated March 12, 1996, among
ProMedCo of Cullman, Inc., an Alabama corporation ("ProMedCo") which is an
affiliate of ProMedCo, Inc., a Texas corporation ("Parent"), Parent and Cullman
Primary Care, P.C., an Alabama Professional Corporation (`CPC`).
RECITALS:
WHEREAS, CPC is a primary care group medical practice in Cullman,
Alabama, which provides professional medical care to the general public;
WHEREAS, ProMedCo is in the business of owning certain assets of and
managing and administering medical clinics, and providing non-professional
support services to and furnishing medical practices with the necessary
facilities, equipment, personnel, supplies and support staff;
WHEREAS, pursuant to a Stock Purchase Agreement dated of even date
hereof, to which ProMedCo, Inc. and Cullman Family Practice, P.C. are parties
(the "CFP Stock Purchase Agreement"), ProMedCo agreed to purchase all of the
shares of capital stock of Cullman Family Practice, P.C.("UP");
WHEREAS, pursuant to a Stock Purchase Agreement dated of even date
hereof, to which ProMedCo, Inc. and Family Medical Clinic P.C., an Alabama
corporation, are parties (the `FMC Stock Purchase Agreement"), ProMedCo agreed
to purchase all of the shares of capital stock of Family Medical Clinic, P.C.
("FMC");
WHEREAS, subject to the terms and conditions hereof, CPC desires to
engage ProMedCo to provide to CPC management services, facilities, personnel,
equipment and supplies necessary to operate the clinic (as defined herein) and
ProMedCo desires to accept such engagement;
WHEREAS, the basis for the financial considerations provided in this
Agreement are derived from the revenues generated by the medical practice of
CPC, such revenues having been documented by CPC and delivered to ProMedCo prior
to the formulation and agreement of such aforementioned financial
considerations; and
WHEREAS, Parent desires to enter into this Agreement for purposes of
guaranteeing the obligations of ProMedCo hereunder;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, CPC and ProMedCo hereby agree as follows:
1. RESPONSIBILITIES OF THE PARTIES
1.1 General Responsibilities of the Parties. ProMedCo shall provide CPC
with offices, facilities, equipment, supplies, non-professional support
personnel, and management and financial advisory services. CPC shall be
responsible, with ProMedCo's assistance, for the recruitment and hiring of
physicians, Technical Employees and all issues related to patient care and
documentation thereof. ProMedCo shall neither exercise control over nor
interfere with the physician-patient relationship, which shall be maintained
strictly between the physicians of CPC and their patients.
1.2 CPC's Matters. CPC shall maintain sole discretion and authority
over the financial matters relative to its own professional corporation. It
shall set compensation levels for CPC Employees. CPC will also be responsible
for all other matters pertaining to the operation of CPC, including, but not
limited to, accounting, tax planning, and tax preparation which shall remain the
sole responsibility of CPC and the individual physician shareholders.
1.3 Patient Referrals. The parties agree that the benefits to CPC do
not require, are not payment for, and are not in any way contingent upon the
5
admission, referral or any other arrangement for the provision of any item or
service offered by ProMedCo to any of CPC's patients in any facility or
laboratory controlled, managed or operated by ProMedCo.
2. POLICY COUNCIL
2.1 Formation and Operation of the Policy Council. A Policy Council
will be established which shall be responsible for the major policies which will
serve as the basis for operations of the Clinic. The Policy Council shall
consist of eight (8) members. ProMedCo shall designate, at its sole discretion,
four (4) members of the Policy Council. Members of the Policy Council designated
by either party shall be entitled to attend and vote by proxy at any meetings of
the Policy Council so long as at least two (2) representatives of such party is
present in person. CPC at its sole discretion shall designate four (4) members.
Except as may otherwise be provided, the act of a majority of the members of the
Policy Council shall be the act of the Policy Council.
2.2 Duties and Responsibilities of the Policy Council. During the term
of this Agreement, the Policy Council shall have the following duties and
responsibilities.
2.2.1 Physician Hiring. The Policy Council, with information and
analysis provided by ProMedCo, shall determine the number and type of physicians
required for the efficient operation of the Clinic; provided, however, that CPC
shall make the final determination as to the individual physicians to be hired
to fill such positions. The approval of ProMedCo shall be required for any
variations to the restrictive covenants in any physician employment contract.
The Policy Council shall approve all physician recruiting.
2.2.2 Patient Fees. in consultation with. CPC and ProMedCo, the
Policy Council shall review and adopt the fee schedule for all physician and
ancillary services rendered by the Clinic.
2.2.3 Administrator. The selection and retention of the Administrator
pursuant to Section 3.1 shall be subject to the reasonable approval of the
Policy Council. If CPC is dissatisfied with the services provided by the
Administrator, CPC shall refer the matter to the Policy Council. ProMedCo and
Policy Council shall in good faith determine whether the performance of the
Administrator could be brought to acceptable levels through counsel and
assistance, or whether the Administrator should be terminated. ProMedCo shall
have the ultimate authority to terminate the Administrator.
2.2.4 Ancillary Services. The Policy Council shall approve Clinic
provided ancillary services based upon the pricing, access to and quality of
such services.
2.2.5 Provider and Payor Relationships. The Policy Council shall make
the decisions regarding the establishment and maintenance of relationships with
institutional health care providers and payors. The Policy Council shall be
responsible for approving the allocation of capitation risk pools between the
professional and institutional components of these pools to the extent
applicable under a payor agreement. ProMedCo and CPC shall use actuarial data
from a nationally recognized actuarial firm as agreed to by both parties, for
the purposes of allocating capitation funds, for those professional services
provided directly by CPC.
2.2.6 Capital Improvements and Expansion. The Policy Council shall
determine the priority for any renovation, expansion plans and major equipment
expenditures with respect to the Clinic based upon economic feasibility,
physician support, productivity and market conditions. Any capital expenditure
in excess of $10,000 shall require the approval of the Policy Council.
6
2.2.7 Annual Budgets. AR annual capital and operating budgets prepared
by ProMedCo, as set forth in Section 3, shall be subject to the review and
approval of the Policy Council, provided, however, ProMedCo shall have final
approval of any capital required by ProMedCo.
2.2.8 Strategic Planning. The Policy Council, with the assistance of
ProMedCo, shall develop long-term strategic planning objectives.
2.2.9 Exceptions to Inclusion in the Net Revenue Calculation. The
exclusion of any revenue from Net Revenue, whether now or in the future, shall
be subject to the approval of the Policy Council.
2.2.10 Advertising. AR advertising, marketing, and public relations
shall be subject to the prior review and approval of the Policy Council.
2.2.11 Grievance Issues. Subject to the provisions of Section 1.2 of
this Agreement, the Policy Council shall consider and make final decisions
regarding grievances pertaining to matters not specifically addressed in this
Agreement as referred to it by CPC's board or ProMedCo.
3. OBLIGATIONS OF PROMEDCO
During the term of this Agreement, ProMedCo shall provide or arrange
for the services set forth in this Section 3, the cost of all of which shall be
included in Clinic Expenses. ProMedCo is hereby expressly authorized to perform
its services in whatever manner it deems reasonably appropriate, in accordance
with policies approved by the Policy Council, and including without limitation,
performance of some functions at locations other than the Clinic Facility. CPC
will not act in a manner which would prevent ProMedCo from efficiently managing
the Clinic Facility operations in a business like manner. CPC, through its CPC
Employees, will provide all medical services. ProMedCo will have no authority,
directly or indirectly, to perform, and will not perform any medical function.
ProMedCo may, however, advise CPC as to the relationship between its performance
of medical functions and the overall administrative and business functioning of
the Clinic.
3.1 Management and Administration. During the term of this Agreement,
CPC hereby appoints ProMedCo as the sole and exclusive manager and administrator
of all non-medical functions and services related to CPC's services at the
Clinic. CPC shall perform all medical services, and ProMedCo shall have no
authority, directly or indirectly, to perform, and will not perform any medical
function. ProMedCo may, however, advise CPC as to the relationship between its
performance of medical functions and the overall administrative and business
functioning of its practice. Without limiting the generality of the foregoing,
ProMedCo shall provide the following administrative, management and marketing
services as may be required in conjunction with CPC's services at the Clinic.
ProMedCo shall hire and supervise an Administrator, subject to the reasonable
approval of the Policy Council, to manage and administer all of the day-to-day
business functions of ProMedCo, including without limitation:
3.1.1 Annual Budgets. Financial planning and preparation of annual
budgets. Annually and at least thirty (30) days prior to the commencement of
each fiscal year, ProMedCo shall prepare and deliver to CPC capital and
operating budgets reflecting in reasonable detail anticipated revenues and
expenses, sources and uses of capital for growth of CPC's practice and Clinic
services.
3.1.2 Financial Statements. ProMedCo shall prepare monthly and fiscal
year unaudited financial statements containing a balance sheet and a statement
of income for Clinic operations, which shall include Net Clinic Revenues and
Clinic Expenses, which shall be delivered to CPC within thirty (30) days after
the close of each calendar month. The fiscal year statement shall be reviewed by
a certified public accountant as selected by ProMedCo in connection with the
audit of the financial statements of Parent. If CPC desires an audit in
7
addition to the audit provided by ProMedCo, such an audit would be at CPC's
expense.
3.1.3 Non-Physician Personnel. ProMedCo will provide all personnel
reasonably necessary for the conduct of Clinic operations with the exception of
Physician Extenders and Technical Employees. ProMedCo shall determine and cause
to be paid the salaries, fringe benefits and any sums for income taxes,
unemployment insurance, social security taxes or any other withholding amounts
required by applicable law or governmental authority, of all such personnel.
Such personnel shall be under the direction, supervision and control of
ProMedCo, with those personnel performing patient care services subject to the
professional supervision of CPC. If CPC is dissatisfied with the services of any
person, CPC shall consult with ProMedCo. If CPC desires that such person be
terminated, then, unless ProMedCo shall in good faith determine that the
performance of that employee is likely to be brought to acceptable levels
through counsel and assistance, such employee shall be terminated. AR of
ProMedCo's obligations regarding staff shall be governed by the overriding
principle and goal of providing high quality medical care.
3.1.4 Quality Assurance. ProMedCo will assist CPC in fulfilling its
obligation to its patients to maintain high quality medical and professional
services, including patient satisfaction programs, employee education, outcomes
analysis, clinical protocol development and to implement a risk management
program.
3.1.5 Facilities and Equipment. ProMedCo will ensure the proper
cleanliness of the premises, maintenance and cleanliness of the equipment,
furniture and furnishings located on the premises.
3.1.6 Inventory Control and Purchasing Supplies. ProMedCo shall order
and purchase inventory and supplies, and such other ordinary, necessary or
appropriate materials which ProMedCo shall reasonably deem to be necessary in
the operation of the Clinic, to deliver quality Clinic services in a cost
effective manner.
3.1.7 Managed Care Contracting. ProMedCo will be responsible for
marketing, negotiation, and administering all managed care contracts, as well as
providing necessary actuarial and utilization data for these managed care
contracts, subject to the provisions of Section 2.2.5.
3.1.8 Billing and Collections. ProMedCo shall xxxx patients and collect
all fees for services performed inside or outside the Clinic Facility or arrange
for such billing and collection. CPC hereby appoints ProMedCo, for the term
hereof, to be its true and lawful attorney-in-fact for the following purposes
(i) to xxxx patients in CPC's name and on its behalf, (ii) to collect accounts
receivable resulting from such billing in CPC's name and on its behalf, (iii) to
receive payments from Blue Cross and Blue Shield, Medicare, Medicaid, payments
from health plans, and all other third party payors; (iv) to receive the cash
proceeds of any accounts receivable; (v) to take possession of and endorse in
the name of CPC (and/or in the name of an individual physician, such payment
intended for purpose of payment of a physician's xxxx) any notes, checks, money
orders, insurance payments and other instruments received in payment of accounts
receivable; and (v) in accordance with policies adopted by the Policy Council,
to' initiate legal proceedings in the name of CPC to collect any accounts and
monies owed to the Clinic, to enforce the rights of CPC as creditors under any
contract or in connection with the rendering of any service, and to contest
reduced payments and denials by governmental agencies (or its fiscal
intermediaries) as third-party payors. AR Adjustments, as hereinafter defined,
made for uncollectible accounts, professional courtesies and other activities
that do not generate a collectible fee shall be done in a reasonable and
consistent manner acceptable to ProMedCo's independent certified public
accountants.
3.1.9 Deposit of Net Clinic Revenues. During the term of this
Agreement, an Net Clinic Revenues collected resulting from the operations of
8
the Clinic shall be deposited directly into a bank account of which CPC shall be
the owner ("Account"). ProMedCo and CPC shall maintain their accounting records
in such a way as to clearly segregate Net Clinic Revenues from other funds of
ProMedCo or CPC. CPC hereby appoints ProMedCo as its true and lawful
attorney-in-fact to deposit in the Account all revenues collected. CPC
covenants, and shall cause all CPC Employees to covenant, to forward any
payments received with respect to Net Clinic Revenues for services provided by
CPC and CPC Employees to ProMedCo for deposit. ProMedCo shall have the right to
withdraw funds from the Account and all owners of the Account shall execute a
revocable standing transfer order ("Transfer Order") under which the bank
maintaining the Account shall periodically transfer the entire balance of the
Account to a separate bank account owned solely by ProMedCo ("ProMedCo
Account"). CPC and ProMedCo hereby agree to execute from time to time such
documents and instructions as shall be required by the bank maintaining the
Account and mutually agreed upon to effectuate the foregoing provisions and to
extend or amend such documents and instructions. Any action by CPC that
interferes with the operation of this Section, including, but not limited to,
any failure to deposit or have ProMedCo deposit any Net Clinic Revenues into the
Account, any withdrawal of any funds from the Account not authorized by the
express terms of this Agreement, or any revocation of or attempt to revoke the
Transfer Order (otherwise than upon expiration or termination of this
Agreement), will constitute a breach of this Agreement and will entitle
ProMedCo, in addition to any other remedies that it may have at law or in
equity, to seek a court ordered assignment of the following rights:
(a) To collect accounts receivable resulting from the provision of
services to patients of CPC and its CPC Employees;
(b) To receive payments from patients, third party payor plans,
insurance companies, Medicare, Medicaid and all other payors, with respect to
services rendered by CPC and its CPC Employees;
(c) To take possession of and endorse any notes, checks, money orders,
insurance payments and any other instruments received as payment of such
accounts receivable; and
(d) To collect all revenues of the Clinic.
3.1.10 Management Information Systems/Computer Systems. ProMedCo
shall supervise and provide information systems that are necessary and
appropriate for the operation of the Clinic.
3.1.11 Legal and Accounting Services. ProMedCo shall arrange for or
render to CPC such business, legal and financial management consultation and
advice as may be reasonably required or requested by CPC and directly related to
the operations of the Clinic. ProMedCo shall not be responsible for rendering
any legal or tax advice or services or personal financial services to CPC or any
employee or agent of CPC.
3.1.12 Negotiation and Payment of Premiums For All Insurance Products
Held By CPC. ProMedCo shall negotiate for and cause premiums to be paid with
respect to the insurance provided for in Section 8. Premiums and deductibles
with respect to such policies shall be a Clinic Expense.
3.1.13 Physician Recruiting. ProMedCo shall assist CPC in recruiting
additional physicians, as approved by the Policy Council, carrying out such
administrative functions as may be appropriate such as advertising for and
identifying potential candidates, checking credentials, and arranging
interviews; provided, however, CPC shall interview and make the ultimate
decision as to the suitability of any physician to become associated with the
Clinic. AU physicians recruited by ProMedCo and accepted by CPC shall be the
sole employees of CPC to the extent such physicians are hired as employees. Any
expenses incurred in the recruitment of physicians, including, but not limited
to, employment agency fees, relocation and interviewing expenses shall be Clinic
Expenses.
9
3.1.14 Supervision of Ancillary Services. ProMedCo shall operate and
supervise such ancillary services as approved by the Policy Council.
3.1.15 Strategic Planning Assistance. ProMedCo shall assist with and
implement the strategic plan as approved by the Policy Council.
3.1.16 Advertising and Public Relations. As provided in Section 2.2.
10, this would be subject to the review and approval of the Policy Council. The
program shall be conducted in compliance with applicable laws and regulations
governing professional advertising and in accordance with the standards and
medical ethics of the American Medical Association and the Alabama Medical
Association.
3.1.17 Files and Records. ProMedCo shall supervise and maintain custody
of all files and records relating to the operation of the Clinic, including but
not limited to accounting, billing, patient medical records, and collection
records. Patient medical records shall at all times be and remain the property
of CPC. The management of all files and records shall comply with applicable
state and federal statutes. ProMedCo shall use its good faith efforts to
preserve the confidentiality of patients medical records and use information
contained in such records only for the limited purpose necessary to perform the
services set forth herein, provided, however, in no event shall a breach of said
confidentiality be deemed a default under this Agreement.
3.2 Expansion of Clinic. ProMedCo will pursue various programs to
increase revenue and profitability including assisting CPC in adding additional
office based procedures, ancillary services and adding additional satellite
office(s) as determined by the Policy Council to be beneficial to the Clinic.
ProMedCo will also assist in recruiting new physicians and developing
relationships and affiliations with other physicians, hospitals, networks, HMOs,
etc. To assist in the continued growth and development of the Clinic, ProMedCo
may acquire other physician practices. CPC will cooperate with ProMedCo in such
expansion efforts and use its good faith efforts to assist ProMedCo with respect
thereto. Without limiting the generality of the foregoing, CPC will not enter
into any agreements with respect to any such matter without the prior consent of
ProMedCo.
3.3 Events Excusing Performance. ProMedCo shall not be liable to CPC
for failure to perform any of the services required herein in the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies, or
other events over which ProMedCo has no control for so long as such events
continue, and for a reasonable amount of time thereafter.
3.4 Compliance With Applicable Laws. ProMedCo shall comply with all
applicable federal, state and local laws, regulations and restrictions in the
conduct of its obligations under this Agreement.
3.5 Guaranty. Parent hereby guarantees the performance by ProMedCo of
ProMedCo's obligations under this Agreement.
3.6 Minimum Net Worth. During the Term of the Service Agreement Parent
shall maintain a minimum net worth of Two Million Five Hundred Thousand Dollars
($2,500, 000). The term "Net Worth" shall mean consolidated shareholders equity
of Parent and its subsidiaries, including redeemable preferred stock, less
liabilities determined in accordance with generally accepted accounting
principles. Parent shall notify CPC in writing in the event its Net Worth falls
below this minimum and shall provide CPC semiannually a letter evidencing
compliance with this Section 3.6.
4. OBLIGATIONS OF CPC
4.1 Professional Services. CPC shall provide professional services to
patients in compliance at all times with ethical standards, laws and
regulations applying to the medical profession. CPC shall also ensure that
10
each physician associated with CPC is licensed by the State of Alabama. In the
event that any disciplinary actions or medical malpractice actions are initiated
against any such physician, CPC shall immediately inform the Administrator of
such action and the underlying facts and circumstances. CPC shall carry out a
program to monitor the quality of medical care practiced, with ProMedCo's
assistance. CPC will cooperate with ProMedCo in taking steps to resolve any
utilization review or quality assurance issues which may arise in connection
with the Clinic.
4.2 Employment Of Physician Employees. CPC shall have complete control
of and responsibility for the hiring, compensation, supervision, evaluation and
termination of its Physician Shareholders and Physician Employees, although at
the request of CPC, ProMedCo shall consult with CPC regarding such matters. CPC
shall enforce formal employment agreements from each of its Physician
Shareholders and Physician Employees, hired or contracted, substantially in the
form attached hereto as Exhibit "C".
4.3 Non-Clinic Expenses. CPC shall be solely responsible for the
payment of all costs and expenses incurred in connection with CPC's operations
which are not Clinic Expenses, including, but not limited to, accounting and
other professional services fees, membership in professional associations,
continuing medical education, and licensing and board certification fees, plus
salaries and benefits, retirement plan contributions, health, disability and
life insurance premiums, payroll taxes for its physicians and Physician
Extenders.
4.4 Medical Practice. CPC shall use and occupy the Clinic Facility
exclusively for the practice of medicine, and shall comply with all applicable
local rules, ordinances and all standards of medical care. It is expressly
acknowledged by the parties that the medical practice or practices conducted at
the Clinic Facility shall be conducted solely by physicians associated with CPC
as employee or independent contractor, and no other physician or medical
practitioner shall be permitted to use or occupy the Clinic Facility without the
prior written consent of ProMedCo.
4.5 Professional Insurance Eligibility. CPC shall cooperate in the
obtaining and retaining of professional liability insurance by assuring that its
Physician Shareholders and Physician Employees are insurable, and participating
in an ongoing risk management program.
4.6 Employment Of Non-Physician Employees. Technical Employees will
remain in the employ of CPC. As provided in Section 3.1.3., ProMedCo will
provide payroll and administrative services for such Technical Employees, and
such Technical Employees, as provided for under Section IL 6. 1, shall be a
Clinic Expense.
4.7 Events Excusing Performance. CPC shall not be liable to ProMedCo
for failure to perform any of the services required herein in the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies, death
or Total Disability (as hereinafter defined) of any physician, or other events
over which CPC has no control for so long as such events continue, and for a
reasonable amount of time thereafter.
4.8 Compliance With Applicable Laws. CPC shall comply with all
applicable federal, state and local laws, regulations and restrictions in the
conduct of its obligations under this Agreement.
4.9 Restrictions on Use of Clinic Facility. CPC shall at all times
during the term of this Agreement comply with the policy of ProMedCo stated in
Section 6.2 herein.
4.10 CPC Employee Benefit Plans.
(a) As of the Effective Date of this Agreement, CPC has in effect the
employee welfare benefit plans (as such term is defined in Section 3(l) of the
11
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and the
employee pension benefit plans (as such term is defined in Section 3(2) of
ERISA), as set forth in Exhibit "D" to this Agreement.
(b) CPC shall not enter into any new "employee benefit plan" (as
defined in Section 3(3) of ERISA) without the express written consent of
ProMedCo. Except as otherwise required by law, CPC shall not materially amend,
freeze, terminate or merge any CPC Plan without the express written consent of
ProMedCo. CPC agrees to make such changes to CPC's Plan, including the freeze,
termination, or merger of such CPC Plan, as may be approved by ProMedCo.
(c) Expenses incurred in connection with any CPC Plan or other employee
benefit plan maintained by CPC, including without limitation the compensation of
counsel, accountants, corporate trustees and other agents shall be included in
Clinic Expenses.
(d) The contribution and administration expenses for Physician
Shareholders and Physician Employees shall be an expense of CPC. ProMedCo shall
make contributions or payments with respect to any CPC Plan, as a Clinic
Expense, on behalf of eligible Technical Employees.
(e) ProMedCo shall have the sole and exclusive authority to adopt,
amend, or terminate any employee benefit plan for the benefit of its employees.
ProMedCo shall have the sole and exclusive authority to appoint the trustee,
custodian, and administrator of any such plan.
4.11 Physician Powers of Attorney. CPC shall require all CPC Employees
to execute and deliver to ProMedCo powers of attorney, satisfactory in form and
substance to ProMedCo and CPC, appointing ProMedCo as attorney-in-fact for each
for the purposes set forth in Sections 3.1.8 and 3.1.9, which powers of attorney
shall immediately terminate upon termination of this Agreement.
4.12 Spokesperson. CPC shall serve as@ spokesperson for ProMedCo,
Parent and Clinic sales and development activities. The parties agree that Xx.
Xxxxxxx X. Xxxxxx and Xx. Xxxx Xxxxx, or such other Physician Shareholders as
the Policy Council shall appoint, shall serve in this capacity on behalf of CPC.
4.13 Physician Guarantees. AU CPC shareholders(Drs. Meiman, Bostick,
Montgomery, Holowach, Schendel, Gober, Machen, Brumleve, and Xxxxxxx) agree to
the terms and conditions of this Agreement as evidenced by their signature on
the Agreement. These physicians agree to personally guarantee the performance of
the obligations of CPC under this Agreement for a period of seven (7) years from
the effective date of this Agreement; provided, however, that in the event any
of the above named physicians employment with CPC is terminated due to death or
Total Disability, then such physician's guarantee shall terminate immediately
and provided further, however, in the event this Agreement is terminated in
accordance with Section 1 0 hereof then such physician's guarantee shall
terminate upon such termination of this Agreement.. For purposes of this
Agreement, "Total Disability" shall mean the physician's inability to perform
the normal duties of his employment by CPC as a physician. If there is any
disagreement between CPC and the physician as to the disability or
non-disability of the physician or as to the effective date of any such
disability, the same shall be determined after an examination of the physician
by an examining physician (the "Examining Physician") to be selected by CPC and
ProMedCo. The physician shall be available for such an examination at any
reasonable time. The determination of such Examining Physician selected by the
Employer shall be conclusive evidence of the disability or the nondisability of
the physician and of the date any such disability began. If the physician should
not cooperate in the examination by such physician selected by CPC and ProMedCo,
then, for purposes hereof, the determination of the physician's disability or
nondisability and the date any such disability began shall be made by CPC and
ProMedCo in their sole
12
discretion.
5.RECORDS
5.1 Patient Records. Upon termination of this Agreement, CPC shall
retain all patient medical records maintained by CPC or ProMedCo in the name of
CPC. CPC shall, at its option, be entitled to retain copies of financial and
accounting records relating to all services performed by CPC.
5.2 Other Records. All records relating in any way to the operation
of the Clinic which are not the property of CPC under the provisions of Section
5.1 above, shall at an times be the property of ProMedCo.
5.3 Access to Records. During the term of this Agreement, and
thereafter, CPC or its designee shall have reasonable access upon reasonable
notice during normal business hours ProMedCo's financial records, including, but
not limited to, records of collections, expenses and disbursements as kept by
ProMedCo in performing ProMedCo's obligations under this Agreement, and CPC may
copy any or all such records.
6. FACILITIES TO BE PROVIDED BY PROMEDCO
6.1 Facilities. ProMedCo hereby agrees to provide or arrange as a
Clinic Expense the offices and facilities for Clinic operations, including but
not limited to, the Clinic Facility and all costs of repairs, maintenance and
improvements, utility (telephone, electric, gas, water) expenses, normal
janitorial services, related real or personal property lease cost payments and
expenses, taxes and insurance, refuse disposal and all other costs and expenses
reasonable incurred in conducting operations in the Clinic Facility during the
term of this Agreement.
6.2 Use of Facilities. Voluntary abortions will not be performed in
facilities that are owned or leased by ProMedCo or any of its affiliates in
whole or in part. ProMedCo and CPC agree that CPC, as an independent contractor,
is a separate organization that retains the authority to direct the medical,
professional, and ethical aspects of its medical practice. If a Physician
Shareholder or a Physician Employee performs abortion procedures in any
facility, ProMedCo shall not receive any ProMedCo Distribution from the revenue
generated from such procedures.
7. FINANCIAL ARRANGEMENTS
7.1 Payments to CPC. CPC and ProMedCo agree that the compensation set
fourth herein is being paid to CPC in lieu of charges which CPC or its Physician
Shareholders or CPC Employees would otherwise earn and retain for the provision
of medical services to patients of their medical practice and which CPC or the
Physician Shareholders or CPC Employees would otherwise xxxx and retain for
their own account. As compensation for its services rendered, each month
ProMedCo shall pay CPC the amount of the CPC Distribution. All Net Clinic
Revenues after deduction of Clinic Expenses, and the ProMedCo Distribution,
shall be referred to as the " CPC Distribution."
7.2 Distribution. ProMedCo shall pay to CPC the CPC Distribution. Some
amounts may need to be estimated, with adjustments made as necessary the
following month. Any audit adjustments would be made after completion of the
fiscal year audit.
7.3 Clinic Expenses. Commencing on the Effective Date, ProMedCo shall
pay an Clinic Expenses as they fall due, provided, however, that ProMedCo may,
in the name of and on behalf of CPC, contest in good faith any claimed Clinic
Expenses as to which there is any dispute regarding the nature, existence or
validity of such claimed Clinic Expenses. ProMedCo hereby agrees to indemnify
and hold CPC harmless from and against any liability, loss, damages, claims,
causes of action and reasonable expenses of CPC (including, without limitation,
reasonable attorney fees) resulting from the contest of any Clinic
13
Expenses.
7.4 Accounts Receivable. Except for the first month of this Agreement,
on approximately the 15th day of each month, ProMedCo shall purchase the
accounts receivable of CPC arising during the previous month, by payment of
cash, or other readily available funds into an account of CPC. The consideration
for the purchase shall be an amount equal to the CPC Distribution for such
previous month. Although it is the intention of the parties that ProMedCo
purchase and thereby become owner of the accounts receivable of CPC, in case
such purchase shall be ineffective for any reason, CPC, as of the Effective Date
of this Agreement, grants and shall cause each CPC Employee to grant to ProMedCo
a first priority lien on and security interest in and to any and all interest of
CPC and such CPC Employees in any accounts receivable generated by the medical
practice of CPC and the CPC Employees or otherwise generated through the
operations of the Clinic during the term of this Agreement, and all proceeds
with respect thereto,
14
to secure the performance of CPC under the terms of this Agreement including,
but not limited to the transfer of funds in accordance with Section 3.1.9, and
this Agreement shall be deemed to be a security agreement to the extent
necessary to give effect to the foregoing. In addition, CPC shall cooperate with
ProMedCo and execute and deliver, and cause each CPC Employee to execute and
deliver, all reasonably necessary documents in connection with the pledge of
such accounts receivable to ProMedCo or at ProMedCo's option, its lenders. All
collections in respect of such accounts receivable shall be deposited in a bank
account in accordance with Section 3.1.9. To the extent CPC or any CPC Employee
comes into possession of any payments in respect of such accounts receivable,
CPC or such CPC Employee shall direct such payments to be deposited in
accordance with Section 3.1.9.
8. INSURANCE AND INDEMNITY
8.1 Insurance to Be Maintained by ProMedCo. Throughout the term of this
Agreement, ProMedCo will purchase and maintain, as a Clinic Expense,
comprehensive professional liability insurance for all professional
non-physician employees of ProMedCo and CPC with limits as determined reasonable
by ProMedCo in its national program, comprehensive general liability insurance
and property insurance covering the Clinic Facility and operations.
8.2 Insurance to Be Maintained by CPC. Unless otherwise determined by
the Policy Council, throughout the term of this Agreement, subject to the
provisions of Section 4.5 and Section 8. 1, CPC shall maintain comprehensive
professional liability insurance with limits of not less than $1,000,000 per
claim and with aggregate policy limits of not less than $3,000,000 per physician
and a separate limit for CPC, the cost of which shall be a Clinic Expense. CPC
shall be responsible for all liabilities (including without limitation
deductibles and excess liabilities) not paid within the limits of such policies.
ProMedCo shall have the option, with Policy Council approval, of providing such
professional liability insurance through an alternative program, provided such
program meets the requirements of the Insurance Commissioner of the State of
Alabama.
8.3 Tail Insurance Coverage. Unless covered by an "occurrence"
malpractice policy, CPC will cause each individual physician associated with the
Clinic to enter into an agreement with CPC that upon termination of such
physician's relationship with CPC, for any reason, tail insurance coverage will
be purchased by the individual physician. Such provisions may be contained in
employment agreements, restrictive covenant agreements or other agreements
entered into by CPC and the individual physicians, and CPC hereby covenants with
ProMedCo to enforce such provisions relating to the tail insurance coverage or
to provide such coverage at the expense of CPC.
8.4 Additional Insured. CPC and ProMedCo agree to use their good faith
efforts to have each other named as an additional insured on the other's
respective professional liability insurance programs at ProMedCo's expense.
8.5 Indemnification. CPC shall indemnify, hold harmless and defend
ProMedCo, its officers, directors and employees, from and against any and all
liability, loss, damage, claim, causes of action, and expenses (including
reasonable attorneys' fees), to the extent not covered by insurance, caused or
asserted to have been caused, directly or indirectly, by or as a result of the
performance of medical services or any other acts or omissions by CPC and/or its
shareholders, agents, employees and/or subcontractors (other than ProMedCo)
during the term hereof, including any claim against ProMedCo by an CPC Employee,
which claim arises out of such CPC Employees' employment relationship with CPC
or as a result of services performed by such CPC Employee, and which claim would
typically be covered by worker's compensation and ProMedCo shall indemnify, hold
harmless and defend CPC, its officers, directors and employees, from and against
any and all liability, loss, damage, claim, causes of action, and expenses
(including reasonable attorneys' fees), to the extent not covered by insurance,
caused or asserted to have been caused, directly or indirectly, by or as a
result of the performance of any acts or omissions by ProMedCo and/or its
shareholders, agents, employees and/or subcontractors (other than CPO during the
term of this
15
Agreement including, but not limited to, the purchase of accounts receivable of
CPC pursuant to Section 7.4 provided any such liability is not incurred as a
result of any intentional act or failure to act, on the part of CPC or any
director, officer, Shareholder, employee or agent thereof.
9. RESTRICTIVE COVENANTS AND LIQUIDATED DAMAGES
The parties recognize that the services to be provided by ProMedCo
shall be feasible only if CPC operates an active medical practice to which the
physicians associated with CPC devote their full time and attention. To that
end:
9.1 Restrictive Covenants by CPC. During the term of this Agreement,
CPC shall not establish, operate or provide physician services at any medical
office, clinic or other health care facility providing services substantially
similar to those provided by CPC pursuant to this Agreement anywhere within the
Restricted Area as defined within Exhibit C without the consent of ProMedCo.
9.2 Restrictive Covenants By Current Physician Shareholders and
Physician Employees. CPC shall enforce employment agreements, substantially in
the form of Exhibit B and in a form reasonably satisfactory to ProMedCo, with
its current Physician Shareholders and Physician Employees pursuant to which the
Physician Shareholders and Physician Employees agree that (a) during the term of
their employment agreement not to establish, operate or provide physician
services at any medical office, clinic or outpatient and/or ambulatory treatment
or diagnostic facility providing services substantially similar to those
provided by CPC pursuant to this Agreement within the Restricted Area as defined
within Exhibit C and (b) if the termination of the employment agreement occurs
prior to the expiration of the initial seven (7) year term of the employment
agreement that for a period of twenty-four (24) months after the date of
termination of his employment with CPC, the Physician Shareholders and Physician
Employees shall not, either directly as a partner, employer,' agent, independent
contractor, employee or indirectly through a corporation, partnership,
affiliate, subsidiary or otherwise, (i) enter into a provider agreement or other
contract with, nor provide any medical services in connection with or pursuant
to any such provider agreement or other contract, any third party payor having a
provider agreement or other contract with CPC or any other employee of CPC at
any time within 120 days prior to and including the date of Physician
Shareholder's or Physician Employee's termination of employment with CPC or (ii)
solicit, induce or attempt to induce any patient of CPC to become a patient of
such Physician Shareholder or Physician Employee or any partner, employee or
affiliate of such Physician Shareholder or Physician Employee. As used herein, a
third party payor shall include, without limitation, any employer, coalition of
employers, union or similar organization maintaining a health benefit plan for
the benefit of its employees or members, any insurance company, any Blue
Cross/Blue Shield plan, any health maintenance organization, preferred provider
organization, independent physicians association, physicians hospital
organization, or similar entity or arrangement which contracts for physician
services on behalf of its employees or members or other third party payors.
However, as used herein, the term "third party payor" shall not include the
federal Medicare program or the state Medicaid program, although such terms
shall include any health maintenance organization providing Medicare or Medicaid
benefits to plan participants. This provision shall be limited in its
application to the Restricted Area as defined within Exhibit C. The employment
agreements shall have a term of seven (7) years ("employment agreement term" as
used within this Section 9 shall mean a time period of seven (7) years),
commencing on the effective date of the CFP Stock Purchase Agreement and the FMC
Stock Purchase Agreement. ProMedCo shall have third-party rights to enforce such
agreements.
9.3 Restrictive Covenants By Future Physician Employees. CPC shall
obtain and enforce formal employment agreements from each of its future
Physician Shareholders and Physician Employees, pursuant to which such
physicians agree (a) during the term of their employment agreement not to
establish, operate or provide physician services at any medical office, clinic
or outpatient and/or ambulatory treatment or diagnostic facility providing
services substantially
16
similar to those provided by CPC pursuant to this Agreement within the
Restricted Area as defined within Exhibit C and (b) that for a period of
twenty-four (24) months after the date of termination of his employment with
CPC, the Physician Shareholders and Physician Employees shall not, either
directly as a partner, employer, agent, independent contractor, employee or
indirectly through a corporation, partnership, affiliate, subsidiary or
otherwise, (i) enter into a provider agreement or other contract with, nor
provide any medical services in connection with or pursuant to any such provider
agreement or other contract, any third party payor having a provider agreement
or other contract with CPC or any other employee of CPC at any time within 120
days prior to and including the date of Physician Shareholder's or Physician
Employee's termination of employment with CPC or (ii) solicit, induce or attempt
to induce any patient of CPC to become a patient of such Physician Shareholder
or Physician Employee or any partner, employee or affiliate of such Physician
Shareholder or Physician Employee. As used herein, a third party payor shall
include, without limitation, any employer, coalition of employers, union or
similar organization maintaining a health benefit plan for the benefit of its
employees or members, any insurance company, any Blue Cross/Blue Shield plan,
any health maintenance organization, preferred provider organization,
independent physicians association, physicians hospital organization, or similar
entity or arrangement which contracts for physician services on behalf of its
employees or members or other third party payors. However, as used herein, the
term 'third party payor" shall not include the federal Medicare program or the
state Medicaid program, although such terms shall include any health maintenance
organization providing Medicare or Medicaid benefits to plan participants. This
provision shall be limited in its application to the Restricted Area as defined
within Exhibit C. The employment agreements shall have a term of five (5) years.
ProMedCo shall have third-party rights to enforce such agreements.
9.4 Physician Shareholder and Physician Employee Liquidated Damages.
The employment agreement terms described in Sections 9.2 and 9.3 of this
Agreement will provide that the Physician Shareholders and Physician Employees
(existing or future) may be released from the restrictive covenants described in
Sections 9.2(b) and (9.3(b) contained in their employment agreement by paying
Liquidated Damages in the amount of the lesser of Two Hundred Thousand Dollars
($200,000) or one (1) times such physician's income, as reported to the Internal
Revenue Service for the previous twelve (12) months. In addition, if a Physician
Shareholder or Physician Employee received any ProMedCo consideration pursuant
to the CFP Stock Purchase Agreement or the FMC Stock Purchase Agreement, and
said Physician Shareholder or Physician Employee terminates their employment
agreement with CPC for any reason (other than death or disability) prior to the
seventh anniversary of the CFP Stock Purchase Agreement and the FMC Stock
Purchase Agreement, or is terminated for cause by CPC prior to the seventh
anniversary of the CFP Stock Purchase Agreement and the FMC Stock Purchase
Agreement, then said Physician Shareholder or Physician Employee will forfeit
any Unredeemed Equity, as hereinafter defined, that was yet to be received
pursuant to the CFP Stock Purchase Agreement or the FMC Stock Purchase
Agreement, as the case may be. Such payments shall be made to ProMedCo by CPC
simultaneously with the payment by the physician to CPC. Such payment shall be
first applied to all costs incurred by ProMedCo in the enforcement of the
employment agreement for that departing physician and in recruiting a
replacement physician for that departing physician. The remainder, if any, shall
become an additional service fee to be paid to ProMedCo pursuant to Section 7.
The accounting treatment of such funds shall be consistently applied and
approved by ProMedCo's independent certified public accountants and the Policy
Council.
9.5 Restrictive Covenants of ProMedCo. During the term of this
Agreement, ProMedCo shall not establish, operate or enter into a service
agreement with, or provide the same services as those provided under this
Agreement to, any medical practice within the Restricted Area set forth in
Exhibit C, without the consent of CPC.
9.6 Enforcement. ProMedCo and CPC acknowledge and agree that since a
remedy at law for any breach or attempted breach of the provisions of this
Section 9 shall be inadequate, either party shall be entitled to specific
17
performance and injunctive or other equitable relief in case of any such breach
or attempted breach, in addition to whatever other remedies may exist by law.
All parties hereto also waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive or other equitable
relief. If any provision of Section 9 relating to territory described therein
shall be declared by a court of competent jurisdiction to exceed the maximum
time period, scope of activity, restricted or geographical area such court deems
reasonable and enforceable under applicable law, the time period, scope of
activity, restricted and/or area of most restriction deemed to be reasonable and
enforceable by the court shall thereafter be the time period, scope of activity,
restricted and/or area of restriction applicable to the restrictive covenant
provisions in this Section 9. The invalidity or non-enforceability of this
Section 9 in any respect shall not affect the validity or enforceability of the
remainder of this Section 9 or of any other provisions of this Agreement unless
the invalid or non-enforceable provisions materially affect the benefits either
party would otherwise be entitled to receive under this Section 9 or any other
provision of this Agreement.
9.7 Termination of Restrictive Covenants. Notwithstanding anything to
the contrary contained herein, if this Agreement is terminated, the employment
agreement terms contained in this Section 9 shall be null and void and of no
further force or effect.
10. TERM; RENEWAL; TERMINATION
10.1 Term and Renewal. The term of this Agreement shall commence on the date
hereof and shall continue for forty (40) years, after which it shall
automatically renew for 5-year terms unless either party provides the other
party with at least six (6) months but not more than nine (9) months written
notice prior to any renewal date.
10.2 Termination by CPC. CPC may terminate this Agreement as follows:
10.2.1 In the event of the filing of a petition in voluntary bankruptcy
or an assignment for the benefit of creditors by ProMedCo or Parent, or upon
other action taken or suffered, voluntarily or involuntarily, under any federal
or state law for the benefit of debtors by ProMedCo, except for the filing of a
petition in involuntary bankruptcy against ProMedCo which is dismissed within 30
days thereafter, CPC may give notice of the immediate termination of this
Agreement.
10.2.2 In the event ProMedCo or Parent shall materially default in the
performance of any duty or obligation imposed upon it by this Agreement and such
default shall continue for a period of 90 days after written notice thereof has
been given to ProMedCo by CPC; or ProMedCo shall fail to remit the payments due
as provided in Section 7 hereof and such failure to remit shall continue for a
period of ten (10) days after written notice thereof, CPC may terminate this
Agreement. Termination of this Agreement pursuant to this Section 10.2.2 by CPC
shall require the affirmative vote of 75% of the Physician Shareholders.
10.2.3 In the event ProMedCo or Parent shall default on any of its
payments due under the Subordinated Convertible Notes pursuant to the CFP Stock
Purchase Agreement or the FMC Stock Purchase Agreement between the parties, and
such failure to remit shall continue for ten (10) business days after written
notice thereof.
10.2.4 During the first five (5) business days following the fifth
anniversary of the Agreement, if CPC and or CPC's Shareholders have not realized
Two Million, Two Hundred Twelve Thousand, Eight Hundred Sixty-Six Dollars
($2,212,866) or such amount as adjusted in accordance with the CFP Stock
Purchase or the FMC Stock Purchase Agreement, as applicable in Value (as defined
below), it may elect to receive Two Million, Two Hundred Twelve Thousand, Eight
Hundred Sixty-Six Dollars ($2,212,866) or such amount as adjusted in accordance
with the CFP Stock Purchase or the FMC Stock Purchase Agreement, as applicable
less any Value received prior to such election.
18
1. Value received shall equal the sum of:
Four Hundred Fifty-Six Thousand, Five Hundred Twenty-Two Dollars ($456,522) plus
Value of Stock Received.
Value of Stock Received is defined as the sum of:
The amount received by CPC and/or CPC Shareholders upon the sale of ProMedCo
stock, plus
The Market Value of any shares possessed by CPC and/or CPC Shareholders that is
either: (1) registered or (2) that is eligible to be sold pursuant to Rule 144
2. Within 30 days from the receipt of written notice by CPC of this
election, ProMedCo shall be required to pay to CPC in cash, the amount
calculated above. Simultaneously with such payment, CPC shall deliver the
Subordinated Convertible Notes to ProMedCo, as well as Certificates representing
shares of Stock not included in the calculation of Value Of Stock Received. In
addition, the Agreement shall continue for the remainder of its 40 year term.
3. Should ProMedCo not make this payment, then CPC may terminate the
Agreement.
10.2.5 On the second, fourth and sixth anniversaries of this Agreement
in the event the average annual Distribution Funds for the previous two year
period immediately preceding each such anniversary for CPC is less than
seventy-five percent (75 %) of the Distribution Funds of CFP and FMC, in the
aggregate, for the twelve (12) month period ended December 31, 1995.
10.2.6 Within ten (10) days of receipt of notice from Parent that. it
does not in . meet the requirements of Section 3.6. In the event CPC fails to
terminate this Agreement pursuant to this Section 10.2.6, CPC's right to
terminate this Agreement under this Section 10.2.6 shall be waived and of no
further force or effect.
10.3 Termination by ProMedCo. ProMedCo may terminate this Agreement
as follows:
10.3.1 In the event of the filing of a petition in voluntary bankruptcy
or an assignment for the benefit of creditors by CPC, or upon other action taken
or suffered, voluntarily or involuntarily, under any federal or state law for
the benefit of debtors by CPC, except for the filing of a petition in
involuntary bankruptcy against CPC which is dismissed within 30 days thereafter,
ProMedCo may give notice of the immediate termination of this Agreement.
10.3.2 In the event CPC shall materially default in the performance of
any duty or obligation imposed upon it by this Agreement or in the event a
majority of the Physicians Shareholders shall materially default in the
performance of any duty or obligation imposed upon them by this Agreement or by
their employment agreements with CPC, and such default shall continue for a
period of 90 days after written notice thereof has been given to CPC and such
Physician Shareholders by ProMedCo, ProMedCo may terminate this Agreement.
10.3.3 ProMedCo may terminate the Agreement if three (3) or more of the
original physician shareholders (Drs Meiman, Bostick, Montgomery, Holowach,
Schendel, Gober, Xxxxxx, Xxxxxxx and Brunileve) terminate their Employment
Agreements with CPC during the first seven (7) years of the term of this
Agreement, for reasons other than death or Total Disability, as such term is
defined within Section 4.13.
10.3.4 On the second, fourth and sixth anniversaries of this Agreement
in the event the average annual Distribution Funds for the previous two year
period immediately preceding each such anniversary is less than seventy-five
percent (75
19
%) of the Distribution Funds of CFP and FMC, in the aggregate, for the twelve
(12) month period immediately preceding the date of this Agreement.
10.4 Actions After Termination. In the event that this Agreement shall
be terminated, the CPC Distribution and the ProMedCo Distribution shall be paid
through the effective date of termination. In addition, the various rights and
remedies herein granted to the aggrieved party shall be cumulative and in
addition to any others such party may be entitled to by law. The exercise of one
or more rights or remedies shall not impair the right of the aggrieved party to
exercise any other right or remedy, at law. Upon termination of this Agreement,
CPC and the CPC Shareholders shall:
10.4.1 Intangible Assets. Purchase from ProMedCo at book value the
Restrictive Covenants provided for in Section 9 and any other intangible Assets
set forth on the Opening Balance Sheet, as adjusted through the last day of the
month most recently ended prior to the date of such termination in accordance
with GAAP to reflect amortization or depreciation of the Restrictive Covenants
and intangibles, which amortization shall be for a period not in excess of 40
years. For purposes of this Section 10.4.1 "Intangible Assets" shall mean those
Assets other than those Assets described in Sections 10.4.2 - 10.4.5 hereof.
10.4.2 Real Estate. Purchase from ProMedCo all real estate, if any,
associated with the Clinic at the then book value thereof.
10.4.3 Improvements. Purchase all improvements, additions or leasehold
improvements which have been made by ProMedCo and which relate solely to the
performance of its obligations under this Agreement or the properties subleased
by ProMedCo, if any, at book value.
10.4.4 Debts. Assume all ordinary and necessary debt, contracts,
payables and leases which are obligations of ProMedCo and which relate
principally to the performance of its obligations under this Agreement or the
properties subleased by ProMedCo.
10.4.5 Other Tangible Assets. Purchase from ProMedCo at book value all
of the equipment listed as set forth in the CFP Stock Purchase Agreement and the
FMC Stock Purchase Agreement, including all replacements and additions thereto
made by ProMedCo with the approval of the Policy Council pursuant to the
performance of its obligations under this Agreement, and all other tangible
Assets, including, but not limited to inventory, supplies, accounts receivable
less Adjustments and other tangible Assets set forth on the Opening Balance
Sheet, as adjusted through the last day of the month most recently ended prior
to the date of such termination in accordance with GAAP to reflect operations of
the Clinic, depreciation, amortization and other adjustments of Assets shown on
the Opening Balance Sheet.
10.4.6 Stock. Purchase from ProMedCo all shares of capital stock of CFP
and FMC for an amount equal to net book value of CFP and FMC in the aggregate
less the aggregate book value paid in accordance with Section 10.4.1 - 10.4.5
hereof.
10.4.7 Closing of Repurchase Upon Termination by ProMedCo or by CPC
Pursuant to Section 10.2.5 or 10.2.6. CPC and the CPC Shareholders shall pay
cash or may use the Subordinated Convertible Notes issued pursuant to the CFP
Stock Purchase Agreement or the FMC Stock Purchase Agreement as currency for the
repurchase described herein. The value of the Subordinated Convertible Notes for
purposes of repurchase shall be @@, @, less the value of stock received as
defined in Section 10.2.4, but in nicase less than $0. The amount of the
purchase price shall be reduced by the amount of debt and liabilities of
ProMedCo assumed by CPC and shall be reduced by any payment ProMedCo has failed
to make under this Agreement. CPC and any physician associated with CPC shall
execute such documents as may be required to assume the liabilities set forth in
Section 10.4.4. and to remove ProMedCo from any liability with respect to such
repurchased Assets and with respect to any property leased or subleased by
ProMedCo. The closing date for the repurchase shall be determined by CPC, but
20
shall in no event occur later than 180 days from the date of the notice of
termination. The termination of this Agreement as provided for in this Section
10 shall become effective upon the closing of the sale of the Assets and CPC
shall be released from the Restrictive Covenants provided for in Section 9 on
the closing date. From and after any termination, each party shall provide the
other party with reasonable access to books and records then owned by it to
permit such requesting party to satisfy reporting and contractual obligations
which may be required of it.
10.4.8 Closing of Repurchase Upon Termination by CPC under Sections
10.2.1 - 10.2.4.
(a) CPC and the CPC Shareholders shall deliver to ProMedCo any
'Unredeemed Equity" received in connection with the CFP Stock Purchase Agreement
or the FMC Stock Purchase Agreement. Unredeemed Equity shall mean any shares of
ProMedCo common stock which remain unsold on the date of termination and the
fair market value of any ProMedCo common stock within ninety (90) days prior to
termination and any principal amount of the Subordinated Convertible Notes which
has not been converted into ProMedCo common stock as of the date of termination.
The delivery of the Unredeemed Equity to ProMedCo shall be deemed to be payment
in full for the repurchase obligations under this Section 10.
(b) For a period of one (1) year after termination of this Agreement by
CPC under Sections 10.2.1 - 10.2.4, ProMedCo and Parent will not provide
services to any medical group substantially similar to those provided under this
Agreement anywhere within the Restricted Area as defined in Exhibit C without
the consent of CPC.
11. DEFINITIONS
For the purposes of this Agreement, the following definitions shall apply:
11.1 Net Clinic Revenues shall mean all of CPC's gross fees or revenues
recorded each month for services rendered in connection with the Clinic,
including (a) professional medical services furnished to patients by physicians
and Physician Extenders and other fees or income generated in their capacity as
professionals, whether in an inpatient or outpatient setting plus (b)
ancillaries, including medical director fees, global and technical fees from
ancillary services; fees for medical, utilization and quality assurance
management; interest on malpractice reserve funds; and fees for depositions and
expert testimony. The gross fees or revenues shall be reduced by any
Adjustments. Net Clinic Revenues specifically excludes Risk Pool Surpluses and
revenues or compensation not to exceed two nights per month per physician
received by CPC Physician shareholders as a result of the provision of services
at urgent care centers which such physician shareholders are providing at nights
as of the date of this Agreement.
11.2 Distribution Funds shall mean those amounts remaining after Clinic
Expenses have been deducted from Net Clinic Revenues.
11.3 ProMedCo Distribution shall mean 15% of Distribution Funds plus a
percentage of Risk Pool Surpluses established by Exhibit A.
11.4 Clinic shall mean the medical care services, including, but not
limited to the practice of medicine, and all related healthcare services
provided by CPC and the CPC Employees, utilizing the management services of
ProMedCo and the Clinic Facility, regardless of the location where such services
are rendered.
11.5 Clinic Facility shall mean the clinic facilities located at 000
Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxx, 00000 and 0000 Xxxxxxx Xxxxxxx 000,
Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, and any substitute facility or additional
facility location, within the Restricted Area as defined within Exhibit C.
11.6 Clinic Expenses shall mean the amount of all expenses incurred in
the operation of the Clinic including, without limitation:
21
11.6.1 Salaries, benefits (including contributions under any Parent
benefit plan), and other direct costs of all employees of ProMedCo and Technical
Employees attributable to CPC;
11.6.2 Direct costs, including benefits, of all employees or
consultants of Parent or affiliate of ProMedCo who, with approval of the Policy
Council, provides services at or in connection with CPC; provided, however, only
that portion of such employee's or consultant's costs without xxxx-up by Parent
that is allocable to Clinic will be a Clinic Expense;
11.6.3 Obligations of ProMedCo or Parent under leases or subleases
related to Clinic operations;
11.6.4 Interest Expense on indebtedness reasonably incurred by ProMedCo
or Parent to finance or refinance any of its obligations or services provided
under this Agreement and directly attributable to the Clinic. Interest will be
charged for loans or operating cash advances from Parent; in such event, charges
will be computed at a floating rate that is equal to the current blended
borrowing rate in effect for outside borrowing sources of Parent.
11.6.5 Personal property and intangible taxes assessed against
ProMedCo's assets used in connection with the operation of Clinic commencing on
the date of this Agreement;
11.6.6 Malpractice insurance expenses to the extend extent provided in
Section 8.
11.6.7 Other expenses reasonably incurred by ProMedCo in carrying out
its obligations under this Agreement.
11.6.8 In the event an opportunity arises for additional physicians in
the service area of CPC to become employed by or merge with CPC, and is approved
by the Policy Council, amortization of intangible asset value as a result of
each such transaction shall be a Clinic Expense.
11.7 Clinic Expenses shall not include:
11.7.1 Corporate overhead charges or any other expenses of Parent or
any corporation affiliated with Parent other than the kind of items listed
above;
11.7.2 Any federal or state income taxes;
11.7.3 Any expenses which are expressly designated herein as expenses
or responsibilities of CPC and/or CPC Employees;
11.7.4 Any amortization expense resulting from the amortization of
expenses incurred in connection with the acquisition and execution of the CFP
Stock Purchase Agreement or the FMC Stock Purchase Agreement and this Agreement;
and
11.7.5 Interest expense on indebtedness incurred by ProMedCo or Parent
to finance the consideration paid under the CFP Stock Purchase Agreement or the
FMC Stock Purchase Agreement.
11.7.6 Any liabilities, judgements or settlements assessed against CPC
or Physician Shareholders in excess of any insurance policy limits.
11.8 Risk Pool Surpluses shall mean all hospital incentive funds,
specialists incentive funds, and funds from shared risk pools under any
risk-sharing arrangements. Risk Pool Surpluses shall be calculated by
aggregating all risk pools applicable, including making any deductions for pools
that are in a deficit position, and after the direct expenses of risk pool
management have been deducted.
11.9 Opening Balance Sheet shall mean the balance sheet of ProMedCo
as of
22
the Effective Date (as defined in the CFP Stock Purchase Agreement or the FMC
Stock Purchase Agreement as applicable), prepared in accordance with GAAP
(except for the absence of certain note information), and substantially in the
form of the attached Exhibit B subject to adjustments in the Consideration (as
defined in the CFP Stock Purchase Agreement and the FMC Stock Purchase
Agreement).
11.10 Technical Employees shall mean technicians who provide services
in the diagnostic areas of CPC's practice, such as employees of the Clinic
laboratory, radiology technicians and cardiology technicians. AU Technical
Employees shall be CPC employees.
11.11 Physician Shareholders shall mean any physician who is a
shareholder of CPC, both as of the date of this Agreement (which said Physician
Shareholders are parties to this Agreement) and at any future point in time.
11.12 Physician Employees shall mean any physician employed by CPC and
providing medical services to patients on behalf of CPC, who are not Physician
Shareholders.
11.13 CPC Employees shall mean all Physician Shareholders, Physician
Employees and Technical Employees at the relevant date.
11.14 Effective Date shall mean 12:01 a.m. March 6, 1996.
11.15 Physician Extenders shall mean Nurse Anesthetists, Physician
Assistants, Nurse Practitioners, Psychologists, Podiatrists and other such
positions, and any position that generates a professional charge, but excluding
Technical Employees.
11.16 Adjustments "Adjustments" shall mean any Adjustments to CPC's
gross xxxxxxxx for uncollectible accounts, discounts, Medicare and Medicaid
disallowances, workers' compensation discount, employee/dependent health care
benefit programs, professional courtesies, and other activities that do not
generate a collectible fee. Any adjustments made shall be based on a reasonable
historical basis, or a reasonable prospective basis should a new payor agreement
apply, and shall be periodically modified during the year to reflect the actual
Adjustments. Final Adjustments and any resulting payments owed by one party to
the other shall be made within (30) days after completion of the fiscal year
audit.
12. GENERAL PROVISIONS
12.1 Independent Contractor. It is acknowledged and agreed that CPC and
ProMedCo are at all times acting and performing hereunder as independent
contractors. Notwithstanding the authority granted to ProMedCo herein, ProMedCo
shall neither have nor exercise any control or direction over the methods by
which CPC or the CPC Employees practice medicine. The sole function of ProMedCo
hereunder is to provide all management services in a competent, efficient and
satisfactory manner. ProMedCo shall not, by entering into and performing its
obligations under this Agreement, become liable for any of the existing
obligations, liabilities or debts of CPC unless otherwise specifically provided
for under the terms of this Agreement. ProMedCo will in its management role have
only an obligation to exercise reasonable care in the performance of the
management services. Neither party shall have any liability whatsoever for
damages suffered on account of the willful misconduct or negligence of any
employee, agent or independent contractor of the other party. Each party shall
be solely responsible for compliance with all state and federal laws pertaining
to employment taxes, income withholding, unemployment compensation contributions
and other employment related statutes regarding their respective employees,
agents and servants.
12.2 Proprietary Property.
12.2. Each party agrees that the other party's proprietary property
shall not be possessed, used or disclosed otherwise than may be necessary for
the
23
performance of this Agreement or except as may be required by law. Each party
acknowledges that its violation of this Agreement would cause the other party
irreparable harm, and may (without limiting the other party's remedies for such
breach) be enjoined at the instance of the other party. Each party agrees that
upon termination of this Agreement for any reason, absent the prior written
consent of the other party, it shall have no right to and shall cease all use of
the other party's proprietary property, and shall return all such proprietary
property of the other party in its possession to the other party.
12.2.2 ProMedCo shall be the sole owner and holder of all fight, title
and interest, to all intellectual property ftimished by it under this Agreement,
including, but not limited to the trade name "CPC, " all computer software,
copyright, services xxxx and trademark right to any material or documents
acquired, prepared, purchased or furnished by ProMedCo pursuant to this
Agreement. CPC shall have no right, title or interest in or to such material and
shall not, in any manner, distribute or use the same without the prior written
authorization of ProMedCo, provided, however, that the foregoing shall not
restrict CPC from distributing managed care information brochures and materials
without the prior written approval of ProMedCo provided no Proprietary Property
of ProMedCo is contained therein. Notwithstanding the preceding, however,
ProMedCo agrees that CPC shall be entitled to use on a nonexclusive and
nontransferable basis for the term of this Agreement the name "CPC" as may be
necessary or appropriate in the performance of CPC's services and obligations
hereunder.
12.3 Cooperation. Each of the parties shall cooperate fully with the
other in connection with the performance of their respective duties and
obligations under this Agreement.
12.4 Licenses, Permits and Certificates. ProMedCo and CPC shall each
obtain and maintain in effect, during the term of this Agreement, all licenses,
permits and certificates required by law which are applicable to their
respective performance pursuant to this Agreement.
12.5 Compliance with Rules, Regulations and Laws. ProMedCo and CPC
shall comply with all federal and state laws and regulations in performance of
their duties and obligations hereunder. Neither party, nor their employees or
agents, shall take any action that would jeopardize the other party's
participation, if applicable, in any federal or state health program including
Medicare and Medicaid. ProMedCo and CPC shall take particular care to ensure
that no employee or agent of either party takes any action intended to violate
Section 1128B of the Social Security Act with respect to soliciting, receiving,
offering or paying any remuneration (including any kickback, bribe, or rebate)
directly or indirectly, overtly or covertly, in cash or in kind in return for
referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part under Title XVIII or XIIX of the Social Security Act, or for purchasing,
leasing, ordering, or arranging for or recommending purchasing, leasing, or
ordering any good, facility, service, or item for which payment may be made in
whole or in part under Title XVIII or XIIX of the Social Security Act.
12.6 Generally Accepted Accounting Principles (GAAP). All financial
statements and calculations contemplated by this Agreement will be prepared or
made in accordance with generally accepted accounting principles consistently
applied unless the parties agree otherwise in writing.
12.7 Notices. Any notices required or permitted to be given hereunder
by either party to the other may be given by personal delivery in writing or by
registered or certified mail, postage prepaid, with return receipt requested.
Notices shall be addressed to the parties at the addresses appearing on the
signature page of the Agreement, but each party may change such party's address
by written notice given in accordance with this Section. Notices delivered
personally will be deemed communicated as of actual receipt; mailed notices will
be deemed communicated as of three days after mailing.
24
12.8 Attorneys' Fees. ProMedCo and CPC agree that the prevailing party
in any legal dispute among the parties hereto shall be entitled to payment of
its attorneys' fees by the other party.
12.9 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction or applicable state or federal law and their
implementing regulations to be invalid, void or unenforceable the remaining
provisions will nevertheless continue in full force and effect.
12.10 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof will be settled by binding arbitration
in accordance with the rules of commercial arbitration of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Such
arbitration shall occur in Birmingham, Alabama, unless the parties mutually
agree to have such proceedings in some other locale. The arbitrator(s) may in
any such proceeding award attorneys' fees and costs to the prevailing party.
12.11 Construction of Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Alabama. The parties
agree that the terms and provisions of this Agreement embody their mutual
interest and agreement and that they are not to be construed more liberally in
favor of, nor more strictly against, any party hereto.
12.12 Assignment and Delegation. ProMedCo shall have the right to
assign its rights hereunder to any person, firm or corporation controlling,
controlled by or under common control with ProMedCo and to any lending
institution, for security purposes or as collateral, from which ProMedCo or the
Parent obtains financing for itself and as agent. Except as set forth above,
neither ProMedCo nor CPC shall have the right to assign their respective rights
and obligations hereunder without the written consent of the other party. CPC
may not delegate any of CPC's duties hereunder. CPC may not delegate any of
CPC's duties hereunder, except as expressly contemplated herein; however,
ProMedCo may delegate some or all of ProMedCo' s duties hereunder to the extent
it concludes, in its sole discretion, that such delegation is in the mutual
interest of the parties hereto, provided however, ProMedCo shall remain
responsible for the performance of such duties.
12.13 Confidentiality. The terms of this Agreement and in particular
the provisions regarding compensation, are confidential and shall not be
disclosed except as necessary to the performance of this Agreement or as
required by law.
12.14 Waiver. The waiver of any provision, or of the breach of any
provision of this Agreement must be set forth specifically in writing and signed
by the waiving party. Any such waiver shall not operate or be deemed to be a
waiver of any prior or future breach of such provision or of any other
provision.
12.15 Headings. The subject headings of the articles and sections of
this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
12.16 No Third Party Beneficiaries. Nothing in this Agreement, express
or implied, is intended or shall be construed to confer upon any person, firm or
corporation other than the parties hereto and their respective successors or
assigns, any remedy or claim under or by reason of this Agreement or any term,
covenant or condition hereof, as third party beneficiaries or otherwise, and all
of the terms, covenants and conditions hereof shall be for the sole and
exclusive benefit of the parties hereto and their successors and assigns.
12.17 Time is of the Essence. Time is hereby expressly declared to be
of the essence in this Agreement.
12.18 Modifications of Agreement for Prospective Legal Events. In the
event any state or federal laws or regulations, now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
25
judicial decision, a regulatory agency or legal counsel for both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, or in the event the Alabama State Board of Medical
Examiners or other authority with legal jurisdiction shall, solely by virtue of
this Agreement, initiate an action to revoke, suspend, or restrict the license
of any physician retained by CPC to practice medicine in the State of Alabama,
CPC and ProMedCo shall amend this Agreement as necessary. To the maximum extent
possible, any such amendment shall preserve the underlying economic and
financial arrangements between CPC and ProMedCo. In the event it is not possible
to amend this Agreement to preserve in all material respects the underlying
economic and financial arrangements between CPC and ProMedCo, this Agreement may
be terminated by written notice by either party within 90 days from date of such
interpretation or action, termination to be effective no sooner than the earlier
of 180 days from the date notice of termination is given or the latest possible
date specified for such termination in any regulatory order or notice.
Termination pursuant to this Section 12.19 by CPC shall require the affirmative
vote of a majority of Physician Shareholders.
12.19 Whole Agreement; Modification. A contract in which the amount
involved exceeds $50,000 in value is not enforceable unless the Agreement is in
writing and signed by the party to be bound or by that party's authorized
representative. The rights and obligations of the parties hereto shall be
determined solely from written agreements. Documents and instruments, and any
prior oral agreements between the parties are superseded by and merged into such
writings. This Agreement (As amended in writing from time to time), the
exhibits, and the schedules delivered pursuant hereto represent the final
agreement between the parties hereto and may not be contradicted by; evidence of
prior, contemporaneous, or subsequent oral agreements by the parties. There are
no unwritten oral agreements between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PROMEDCO, INC.,
By:
Name
Title
Address
PROMEDCO OF CULLMAN, INC.,
By:
Name:
Title:
Address:
CULLMAN PRIMARY CARE, P.C.
By:
Name:
Address:
26
Allocation of Risk Pool Surpluses
ProMedCo shall receive a percentage of the Risk Pool Surpluses.
ProMedCo's percentage shall be based on the cumulative Risk Pool Surpluses that
have occurred during the entire term of this Agreement, including any renewals.
The percentage shall be based on the graduated scale as shown below:
Cumulative Risk Pool Savings ProMedCo %
[*]
The distribution of Risk Pool Surpluses shall be made on an annual
basis no later than 90 days after the conclusion of each contract year of this
Agreement, and after a full analysis of an Incurred But Not Reported (IBNR)
liabilities. Once the final balance of Risk Pool Surpluses has been calculated,
[*]% of that amount shall be distributed, with the final [*]% held for an
additional 6 months to pay for any unanticipated claims. At the end of that 6
months, any funds remaining from the [*]% reserved shall be distributed.
A-1
CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS ON
THIS PAGE WHERE INFORMATION HAS BEEN OMITTED ARE MARKED WITH THE SYMBOL
"[*]."
27
AGREEMENT OF EMPLOYMENT
AGREEMENT, made as of the day of , 1996, by and between CULLMAN PRIMARY CARE,
P.C., an Alabama professional corporation (the "Employer, " "CPC" or the
"Corporation") , and , M.D., a resident of the State of Alabama duly licensed to
practice the profession of medicine under the laws of the State of Alabama (the
"Employee").
W I T N E S S E T H:
WHEREAS, pursuant to the Provisions of a Stock Purchase Agreement
of even date (the "Stock Purchase Agreement"), by and among Cullman
Family Practice, Inc. ("CFP, Inc."), Xxxxxxx X. Xxxxxx, M.D.,
Xxxxxx X. Xxxxxxxxxx, M.D., B. Xxxxxxx Xxxxxxx, M.D., Xxxxx X.
liolowach, M.D. and Xxxxxxx X. Xxxxxxxx, M.D., ProMedCo, Inc. and
ProMedCo of Cullman, Inc. ("ProMedCo"), ProMedCo acquired
substantially all of the stock of CFP, Inc. , including the stock
of CFP, Inc. owned by the Employee;
WHEREAS, the Stock Purchase Agreement provides for the contemporaneous execution
and delivery of that certain Service Agreement (the "Service Agreement"), which
outlines and determines the amount of compensation the Employer is to receive
for providing services under said Service Agreement;
WHEREAS, the Employer and the Employee desire to enter into a agreement relating
to the employment of the Employee by the Employer to provide for compensation
consistent with the relevant provisions of the Service Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. EMPLOYMENT. The Employer hereby employs Employee, and the
Employee hereby accepts such Employment from the Employer, upon the
terms and conditions hereinafter set forth.
2. EFFECTIVE DATE OF AGREEMENT. This Agreement shall be effective as of the date
hereof (the "Effective Date") and shall continue for a period of seven (7) years
(the "Initial Term"), unless otherwise terminated pursuant to the terms hereof.
Thereafter, the term of Employee's employment hereunder shall renew
automatically for three (3) year terms thereafter, unless otherwise terminated
as provided below.
3. DUTIES. The Employee shall devote his full time and attention to the practice
of medicine in which the Employer is and will be engaged, as an employee of the
Employer, and the Employee shall not, without the written consent of the Board
of Directors (the "Board"), either directly or indirectly, engage in any other
professional or business activity, whether or not such professional or business
activity is pursued for gain, profit or other pecuniary advantage; provided,
however, that the Employee may engage in personal non-financial pursuits that do
not substantially interfere
28
with the performance of his duties under this Agreement and nothing contained
herein shall be construed as preventing the Employee from investing his assets
in such form or manner as will not require his services in the operation of the
affairs of the company or companies in which such investment or investments are
made. Any consent granted to the Employee to engage in other professional or
business activities shall be revocable by the Employer at any time upon ten (10)
days' notice, and the Employee agrees to cease and desist upon receipt of such
notice. The Employee shall use his best efforts to promote the interest and
welfare of the Employer and, during the term of this Agreement, the Employee
shall not engage in the practice of medicine except as an employee of the
Employer.
The Employee shall abide by all of the rules, regulations and policies
established or promulgated by the Employer. The Employee shall devote such time
to the administration and operation of the medical practice of the Employer as
the Employer shall determine. The Employee shall provide such evening and
weekend coverage for the Employer's medical practice as shall be assigned to
him, from time to time, by the Employer. His duties shall include, but not be
limited to, the following:
(a) Keeping and maintaining (or causing to be kept and maintained)
appropriate records relating to all professional services rendered
by him during the term of his employment with the Employer;
(b) Preparing and attending to, in connection with such services, all reports,
claims and correspondence necessary or appropriate in the circumstances, all of
which records, reports, claims and correspondence shall belong to the Employer;
(c) Working with the staff of the Employer in a cooperative, constructive manner
consistent with a policy of providing quality professional services to patients
while maintaining excellent morale among the members of the staff of the
Employer; and
(d) Carrying out all other duties assigned to him by the Board or
the President.
4. DIRECTION OF SERVICES. The Employer shall direct, control and supervise the
duties and work of the Employee; provided, however, that the Employer shall not
impose employment duties or constraints of any kind which would require the
Employee to infringe the ethics of his profession or violate any ordinance or
law. The Employer shall have the exclusive right to allocate the patients among
its employees with due regard to the source of the patient, the specialty and
skill of the employees, and the work load of the employees. The Employer shall
have the right to determine the days and hours when the Employee shall perform
his duties; provided, however, that the Employee shall not be required to work
longer than a physician's normal work week.
29
5. RELATIONSHIP WITH PATIENTS. The Employee agrees that in dealing with patients
or prospective patients of the Employer, he will give no assurance in any form
to such persons that he or any particular employee of the Employer will treat
such patient, it being expressly understood that the Board, or its designee,
shall have sole authority to determine which employees of the Employer shall
perform professional services for any particular patient of the Employer. The
Employer shall have authority to determine who shall assume the Employee's
duties during periods of illness and vacation.
6. FEES FOR SERVICE. Except as otherwise provided herein or in the Service
Agreement, all income generated by the Employee for his services as a physician
including, without limitation: (i) treatment of patients; (ii) reading or
interpreting tests, films or other data; (iii) consulting or testifying with
regard to the medical aspects of any controversy, litigation, or safety program;
(iv) consulting, advising, managing or directing with regard to any medical
program or facility; or (v) any other compensation paid with respect to any
employment or engagement of the Employee on account of his being a medical
doctor shall belong to ProMedCo in accordance with the terms of the Service
Agreement. The Employee agrees, upon request by the Employer, to render an
accounting of all transactions relating to his practice as a physician during
the course of his employment. Employee shall be entitled to retain any
compensation paid for Employee's participation in educational programs for
teaching, instruction, or supervising persons in connection with residency
programs in any local hospital.
7 . RELATIONSHIP OF PARTIES. The relationship between the Employee and the
Employer is that of employee and employer. The Employee, by virtue of this
relationship, shall not have any interest in the Employer's tangible or
intangible assets. The relationship between the Employee and the Employer shall
not modify or affect in any way the physician-patient privilege or relationship.
8. COMPENSATION. As his entire compensation for all services rendered to the
Employer during the term of this Agreement, in whatever capacity rendered, the
Employee shall have and receive the compensation which shall be determined from
time to time by the Board. Such compensation shall be subject to withholding and
other applicable employment taxes.
9. WORKING FACILITIES.
(a) Office. The Employee shall be provided with an office, stenographic and
technical help, equipment and such other facilities and services suitable to his
position and adequate for the performance of his duties.
(b) Professional Organizations. The Employer shall pay the
reasonable expenses of the Employee's membership and participation
in such professional organizations as shall be approved by the
Board. The Employee is expected, from time to time, to incur
30
reasonable expenses for additional social, professional, and civic club
memberships and participation, entertainment, travel and similar items. The cost
of such activities shall be at the sole expense of the Employee except as the
Board shall authorize the payment or reimbursement of such expenses as an
expense of the Employer.
10. RECORDS. All records, documents and personal or professional files
pertaining to patients of the Employer or patients consulted, interviewed,
served or treated by the Employee shall belong to and remain the property of the
Employer; provided, however, the Employee, upon termination of his employment,
shall have the privilege of reproducing at his own expense any of such records
of patients treated or served by him during his employment with the Employer.
11. MEETING AND POST-GRADUATE COURSES. The Employee is encouraged and is
expected to attend such meetings, professional conventions and post-graduate
courses in the field of medicine as approved from time to time by the Board. The
cost of tuition and registration for attending such meetings and other costs
incurred by the Employee in connection therewith shall be an expense of the
Employer.
12. VACATION AND SICK LEAVE. The Employee shall be entitled to (_) weeks of
vacation with pay (or such greater length of time as may be approved from time
to time by the Board) during each calendar year, such (_) week period to include
such time taken by the Employee during the year to attend professional seminars.
In addition, Employee shall be entitled to - (-) days per month sick leave
during each calendar year. For purposes of this Paragraph 12, a "week" shall
mean five business days and one weekend. Such vacation shall be taken by the
Employee at such time or times as shall be approved by the Board. In addition,
the Employee shall be entitled to such holidays (unless Employee is on call) as
the Board may approve. Unused days of vacation, sick leave or holidays may not
be carried over from one calendar year to another. No payment for any such
unused days of vacation, sick days or holidays shall be made upon the
termination of Employee' employment hereunder.
13. HEALTH, WELFARE AND INSURANCE PLANS. In accordance with their terms, the
Employee may be entitled to participate in any plans, insurance contracts, or
agreements maintained by the Employer relating to retirement, health, disability
and other related benefits. The Employee's rights and entitlement with respect
to any such benefits will be subject to the provisions of the relevant
contracts, policies or plans providing such benefits. Nothing contained herein
shall be deemed to impose any obligation on the Employer to initiate or maintain
any such plans, policies, contracts or agreements.
14. TERMINATION OF EMPLOYMENT - The employee's employment under the Agreement,
shall be terminated immediately upon the happening of any of the following
events:
31
(a) The termination by the Employer of the Employee's employment without cause
upon at least ninety (90) days written notice to the Employee; provided,
however, that the Employer shall not be entitled to terminate the Employee's
employment under the terms of this Paragraph 14(a) during any period of total
disability of the Employee as defined in Paragraph 17(c) hereof;
(b) The termination by the Employee of his employment with the
Employer without cause upon at least ninety (90) days written
notice to the Employer;
(c) The permanent disqualification of the Employee to practice
medicine in the State of Alabama;
(d) The death of the Employee;
(e) The Employee's expulsion from membership in the Medical
Association of the State of Alabama;
(f) Abusive use or abuse of drugs or alcohol;
(g) The total disability of the Employee as set forth in Paragraph
17 hereof;
(h) The suspension, revocation, termination or cancellation of the Employee's
membership on the medical staff of, or his privileges at, any hospital for
non-disciplinary reasons, including, without limitation, failure to admit
patients or failure to maintain patient records on a timely basis;
(i) The termination of Employee's ability to participate in or
receive reimbursements from Medicare or Medicaid; and
(j) Immediate termination by the Employer with "good cause" upon the giving of
written notice. For the purpose of this Agreement, "good cause" shall include,
neglect of duty or professional standards, proven dishonesty, theft, fraud,
embezzlement, repeated failure to be available for work or call when scheduled,
disloyalty to the Employer, conviction of a felony or a crime involving moral
turpitude, willful inattention to the economic or ethical welfare of the
Employer, and conduct constituting a breach of this or any other agreement
between the Employer and the Employee.
In the event the Employee's employment under the Agreement is terminated without
cause pursuant to Paragraph 14(a) or 14(b), the Employer, at its option, may
require the Employee to cease providing services to the Employer immediately;
provided, however, that the Employee shall receive his compensation and other
benefits, if any, hereunder until the effective date of such termination.
15. PAYMENTS BY EMPLOYER UPON TERMINATION. Within fifty (50) days
following the effective date of the Employee's termination of
32
employment (the "Termination Date"), the Employer shall pay the Employee (or his
legal representative, as the case may be) his compensation due under Paragraph 8
above prorated through the Termination Date. Except as provided in this
Paragraph, the Employee shall not be entitled to receive any severance pay or
other compensation. The Employee shall not have nor acquire any interest in the
Employer's accounts receivable, shall not be entitled to receive any payment
from or on account of such accounts receivable and shall have no interest in or
claim to the nonvested portion of his benefits in any qualified retirement plan
maintained by the Employer.
16. PAYMENTS BY EMPLOYEE UPON TERMINATION. Upon the termination
of the Employee's employment, the Employee (or his legal
representative, as the case may be) shall pay the Employer an
amount equal to the sum of:
(a) all amounts owed by the Employee to the Employer as of the
Termination Date; and
(b) the value of all prepaid and unearned items and expenses paid by the
Employer for the benefit of the Employee including, without limitation, all
prepaid and unearned premiums for health insurance prorated through the
Termination Date but only to the extent the Employee continues to derive
benefits from such coverage after the Termination Date.
The amount payable to the Employer pursuant to this Paragraph shall be
determined by the accountant retained by the Employer and such determination,
when made and delivered to the Employer and the Employee (or his legal
representative, as the case may be), shall be conclusive and binding on the
Employer and the Employee (or his legal representative, as the case may be) -
The Employer may offset any amounts payable to it pursuant to this Paragraph
against any amounts payable by the Employer to the Employee (or his legal
representative, as the case may be) under this Agreement.
17. DISABILITY.
(a) Amount. Notwithstanding anything to the contrary herein, in the event the
Employee becomes totally disabled, as defined below, and is unable to perform
his normal duties as an employee of the Employer, then the Employee, in lieu of
any compensation due under Paragraph 8 above, shall pay Employee only such
compensation as the Board may approve. The parties acknowledge that Employee's
compensation and disability benefits hereunder shall be based on Employee's
productivity and that Employee's disability will likely result in a reduction
and possible elimination of Employee's compensation hereunder.
(b) Termination of Employment. In the event such total disability continues for
a period of (_) months in a month period, such disability shall be deemed to be
permanent total disability, and the Employee's employment hereunder shall, at
the end of such (_)
33
month period, be automatically terminated. If, however, prior to the end of such
(_) month period of total disability, the Employee's total disability shall have
ceased and he shall have resumed the performance of his normal duties hereunder,
the Employee shall thereafter receive his full compensation as set forth in
Paragraph 8 hereof.
(c) Definition and Determination of Total Disability. For purposes of this
Agreement, the term "total disability" shall mean the Employee's inability to
perform the normal duties of his employment by the Employer as a physician. If
there is any disagreement between the Employer and the Employee as to the
disability or non-disability of the Employee or as to the effective date of any
such disability, the same shall be determined after an examination of the
Employee by a physician to be selected by the Board and ProMedCo. The Employee
shall be available for such an examination at any reasonable time. The
determination of such physician selected by the Employer shall be conclusive
evidence of the disability or the nondisability of the Employee and of the date
any such disability began. If the Employee should not cooperate in the
examination by such physician selected by the Employer, then, for purposes
hereof, the determination of the Employee's disability or nondisability and the
date any such disability began shall be made by the Employer and ProMedCo in
their sole discretion.
18. PROFESSIONAL LIABILITY INSURANCE. The Employer, at its expense shall carry
professional liability (malpractice) insurance for the Employee in the same
manner, with the same limitations and to the same extent and amount, if any, as
is provided by the Employer for its other professional employees. Upon the
termination of his employment, the Employee shall pay the "tail premium," "final
endorsement premium" or any other premium or charge for extending the coverage
of the professional liability insurance then carried by the Employer for the
nine (9) year period beginning on the date of such termination or otherwise
cause such insurance to remain in effect for such nine (9) year period. if the
Employee fails to pay such tail premium or cause such insurance to remain in
effect for such nine (9) year period, the Employer may pay such tail premium and
the Employee shall reimburse the Employer for any and all costs incurred by the
Employer in connection with the Employer's payment of such tail premium
including interest on such amount at a rate of 15% per annum. Any premium refund
or similar reimbursement which may be payable by any malpractice insurance
company upon the cancellation of the Employee's coverage on account of the
termination of his employment with the Employer shall be the exclusive property
of the Employer and the Employee shall cooperate in good faith with the
Employer's efforts to collect any such amounts.
19. PROMEDCO CONSIDERATION. In the event that, during the Initial
Term of this Agreement, the Employee is terminated by Employer
pursuant to Paragraphs 14(c), (e), (f), (h), (i) or (j), or by the
Employee pursuant to Paragraph 14(b), the Employee shall forfeit
any Unredeemed Equity (as defined in the Service Agreement) that
34
was yet to be received by him pursuant to the Stock Purchase Agreement (this
would include any future interest or principal payments under the Convertible
Subordinated Note, and any future Converted Shares) attributable to the sale of
his shares in CFP, Inc. Said future consideration will be transferred to
ProMedCo (the "Transfer"). The Employee acknowledges that in the event that,
during the Initial Term, Employee is terminated by Employer pursuant to
Paragraph 14(c), (e), (f), (h), (i) or (j) or the Employee's termination of his
or her employment pursuant to Paragraph 14(b), it would be difficult to
calculate the precise amount of damages and for that reason the parties have
determined that the Transfer will be appropriate liquidated damages for such
actions during the Initial Term hereof. The Transfer shall be effective as of
the date of the event giving rise to the termination of Employee's employment
hereunder by Employer or Employee as aforesaid. The Employee hereby appoints
ProMedCo as its attorney in fact to cause such Transfer. The Employer and
ProMedCo shall be entitled to specific performance and other equitable relief to
enforce the Transfer. This provision is in addition to the rights of Employer
pursuant to Paragraph 14 of this Agreement.
20. NON-COMPETITION AND NON-SOLICITATION.
(a) Noncompetition. During the term of his employment hereunder (including any
extensions thereof), the Employee shall not, either directly as a partner,
employer, agent, independent contractor, employee or indirectly through a
corporation, partnership, affiliate, subsidiary or otherwise:
(1) establish, operate or provide professional medical services at any medical
office, clinic or outpatient and/or ambulatory treatment or diagnostic facility
within the geographic area described in Exhibit A attached hereto (the "Area")
other than such offices, clinics or facilities owned, operated, managed, staffed
or leased by ProMedCo, or any affiliate thereof;
(2) solicit, induce or attempt to induce, in connection with any business
competitive with that of the Employer, patients of any physician associated with
the Employer to leave the care of physicians associated with the Employer; or
(3) solicit, induce or attempt to induce any employee, consultant or other
persons associated with the Employer or ProMedco to leave the employment of, or
to discontinue their association with the Employer or ProMedCo, or any affiliate
thereof.
(b) Employee agrees and covenants that for a period of twenty-four (24) months
after the date of termination of his employment with CPC during the Initial
Term, the Employee shall not, either directly as a partner, employer, agent,
independent contractor, employee or indirectly through a corporation,
partnership, affiliate, subsidiary or otherwise, (a) enter into a provider
agreement or other contract with, nor provide any medical services
35
in connection with or pursuant to any such provider agreement or other contract,
any third party payor having a provider agreement or other contract with CPC or
any other employee of CPC at any time within 120 days prior to and including the
date of Employee's termination of employment with CPC or (b) solicit, induce or
attempt to induce any patient of CPC to become a patient of Employee or any
partner, employee or affiliate of Employee. As used herein, a third party payor
shall include, without limitation, any employer, coalition of employers, union
or similar organization maintaining a health benefit plan for the benefit of its
employees or members, any insurance company, any Blue Cross/Blue Shield plan,
any health maintenance organization, preferred provider organization,
independent physicians association, physicians hospital organization, or similar
entity or arrangement which contracts for physician services on behalf of its
employees or members or other third party payors. However, as used herein, the
term "third party payor" shall not include the federal Medicare program or the
state Medicaid program, although such terms shall include any health maintenance
organization providing Medicare or Medicaid benefits to plan participants. This
provision shall be limited in its application to the Area.
(c) Covenants Necessary. The covenants contained in Paragraphs 20 and 22 herein
are necessary to protect the business and goodwill of the Employer and ProMedCo
and a breach of these covenants will result in the irreparable harm and
continuing damage to the Employer and ProMedCo. In the event the Employee
breaches such covenants during the Initial Term, the Employer and ProMedCo shall
be entitled to specific performance and/or injunctive or other equitable relief
in order to prevent the continuation of such harm, as well as money damages. The
Employee waives any requirement for the securing or posting of any bond in
connection with the obtaining of any such equitable relief. The Employee
acknowledges that if the Employee breaches the covenants contained in Paragraph
20(b) and the Employer or ProMedCo is unable for any reason to obtain a
restraining order from a court of competent jurisdiction within thirty (30) days
after application enjoining the breach by the Employee, it will be difficult to
calculate the precise amount of the Employer's damages. As a result, the parties
have determined that, in the event of such a breach, the Employer's damages
shall be equal to Liquidated Damages in the amount of the physician's total
compensation for the most recent 12 month period, but not in excess of $200,000.
(d) Limitations. The parties have attempted to limit the provisions of this
Paragraph 20 only to the extent necessary to protect each parties' interest. In
the event that any provision, section or subsection of this Paragraph 20 is
adjudged by any court of competent jurisdiction to be void or unenforceable, in
whole or part, such court shall modify and enforce any such provision, section,
or subsection to the extent and geographic area that it believes to be
reasonable under the circumstances.
36
21. ACKNOWLEDGMENTS. The Employee hereby represents and
acknowledges as follows:
(a) All documents, knowledge and information regarding the methods of operation
of Employer and ProMedCo, and any affiliate thereof, are highly confidential and
constitute trade secrets, including, but not limited to information regarding
patient lists, patient solicitation, patient treatment and charging, financial
statements and reports, memorandum or correspondence regarding the Employer's
and ProMedCo's, and any affiliate thereof, methods of operation (collectively,
"Confidential Information,,);
(b) The Employee is fully capable of earning a livelihood and
practicing in the Employee's professional medical field without
violating any of the provisions of this Agreement;
(c) The Employee's ability to earn a livelihood and practice in his or her
professional medical field without violating any of the provisions of this
Agreement was a material condition to the execution of this Agreement;
(d) Under current circumstances, the Employee has no reason to believe that the
medical needs of the communities served by the Employer for the professional
medical services which the Employer provides cannot be adequately met without
the Employee violating any of the provisions of this Agreement; and
(e) The ability to adequately meet the medical needs of the communities served
by the Employer for the professional medical services which the Employee will
provide without violating any of the provisions of this Agreement was a material
condition to the execution of this Agreement.
22. TRADE SECRETS AND CONFIDENTIAL INFORMATION. The Employee shall not disclose,
communicate or misuse, to the detriment or injury of the Employer or ProMedCo
and any affiliate thereof, any Confidential Information to any person or entity
not associated with the Employer or ProMedCo and any affiliate thereof, other
than his or her attorneys or accountants who shall also agree not to disclose
such information without the written consent of the Employer or ProMedCo, and
any affiliate thereof, as the case may be, unless required to disclose it by law
or, unless such information is generally known or available in the industry or
by the person to whom it is communicated. Immediately after the earlier of the
termination of Employee's employment under this Agreement or such time as the
Employee shall cease to be associated with the Employer, the Employee shall
return any and all Confidential Information to the possession of the Employer
and/or ProMedCo, and any affiliate thereof.
23. ARBITRATION. Any dispute arising out of this Agreement shall
be settled by a single arbitrator sitting in the City of Cullman,
who is mutually agreeable to both parties, and applying the rules
and regulations of the American Arbitration Association. The
37
parties hereto agree to be bound by the arbitrator's decision.
Judgment may be entered in any state or federal court having
jurisdiction.
24. GENERAL ASSETS OF THE EMPLOYER. Nothing contained in this Agreement nor any
action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Employer and the Employee, his designated beneficiary or any other person. Any
funds which may be used to discharge the Employer's obligations under the
provisions of this Agreement shall be paid from the general funds of the
Employer, and no person other than the Employer shall, by virtue of the
provisions of this Agreement, have any interest in such funds or assets. To the
extent that any person acquires a right to receive payments from the Employer
under this Agreement, such right shall be no greater than the right of any
unsecured general creditor of the Employer.
25. MISCELLANEOUS.
(a) Standards. The Employee shall perform his duties under this Agreement in
accordance with such standards of professional ethics and practice as may from
time to time be applicable during the term of his employment hereunder.
(b) Nature and Survival of Representations. All representations, warranties and
agreements made herein by any of the parties hereto shall survive consummation
of the transactions contemplated hereby.
(c) Construction. This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of Alabama, applied without giving effect
to conflict-of-laws principles.
(d) Notices. Any and all notices required or permitted to be given under this
Agreement shall be sufficient if furnished in writing and sent by certified
mail, return receipt requested, in the case of the Employee, to the Employee's
last known residence address or, in the case of the Employer, to its principal
office in Cullman, Alabama.
(e) Severability. The provisions of this Agreement shall be severable and if any
provision shall be invalid, void or unenforceable in whole or in part for any
reason, the remaining provisions shall remain in full force and effect.
(f) Binding Agreement. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and
permitted assigns.
(g) Amendment. Neither this Agreement nor any term or provision
hereof may be changed, modified, waived, discharged or terminated
orally or in any manner other than by instrument in writing, signed
38
by the party against whom the enforcement of such change, modification, waiver,
discharge or termination is sought.
(h) Waiver of Breach or Violation Not Deemed Continuing. The
waiver by either party of a breach or violation of any provision of
this Agreement shall not operate as, or be construed to be, a
waiver of any subsequent breach hereof.
(i) Necessary Action. Each party shall perform any further acts
and execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
(j) Interpretation. The terms "herein" or "hereunder" or like terms shall be
deemed to refer to this Agreement as a whole and not to a particular section.
Whenever terms such as "include" or"including" are used in this Agreement, they
shall mean "include" or "including", as the case may be, without limiting the
generality of any description or word preceding such term. The captions or
headings in this Agreement are made for convenience and general reference only
and shall not be construed to describe, define or limit the scope or intent of
the provisions of this Agreement. As used herein, all masculine pronouns shall
include the feminine or neuter, and all singular terms the plural forms thereof,
and vice versa. All references to sections hereunder shall be deemed to refer to
sections of this Agreement, unless otherwise expressly provided, whether or not
"hereof", "above", "below" or like words are used.
(k) Litigation. In the event that it becomes necessary for any party to initiate
litigation for the purpose of enforcing any of any rights hereunder or for the
purpose of seeking damages for any violation hereof, then, in addition to all
other judicial remedies that may be granted, the prevailing party or parties
shall be entitled to recover reasonable attorneys, fees and all other cost that
may be sustained by such prevailing party or parties in connection with such
litigation. For purposes of any action or proceeding involving this Agreement,
each party hereby expressly submits to the jurisdiction of all federal and state
courts located in the State of Alabama and consent to be served with any process
on paper by registered mail or by personal service within or without the State
of Alabama in accordance with applicable law, provided a reasonable time for
appearance is allowed. All parties hereby waive, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
any such action or proceeding.
(1) Assignment. Employee shall not assign any of his rights or delegate any of
his duties under this Agreement without the express prior written consent of the
Employer. Employer shall have the absolute right, in its sole discretion, to
assign all or any of its rights or obligations hereunder or to delegate all or
any of its duties hereunder to any affiliate of Employer or in connection with
the sale of substantially all of the operating assets of the Employer's
business.
39
(m) Authority. The provisions of this Agreement required to be
approved by the Board have been so approved and authorized.
(n) Fiscal Year Defined. Whenever the term "fiscal year" is used
herein, it shall, unless otherwise specified, be deemed to refer to
the fiscal year of the Employer.
(o) Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute a single fully
executed agreement.
(p) Defined Terms. Except as otherwise defined herein, terms in
the Stock Purchase Agreement and the Service Agreement shall have
the same meaning in this Agreement.
(q) Entire Agreement. This Agreement and the written documents referred to or
described herein contains the entire agreement of the parties hereto regarding
the transactions contemplated hereby and thereby and supersede all prior
negotiations or agreements among such parties regarding such transactions.
IN WITNESS WHEREOF, the Employer has hereunto caused this Agreement to be
executed by its duly authorized officers and the Employee has hereunto set his
hand, all being done in duplicate originals with one (1) original being
delivered to each party on the day and year first above written.
EMPLOYER:
By:
President
EMPLOYEE:
