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EXHIBIT 2.41
MANAGEMENT SERVICES AGREEMENT
BY AND AMONG
SPECIALTY CARE NETWORK, INC.,
XXXXX & XXXXX ORTHOPEDIC ASSOCIATES, LLP,
XXXXXX XXXXX, M.D.,
XXXXX XXXXX, M.D.,
XXXX X. XXXXX, M.D.,
XXXXXXXXX XXXXXXX, M.D.,
AND
XXXXXXX XXXXXXXXX, M.D.
DATED AS OF JANUARY 1, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS.........................................................................1
ARTICLE II
RELATIONSHIP OF THE PARTIES.........................................................4
2.1 Independent Relationship..............................................4
2.2 Responsibilities of the Parties.......................................4
2.3 OCOA Matters..........................................................4
2.4 Patient Referrals.....................................................4
2.5 Professional Judgment.................................................4
ARTICLE III
MANAGEMENT AND FINANCIAL ADVISORY SERVICES TO BE PROVIDED BY SCN....................5
3.1 Performance of Limited Management Functions...........................5
3.2 Practice Assessment...................................................5
3.3 Third-Party Payor Matters.............................................5
3.4 Malpractice Insurance.................................................5
3.5 Financial Reporting...................................................5
3.6 Data/Information......................................................5
3.7 Billing and Coding Analysis...........................................6
3.8 Events Excusing Performance...........................................6
3.9 Compliance with Law...................................................6
ARTICLE IV
OBLIGATIONS OF OCOA AND PHYSICIAN OWNERS............................................6
4.1 Professional Services.................................................6
4.2 Employment of Physician Employees and Other Employees.................6
4.3 Professional Insurance Eligibility....................................6
4.4 Fees for Professional Services........................................6
4.5 Events Excusing Performance...........................................6
ARTICLE V
FINANCIAL ARRANGEMENTS..............................................................7
ARTICLE VI
INTELLECTUAL PROPERTY AND RECORDS...................................................7
6.1 Ownership of SCN's Business Records and Systems.......................7
6.2 Maintenance of Records................................................7
6.3 Access to Records.....................................................7
6.4 Patient Records.......................................................7
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ARTICLE VII
INDEMNITY...........................................................................7
7.1 Indemnification by OCOA...............................................7
7.2 Indemnification by SCN................................................7
7.3 Escrow Pending Indemnification Determination..........................8
ARTICLE VIII
TERM AND TERMINATION................................................................8
8.1 Term of Agreement.....................................................8
8.2 SCN Events of Default.................................................8
8.3 OCOA Events of Default................................................8
8.4 OCOA's Remedies.......................................................9
8.5 SCN's Remedies........................................................9
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF OCOA AND PHYSICIAN OWNERS.........................9
9.1 Validity..............................................................9
9.2 Authority.............................................................9
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SCN...............................................9
10.1 Organization.........................................................9
10.2 Authority............................................................9
10.3 Absence of Litigation...............................................10
ARTICLE XI
COVENANTS OF OCOA AND PHYSICIAN OWNERS.............................................10
11.1 Merger, Consolidation and Other Arrangements........................10
11.2 Necessary Authorizations/Assignment of Licenses and Permit..........10
11.3 Compliance with All Laws............................................10
ARTICLE XII
GENERAL PROVISIONS.................................................................10
12.1 Assignment..........................................................10
12.2 Whole Agreement; Modification.......................................11
12.3 Notices.............................................................11
12.4 Binding on Successors...............................................11
12.5 Waiver of Provisions................................................12
12.6 Governing Law; Venue; Alternative Dispute Resolution..............12
12.7 No Practice of Medicine.............................................12
12.8 Severability........................................................12
12.9 Additional Documents................................................12
12.10 Attorneys' Fees....................................................12
12.11 Time is of the Essence.............................................12
12.12 Confidentiality....................................................12
12.13 Contract Modifications for Prospective Legal Events................12
12.14 Remedies Cumulative................................................13
12.15 Language Construction..............................................13
12.16 No Obligation to Third Parties.....................................13
12.17 Communications.....................................................13
EXHIBIT 5 FINANCIAL MATTERS.......................................................5-1
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT ("Agreement") dated as of January 1,
1999, by and among SPECIALTY CARE NETWORK, INC., a Delaware corporation ("SCN"),
XXXXX & XXXXX ORTHOPEDIC ASSOCIATES, LLP, a New York limited liability
partnership ("OCOA"), and XXXXXX XXXXX, M.D., XXXXX XXXXX, M.D.,XXXX X. XXXXX,
M.D., XXXXXXXXX XXXXXXX, M.D. and XXXXXXX XXXXXXXXX, M.D. ("Physician Owners"),
residents of New York. SCN, OCOA, and the Physician Owners are sometimes
referred to individually herein as a "Party" and collectively herein as the
"Parties."
WITNESSETH:
WHEREAS, SCN is in the business of assisting in the management of
orthopaedic and musculoskeletal medical practices and providing certain support
services to such practices;
WHEREAS, OCOA and Physician Owners desire to obtain the services of SCN
in performing such management and support services functions so as to assist
OCOA and its Physician Owners and Physician Employees;
WHEREAS, the Parties have entered into that certain Service Agreement
dated March 31, 1998 (the "Service Agreement"); and
WHEREAS, the Parties intend and agree to amend and restate the Service
Agreement in accordance with the terms of this Agreement, and intend and agree
for this Agreement to govern their relationship from January 1, 1999, forward.
NOW, THEREFORE, for and in consideration of the premises above, the
mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1.
DEFINITIONS
For the purpose of this Agreement, the following definitions shall
apply:
"Affiliate" means, with respect to any Person, any entity which
directly or indirectly controls, is controlled by, or is under common control
with, such Person or any Subsidiary of such Person or any Person who is a
director, officer or partner of such Person or any Subsidiary of such Person.
For purposes of this definition, "control" means the possession, directly or
indirectly, of the power to (a) vote ten percent (10%) or more of the securities
having ordinary voting power for the election of directors (or Persons serving
in a capacity similar to directors for entities other than corporations) of such
Person, or (b) direct or cause the direction of management and policies of a
business, whether through the ownership of voting securities, by contract or
otherwise and either alone or in conjunction with others or any group.
"Agent" shall have the meaning as defined in SECTION 12.1.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations, ordinances and orders of all Governmental
Authorities and all orders and decrees of all courts, tribunals and arbitrators,
and shall include, without limitation, Health Care Law and any Governmental
Rules and Regulations.
"Banks" shall have the meaning as defined in SECTION 12.1.
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"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Services.
"Code" means the Internal Revenue Code of 1986, as amended.
"DHS" means a "designated health service," as defined under 42 U.S.C.
Section 1395nn (and federal regulations promulgated thereunder).
"Disabled" means that a Physician Owner suffers from a mental or
physical condition resulting in such Physician Owner's inability to perform the
essential functions of his or her job without significant risk to the health or
safety of others, even with such reasonable accommodation as may be available
under the circumstances, and SCN or OCOA may reasonably anticipate that such
Physician Owner will remain disabled for at least two (2) years following the
commencement of such disability.
"GAAP" means generally accepted accounting principles as set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved or adopted by a significant segment of the accounting profession. For
purposes of this Agreement, GAAP shall be applied in a manner consistent with
the historic practices used by SCN or OCOA as applicable.
"Governmental Authority" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, board, body, agency, bureau or entity or any arbitrator with
authority to bind a Party at law.
"Governmental Rules and Regulations" means 42 U.S.C. Section 1320a-7b,
or the rules, regulations, policies, contracts or laws pertaining to any
Third-Party Payor Program, or which are prohibited by rules of professional
conduct, including but not limited to the following: (a) knowingly and
willfully making or causing to be made a false statement or representation of a
material fact in any application for any benefit or payment; (b) knowingly and
willfully making or causing to be made any false statement or representation of
a material fact for use in determining rights to any benefit or payment; (c)
failing to disclose knowledge by a claimant of the occurrence of any event
affecting the initial or continued right to any benefit or payment on OCOA's
own behalf or on behalf of another, with intent to fraudulently secure such
benefit or payment; or (d) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly or
indirectly, overtly or covertly, in cash or in kind or offering to pay or
receive such remuneration (i) 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 by Medicare or Medicaid, or (ii)
in return for purchasing, leasing, or 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 by Medicare or Medicaid.
"Health Care Law" means any and all applicable federal or state law
regulating the acquisition, construction, operation, maintenance, certification
or management of a health care practice, facility, provider or payor, including,
without limitation, the following: 18 U.S.C. Section 287 (relating to false,
fictitious or fraudulent claims); 18 U.S.C. Section 669 (relating to theft or
embezzlement in connection with health care); 18 U.S.C. Section 1001 et seq.
(relating to fraud and false statements); 18 U.S.C. Section 1035 (relating to
false statements relating to health care matters); 18 U.S.C. Section 1347
(relating to health care fraud); 42 U.S.C. Section 1320a-7b(a)(1)-(5) (relating
to making and causing to be made false statements or representations); 42 U.S.C.
Section 1320a-7b(d) (relating to illegal patient admittance and retention
practices); 42 U.S.C. Section 1320a-7b(e) (relating to violation of assignment
terms); 42 U.S.C. Section 1320a-7b(b) (relating to illegal remuneration); 31
U.S.C. Section 3729 (relating to false claims); 31 U.S.C. Section 3730(h)
(relating to relief for retaliation against false claims relator); 42 U.S.C.
Section 1395nn (relating to limitation of certain physician referrals); 42
U.S.C. Section 1320a-3 (relating to disclosure of ownership and related
information); and 42 U.S.C. Section 1320a-3(a) (relating to disclosure
requirements for other providers under Part B Medicare) and any similar or
analogous New York laws.
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"Lender" means any lender to SCN that has a security interest in any of
the following assets of SCN: accounts receivable including any and all rights to
payment of money or other forms of consideration of any kind (whether classified
under the Uniform Commercial Code as accounts, chattel paper, general
intangibles, or otherwise) for goods sold or leased or for services rendered by
SCN, including, but not limited to, accounts receivable, proceeds of any letters
of credit naming SCN as beneficiary, chattel paper, insurance proceeds, contract
rights, notes, drafts, instruments, documents, acceptances, and all other debts,
obligations and liabilities in whatever form from any other Person.
"Management Services Fee" shall have the meaning as defined in EXHIBIT
6.
"Medicaid" means any state program pursuant to which health care
providers are paid or reimbursed for care given or goods afforded to indigent
persons and administered pursuant to a plan approved by the Health Care
Financing Administration under Title XIX of the Social Security Act.
"Medicare" means any medical program established under Title XVIII of
the Social Security Act and administered by the Health Care Financing
Administration.
"Necessary Authorizations" means with respect to OCOA, all certificates
of need, authorization, certifications, consents, approvals, permits, licenses,
notices, accreditations and exemptions, filings and registrations, and reports
required by Applicable Law, which are required, necessary or reasonably useful
to the lawful ownership and operation of OCOA's business.
"Non-DHS" means any health services not included in the meaning of
"designated health services," as defined under 42 U.S.C. Section 1395nn (and
federal regulations promulgated thereunder).
"Person" means an individual, corporation, partnership, association,
limited liability company, limited liability partnership, joint stock company,
joint venture, trust, unincorporated organization, or governmental entity (or
any department, agency or political subdivision thereof).
"Physician Employees" means only those individuals who are doctors of
medicine (including Physician Owners) and who are employed by OCOA or are
otherwise under contract with OCOA to provide professional services to patients
seen in the Practice Offices and are duly licensed to provide professional
medical services in the state or states in which such individuals render
professional services.
"Physician Extender Employees" means physician assistants, nurse
practitioners who do not provide billable services, and other such persons, but
expressly excluding any Technical Employees.
"Physician Owners" means those Physician Employees who own an interest,
directly or indirectly, in the equity of OCOA, including those Persons set forth
in the preface above.
"Practice Offices" means any office location under the control of OCOA
or the Physician Owners at which OCOA or the Physician Owners provide medical
services or any Ancillary Services.
"Professional Services Revenue" means all fees actually collected each
month by or on behalf of OCOA, or any of the Physician Owners (as the case may
be) as a result of professional medical services personally furnished to
patients and other fees or income generated by Physician Employees and Technical
Employees, and any revenue from the sale of any goods.
"SCN" means Specialty Care Network, Inc., a Delaware corporation,
together with its successors and assigns.
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"Service Agreement" has the meaning set forth in the recitals.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Technical Employees" shall mean individuals who provide billable
services on behalf of OCOA and are employees of OCOA.
"Third-Party Payors" means Medicare, Medicaid, CHAMPUS, Blue Cross
and/or Blue Shield, managed care plans and any other private healthcare
insurance program or company as well as any future payor of a Third-Party Payor
Program.
"Third-Party Payor Programs" means Medicare, Medicaid, CHAMPUS,
insurance provided by Blue Cross and/or Blue Shield, managed care plans, and any
other private health care insurance programs and employee assistance programs as
well as any future similar programs.
ARTICLE 2.
RELATIONSHIP OF THE PARTIES
a. Independent Relationship. OCOA, Physician Owners and SCN intend to
act and perform as independent contractors, and the provisions hereof are not
intended to create any partnership, joint venture, agency or employment
relationship between the Parties. Notwithstanding the authority granted to SCN
herein, SCN, OCOA, and Physician Owners agree that OCOA and Physician Owners
shall retain all authority to direct the medical, professional, ethical,
administrative, and managerial (other than as provided by SCN under this
Agreement) aspects of OCOA's and Physician Owners' medical practice. Each Party
shall be solely responsible for and shall comply with all state and federal laws
pertaining to employment taxes, income withholding, unemployment compensation
contributions and other employment related statutes applicable to that Party; it
being understood that SCN shall provide certain services, as set forth herein,
to OCOA to assist OCOA in satisfying its obligations described above.
b. Responsibilities of the Parties. As more specifically set forth
herein, SCN shall provide OCOA with certain limited management and financial
advisory services as provided under ARTICLE III. As more specifically set forth
herein, OCOA shall be responsible for day-to-day operation and management of the
medical practice, including without limitation all matters related to the
professional practice of medicine, medical practice patterns and documentation
thereof. Notwithstanding anything herein to the contrary, no DHS shall be
provided by SCN under this Agreement. SCN shall neither exercise control over
nor interfere with the physician-patient relationship, which shall be maintained
strictly between the physicians of OCOA and their patients.
c. OCOA Matters. Except for the services provided by SCN pursuant to
ARTICLE III, OCOA shall be solely responsible for all matters relating to OCOA,
operational or otherwise.
d. Patient Referrals. The Parties agree that the benefits to OCOA and
Physician Owners hereunder do not require, are not payment for, and are not in
any way contingent upon the admission, referral or any other arrangement for the
provision of any item or service offered by SCN to any of OCOA's patients in any
facility operated by SCN.
e. Professional Judgment. Each of the Parties acknowledges and agrees
that the terms and conditions of this Agreement pertain to and control solely
the business and financial relationship between and among the Parties and do not
pertain to and do not control the professional and clinical relationship between
and among OCOA, Physician Owners, Physician Employees, OCOA Employees and OCOA's
patients. Nothing in this Agreement shall be construed to alter or in any way
affect the legal, ethical, and professional relationship between and among OCOA,
Physician Owners, Physician
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Employees and OCOA's patients, nor shall anything contained in this Agreement
abrogate any right, privilege, or obligation arising out of or applicable to the
physician-patient relationship.
ARTICLE 3.
MANAGEMENT AND FINANCIAL ADVISORY SERVICES TO BE PROVIDED BY SCN
a. Performance of Limited Management Functions. SCN shall provide or
arrange for the services set forth in this ARTICLE III. SCN is hereby expressly
authorized to perform its services hereunder in whatever manner it deems
reasonably appropriate. OCOA will not act in a manner which would prevent SCN
from carrying out its duties under this Agreement. OCOA and the Physician Owners
acknowledge and agree that, except as set forth in this ARTICLE III, SCN shall
not be responsible for providing any other services to OCOA or the Physician
Owners, unless otherwise agreed to between or among the Parties in a separate
written agreement. In connection with the foregoing sentence, SCN shall not
provide any equipment, facilities, supplies or employee staffing for OCOA and
shall not perform the following services: personnel evaluations, billing and
collection services, computer hardware/software support, payroll services,
accounts payable processing/management, on-site procurement, or other types of
day-to-day practice management or assessment services. In the event that OCOA
desires SCN to provide any of the foregoing services, SCN and OCOA shall
contract separately for such services. In connection with the services provided
by SCN under this ARTICLE III, OCOA shall give SCN a written request for
specific services to be performed and direction with respect to the performance
of such services. SCN shall provide, or communicate, the services to be provided
under this ARTICLE III in writing (including via Internet transmission) or
telephonically where appropriate; provided, however, upon thirty (30) days
written notice OCOA shall be entitled to one (1) onsite visit per calendar
quarter by one (1) SCN employee at SCN's expense, with the cost and expense of
any further onsite visits by any other SCN employees to be reimbursed to SCN by
OCOA.
b. Practice Assessment. Within one hundred-twenty (120) days following
the date of this Agreement, to the extent not already provided by SCN to OCOA,
and within one hundred-twenty (120) days following the third (3rd) anniversary
of this Agreement (provided this Agreement shall be in effect after the third
(3rd) anniversary hereof), SCN shall perform an assessment of OCOA's operations
and shall provide OCOA with a written report of SCN's findings. The written
report shall include the following reports: (a) financial performance review,
(b) functional area assessment, (c) organizational structure review, (d) wage
rate analysis, and (e) strategic plan.
c. Third-Party Payor Matters. SCN shall advise OCOA with respect to
marketing and Third-Party Payor and managed care matters. SCN shall provide (a)
analysis and recommendations regarding Third-Party Payor contracting and
reimbursement arrangements and (b) advice regarding negotiating strategies with
respect to Third-Party Payors. OCOA shall identify for SCN specific Third-Party
Payor contract and reimbursement issues that will be the basis of such analysis
and advice.
d. Malpractice Insurance. Upon written request of OCOA, SCN, for and on
behalf of OCOA, shall negotiate for the purchase of medical malpractice
insurance for OCOA and its Physician Owners and Physician Employees. Upon the
mutual agreement of the Parties, OCOA shall be allowed to participate in any
captive malpractice insurance plan maintained by SCN from time to time.
e. Financial Reporting. If OCOA currently has an electronic data
interface with SCN, SCN shall provide OCOA with monthly reports on charges,
receipts and adjustments and a review of OCOA's accounts receivable. Except as
specifically set forth in this ARTICLE III, SCN shall not provide any other
financial or accounting reporting services to OCOA. SCN's obligations under this
SECTION 3.5 are subject to and dependent upon OCOA providing accurate financial
information to SCN no later than the fourth (4th) business day of each month.
f. Data/Information. SCN shall provide OCOA with access to patient
demographics, clinical and financial data bases (including outcomes data if
available) and information related to SCN affiliated practices' "best
practices." OCOA
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and the Physician Owners acknowledge and agree that all of such information is
subject to the provisions of ARTICLE VII and shall remain the property of SCN
upon termination of this Agreement. SCN shall perform an annual benchmarking
analysis of OCOA's practice data. Inclusion of OCOA's practice data in the
comparative data analysis is subject to and dependent upon OCOA providing
accurate financial information to SCN no later than the fourth (4th) business
day of each month.
g. Billing and Coding Analysis. Upon the request of OCOA, SCN shall
perform an analysis of OCOA's coding and billing practices on a fiscal year
basis. The purpose of this analysis will be to evaluate OCOA's compliance with
Applicable Law (in particular Health Care Law) and to make recommendations with
respect to coding and billing practices.
h. Events Excusing Performance. SCN shall not be liable to OCOA or
Physician Owners 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 SCN has no control for so long as such
events continue, and for a reasonable period of time thereafter.
i. Compliance with Law. SCN shall comply with Applicable Law. In the
event that any change in Applicable Law shall occur that necessitates
modification of SCN's manner of operation, then SCN shall make such modification
that may be necessary and appropriate to comply with Applicable Law.
ARTICLE 4
OBLIGATIONS OF OCOA AND PHYSICIAN OWNERS
a. Professional Services. OCOA, its Physician Owners and Physician
Employees shall provide professional services to patients, in compliance at all
times with ethical standards, laws and regulations applying to OCOA's
professional practice. OCOA shall use its best efforts to determine that each
Physician Employee and Technical Employee associated with OCOA who provides
medical care to patients of OCOA is licensed by the state or states in which he
or she renders professional services.
b. Employment of Physician Employees and Other Employees. OCOA shall
have complete control of and responsibility for the hiring, compensation,
supervision, evaluation and termination of Physician Employees. OCOA shall be
responsible for the payment of OCOA employees' salaries and wages, payroll
taxes, employee benefits and all other taxes and charges now or hereafter
applicable to them.
c. Professional Insurance Eligibility. To the extent OCOA shall request
SCN to assist OCOA pursuant to SECTION 3.4, OCOA shall cooperate with SCN in the
obtaining and retaining of professional liability insurance by assuring that all
Physician Owners and Physician Employees are insurable and participating in an
on-going risk management program.
d. Fees for Professional Services. OCOA shall be solely responsible for
all costs and fees incurred by OCOA, and its employees, including without
limitation Physician Owners, or any officers, directors, partners, members,
employees or agents of OCOA, including without limitation legal, accounting and
other professional services costs and fees.
e. Events Excusing Performance. OCOA and Physician Owners shall not be
liable to SCN 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 OCOA has no control for so long as such events
continue, and for a reasonable period of time thereafter.
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ARTICLE 5.
FINANCIAL ARRANGEMENTS
[SEE EXHIBIT 5]
ARTICLE 6.
INTELLECTUAL PROPERTY AND RECORDS
a. Ownership of SCN's Business Records and Systems. All business
records, information, software and systems of SCN relating to the provision of
its services under this Agreement shall remain the property of SCN and may be
removed by SCN from supporting OCOA upon any termination of this Agreement;
provided, however, that OCOA shall be entitled, upon reasonable written request,
to access such records and make copies or extracts thereof to the extent
necessary to prosecute or defend against any liabilities imposed on OCOA by any
governmental authority or other Party.
b. Maintenance of Records. Except as otherwise provided in this
Agreement, the Parties shall safeguard all records maintained by them pursuant
to this Agreement for a period of time specified by the Party holding such
records, and such period must be noticed in writing to the other Parties, from
the date of the last activity recorded in such records and, prior to destruction
of any such records, shall give the other Party notice of such destruction and,
if the other Party so elects and applicable law so permits, shall deliver such
records to the other Party in lieu of destroying them. In particular, the
Parties agree, to the extent necessary to permit receipt of reimbursement for
services by OCOA, to make available to the Secretary of the United States
Department of Health and Human Services, the Comptroller General at the General
Accounting Office, or their authorized representatives, any books, documents and
records in their possession relating to the nature and extent of the costs of
services hereunder for a period of four (4) years after the provision of such
services. Each Party further agrees that, if it contracts with any third party
to provide services that are valued in excess of $10,000, it shall require such
contract party to comply with the requirements of the previous sentence. Nothing
in this SECTION 6.3 constitutes the waiver of any attorney-client privilege, and
neither Party shall be required hereunder to give the other Party documents if,
as a result, an existing attorney-client privilege would be waived.
c. Access to Records. Each Party shall at all reasonable times during
the term of this Agreement and thereafter permit the other Party to have
reasonable access at reasonable times to its documents, books and records
relating to this Agreement.
d. Patient Records. All patient records shall remain the property of
OCOA, provided that SCN shall have the right to analyze and obtain information
from such records to the extent necessary to perform the services described in
ARTICLE III and subject to Applicable Law. Upon termination of this Agreement,
OCOA shall retain such records, but SCN shall be entitled to retain any
information it has acquired from such records; provided, however, that SCN shall
take all action reasonably necessary to ensure the confidentiality of the
patient records in accordance with Applicable Law and shall indemnify OCOA and
any of its Physician Employees (who are deemed hereby to be third party
beneficiaries for this purpose) for breach of any applicable confidentiality
requirements.
ARTICLE 7.
INDEMNITY
a. Indemnification by OCOA. OCOA shall indemnify, hold harmless and
defend SCN, its officers, directors and employees, from and against any direct,
out-of-pocket losses, damages, claims, costs and expenses (including reasonable
attorneys' fees), caused by or as a result of the performance of any negligent
acts or negligent omissions by OCOA and/or OCOA's Physician Owners, agents,
employees and/or subcontractors (other than SCN) during the term hereof or as a
result of a breach of the representations and warranties contained in ARTICLE IX
of this Agreement or the breach of any covenant contained in ARTICLE XI of this
Agreement.
b. Indemnification by SCN. SCN shall indemnify, hold harmless and
defend OCOA, the Physician Owners, OCOA's officers, directors and employees,
from and against any direct, out-of-pocket losses, damages, claims, costs and
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expenses (including reasonable attorneys' fees), caused by or as a result of the
performance of any negligent acts or negligent omissions by SCN and/or its
shareholders, agents, employees and/or subcontractors (other than OCOA and the
Physician Owners) during the term of this Agreement or as a result of a breach
of the representations or warranties set forth in ARTICLE X of this Agreement or
breach of any covenant contained in this Agreement.
c. Escrow Pending Indemnification Determination. In the event that
either Party makes a claim for indemnification under this Agreement, then the
claiming Party shall have the right, to the extent it is owed indemnifications,
to pay amounts owed to the other Party under this Agreement into an escrow
account (established pursuant to an escrow agreement to be agreed upon by the
Parties) to be held by the escrow agent in an interest bearing account until a
determination by either (i) the Parties, (ii) a court of proper jurisdiction or
(iii) agreed upon panel of arbitrators, has been made regarding the claiming
Party's right to indemnification. In the event that the claiming Party is
entitled to indemnification, then such escrowed funds shall be paid to the
claiming Party in partial or complete satisfaction of such indemnification
obligation. In the event the escrowed funds are insufficient to satisfy the
indemnification obligation, the indemnifying party shall nevertheless be
obligated to pay the indemnified party the full amount of such indemnification
obligation. Any excess funds remaining in the escrow account after the payment
of the indemnification obligation or any funds held in the escrow account if it
is determined that no indemnification obligation is owed shall be paid to the
nonclaiming Party.
ARTICLE 8.
TERM AND TERMINATION
a. Term of Agreement. This Agreement shall be effective as of January
1, 1999, and shall expire on March 31, 2003, unless earlier terminated pursuant
to the terms hereof.
b. SCN Events of Default. SCN shall be in default under this Agreement
upon the occurrence of any of the following:
i. In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by SCN, or
upon other action taken or suffered, voluntarily or involuntarily,
under any federal or state law for the benefit of debtors by SCN,
except for the filing of a petition in involuntary bankruptcy against
SCN which is dismissed within thirty (30) days thereafter.
ii. In the event that SCN shall intentionally or in bad faith
violate Applicable Law resulting in a direct, continuing material
adverse effect on the operations, earnings and cash flow of OCOA.
c. OCOA Events of Default. OCOA shall be in default under this
Agreement upon the occurrence of any of the following:
i. In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by OCOA, or
upon other action taken or suffered, voluntarily or involuntarily,
under any federal or state law for the benefit of debtors by OCOA,
except for the filing of a petition in involuntary bankruptcy against
OCOA which is dismissed within thirty (30) days thereafter.
ii. In the event OCOA's Medicare or Medicaid Number shall be
terminated or suspended as a result of the action or inaction of OCOA
or a Physician Employee, and such termination or suspension shall
continue for thirty (30) days, unless OCOA shall at that time be acting
in good faith (and shall provide reasonable evidence of the action
being taken) to reverse such termination or suspension; provided,
however, that in no event may such termination or suspension continue
for more than ninety (90) days.
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iii. In the event OCOA fails to pay (i) the Management
Services Fee provided for hereunder or (ii) any expenses incurred by
SCN on behalf of OCOA when due, and such failure is not cured within
fifteen (15) days of written notice from SCN to OCOA.
d. OCOA's Remedies. Notwithstanding any other provision in this
Agreement, in the event SCN is in default under this Agreement, SCN shall
compensate OCOA for any actual damages suffered by OCOA as a result of such
default; provided, however, that such damages shall not include incidental,
consequential or speculative damages suffered by OCOA as a result of such
default.
e. SCN's Remedies. In the event OCOA is in default under this
Agreement, OCOA shall pay SCN, as liquidated damages, an amount equal to (i) the
average monthly Management Services during the twelve (12) months immediately
prior to such default, multiplied by (ii) the number of months remaining in the
term of this Agreement. In the event that this Agreement has not been in effect
for twelve (12) months prior to OCOA's default, the average monthly Management
Service Fee shall be determined for such shorter period.
ARTICLE 9.
REPRESENTATIONS AND WARRANTIES OF OCOA AND PHYSICIAN OWNERS
OCOA and Physician Owners jointly and severally represent, warrant,
covenant and agree with SCN that:
a. Validity. OCOA is a New York limited liability partnership. OCOA has
the full power and authority to own OCOA's property, to carry on OCOA's business
as presently being conducted, to enter into this Agreement, and to consummate
the transactions contemplated hereby. Each Physician Owner is an adult citizen
and resident of the State of New York. Each Physician Owner has the full power
and authority to own his or her property, to practice medicine in the state(s)
where the Practice Offices are located and where he or she is presently
practicing medicine, to carry on his or her business as presently being
conducted, to enter into this Agreement, and to consummate the transactions
contemplated hereby.
b. Authority. The execution of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action, and this Agreement is a valid and binding Agreement of OCOA and each
Physician Owner, enforceable in accordance with its terms. OCOA and each
Physician Owner have obtained all third-party consents necessary to enter into
and consummate the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, nor compliance by OCOA or any Physician Owner with any of
the provisions hereof, will (a) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under any license, agreement
or other instrument or obligation to which either OCOA or any Physician Owner is
a Party, except for such defaults which in the aggregate do not result in a
material adverse effect on the business of OCOA or the Physician Owners (taken
as a whole) or (b) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to either OCOA or any Physician Owner.
ARTICLE 10.
REPRESENTATIONS AND WARRANTIES OF SCN
SCN represents, warrants, covenants and agrees with OCOA as follows:
a. Organization. SCN is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. SCN has the full
power to own its property, to carry on its business as presently conducted, to
enter into this Agreement and to consummate the transactions contemplated
hereby.
b. Authority. SCN has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, as well as the
consummation of the transactions contemplated hereby. The execution and delivery
of this
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Agreement do not, and the consummation of the transactions contemplated hereby
will not, violate any provisions of the charter or the bylaws of SCN or any
indenture, mortgage, deed of trust, lien, lease, agreement, arrangement,
contract, instrument, license, order, judgment or decree or result in the
acceleration of any obligation thereunder to which SCN is a Party or by which it
is bound.
c. Absence of Litigation. No action or proceeding by or before any
court or other Governmental Authority has been instituted or is, to the best of
SCN's knowledge, threatened with respect to the transactions contemplated by
this Agreement.
ARTICLE 11.
COVENANTS OF OCOA AND PHYSICIAN OWNERS
OCOA and the Physician Owners covenant and agree with SCN that:
a. Merger, Consolidation and Other Arrangements. OCOA may incorporate,
merge or consolidate with any other entity or individual or liquidate or
dissolve or wind-up OCOA's affairs or enter into any partnerships, joint
ventures or sale-leaseback transactions or purchase or otherwise acquire (in one
or a series of related transactions) any part of the property or assets (other
than purchases or other acquisitions of inventory, materials and equipment in
the ordinary course of business) of any other person or entity without the prior
written consent of SCN; provided, however that this Agreement shall be binding
upon any successor or assigns of OCOA.
b. Necessary Authorizations/Assignment of Licenses and Permits. OCOA
and each Physician Owner shall maintain all licenses, permits, certifications,
or other Necessary Authorizations (the absence of which would have a material
adverse effect on OCOA) and shall not assign or transfer any interest in any
license, permit, certificate or other Necessary Authorization granted to it by
any Governmental Authority (the absence of which would have a material adverse
effect on OCOA).
c. Compliance with All Laws. OCOA and each Physician Owner shall comply
in all material respects with any Applicable Law relating to OCOA's practice and
the operation of any facility.
ARTICLE 12.
GENERAL PROVISIONS
a. Assignment. SCN shall have the right to assign its rights hereunder
to any person, firm or corporation under common control with SCN and to any
lending institution from which SCN obtains financing for security purposes or as
collateral. OCOA agrees to, and acknowledges, SCN's right to assign SCN's rights
under this Agreement to any Lender and further agrees that upon receipt of
written notice from such Lender, OCOA shall pay to Lender or cause to be paid to
Lender all amounts which are otherwise payable to SCN pursuant to the terms of
this Agreement, including without limitation all Management Service Fees, and
until such amounts are delivered to Lender, hold payments in trust for Lender.
Except as set forth above, neither SCN nor OCOA shall have the right to assign
their respective rights and obligations hereunder without the written consent of
the other Party. Without limiting the foregoing, OCOA acknowledges that, as
collateral for certain obligations, SCN has assigned all of its rights hereunder
to NationsBank of Tennessee, N.A. as Agent (the "Agent") for itself and other
banks and institutional lenders from time to time (collectively the "Banks"). As
an inducement for the Banks to extend or continue the extension of credit to
SCN, OCOA (i) acknowledges that the collateral assignment to the Agent covers
all rights of SCN hereunder, including, but not limited to, rights arising from
warranties and representations made by OCOA, rights to enforce covenants made by
OCOA, and rights to receive all payments due SCN; (ii) agrees to regard the
Agent as the owner of any or all of the assigned rights upon written notice to
OCOA of this election from the Agent; (iii) agrees that neither the Agent nor
any of the Banks has any obligation for the performance of the duties of SCN
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hereunder, and shall not assume any such duty by the exercise of rights as a
secured lender; (iv) agrees to give the Agent written notice of any material
default hereunder on SCN's part at the address of 0 XxxxxxxXxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000, Attn: Walker Choppin, and to allow at least thirty
(30) days thereafter for the cure of such default before OCOA terminates this
Agreement; (v) agrees that the rights of OCOA under this Agreement are and shall
be junior to any security interest that the Agent and the Banks, their
successors or assigns may have at any time; (vi) agrees that the benefits of the
above undertakings in favor of the Agent and Banks shall further extend to all
successors and assigns of the Agent and Banks, provided that any notices given
by OCOA under this Section shall be given to the Agent at the foregoing address
unless OCOA has received written notice of a change thereof; and (vii) agrees
that this SECTION 12.1 may not be modified, and no provision of this SECTION
12.1 may be waived, absent the written approval of the Agent.
b. Whole Agreement; Modification. Except as otherwise set forth herein,
this Agreement supersedes all prior agreements between the Parties on the
subject matter hereof and there are no other agreements or understandings,
written or oral, between the Parties regarding this Agreement, the Exhibits and
the Schedules, other than as set forth herein. This Agreement shall not be
modified or amended except by a written document executed by both Parties to
this Agreement.
c. Notices. All notices required or permitted by this Agreement shall
be in writing and shall be deemed to have been given (i) when received if given
in person, (ii) on the date of acknowledgment of receipt if sent by telex,
facsimile or other wire transmission, (iii) one business day after being sent by
overnight delivery service, or (iv) three days after being deposited in the
United States mail, certified or registered mail, postage prepaid, addressed as
follows:
To SCN: Specialty Care Network, Inc.
00 Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxx
With a copy to: Baker, Donelson, Bearman & Xxxxxxxx, P.C.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
To OCOA: Xxxxx & Xxxxx Orthopedic Associates, LLP
00 Xxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx, M.D.
With a copy to: Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
or to such other address as either Party shall notify the other. In the event
that either Party gives notice of an event of default under this Agreement, as
described under ARTICLE X of this Agreement, then the Party giving such notice
must state in specific detail the factual circumstance causing the event of
default or justifying a determination of an event of default. In addition
thereto, any notice of default shall include a written description of the
actions necessary, in the opinion of the Party giving notice, to cure the
default.
d. Binding on Successors. Subject to SECTION 12.1, this Agreement shall
be binding upon the Parties hereto, and their successors, assigns, heirs and
beneficiaries.
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e. Waiver of Provisions. Any waiver of any terms and conditions hereof
must be in writing, and signed by the Parties hereto. The waiver of any of the
terms and conditions of this Agreement shall not be construed as a waiver of any
other terms and conditions hereof.
f. Governing Law; Venue; Alternative Dispute Resolution. The validity,
interpretation and performance of this Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado. Each of the
Parties submits to the jurisdiction of any state or federal court sitting in
Colorado, and any action or proceeding for injunctive relief arising out of this
Agreement. Except as set forth in this SECTION 12.13 below, each Party also
agrees not to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties waives any defense of
inconvenient form to the maintenance of any action or proceeding so brought and
waives any bond, security, or other security that might be required of any other
Party with respect thereto.
g. No Practice of Medicine. The Parties acknowledge that SCN is not
authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of medicine. To the extent any act or service
required of SCN in this Agreement should be construed or deemed by any
Governmental Authority or court to constitute the practice of medicine, the
performance of said act or service by SCN shall be deemed waived and
unenforceable to the minimum extent required to comply with Applicable Law.
h. Severability. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or unenforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the Parties.
i. Additional Documents. Each of the Parties hereto agrees to execute
any document or documents that may be requested from time to time by any other
Party to implement or complete such Party's obligations pursuant to this
Agreement.
j. Attorneys' Fees. If legal action is commenced by any Party to
enforce or defend its rights under this Agreement, the prevailing Party in such
action shall be entitled to recover its costs and attorneys' fees in addition to
any other relief granted.
k. Time is of the Essence. Time is hereby expressly declared to be of
the essence in this Agreement.
l. Confidentiality. No Party hereto shall disseminate or release to any
third party any information regarding any provision of this Agreement, or any
financial information regarding the other (past, present or future) that was
obtained by such Party in the course of the negotiations of this Agreement or in
the course of the performance of this Agreement, including, but not limited to,
any information relating to the internal operations of OCOA, OCOA fees or the
terms of any of the managed care contracts, without the written consent of SCN
and OCOA; provided, however, the foregoing shall not apply to information which
(i) is generally available to the public other than as a result of a breach of
confidentiality provisions; (ii) becomes available on a non-confidential basis
from a source other than the other Party or its affiliates or agents, which
source was not itself bound by a confidentiality agreement; (iii) which is
required to be disclosed by law or pursuant to court order (SCN shall provide
OCOA with copies of any information regarding OCOA provided by SCN to any third
party); (iv) except is disclosed to its investment bankers, banks, underwriters
or lenders, or its advisors (who shall be advised that they must keep such
information in confidence to the extent required by this SECTION 12.12); or (v)
is required to be disclosed in public filings made with the Securities and
Exchange Commission or State Departments of Securities (or equivalent thereof).
m. Contract Modifications for Prospective Legal Events. In the event
any applicable federal, state or local law or any regulation, order or policy
issued under any such law is changed (or any judicial or administrative
interpretation thereof is developed or changed) in a way which could reasonably
be expected to have a material adverse effect on the practical realization of
the benefits anticipated by one or more Parties to this agreement, the adversely
affected Party or Parties shall notify the other Party or Parties in writing of
such change and the effect of the change. The Parties shall enter into good
faith negotiations to modify this Agreement to compensate for such change. If an
agreement on a method for
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modifying this Agreement is not reached within thirty (30) days of such written
notice, the matter shall be submitted to a single arbitrator for arbitration in
Washington, D.C. pursuant to the rules and procedures of the American Health
Lawyers Association Alternative Dispute Resolution Service Rules of Procedure
for Arbitration. The arbitrator shall (i) structure an amendment to this
Agreement which will leave the Parties as nearly as possible in the same
economic positions in which they would have been under the original terms of
this Agreement, had the change in the law, regulation, order or policy (or
change or development of the judicial or administrative interpretation thereof)
not occurred; or (ii) if the arbitrator determines that the change is so
fundamental that revision and continuation of this Agreement is not feasible,
structure a termination of this Agreement that will return the Parties as nearly
as possible to the economic positions in which they would have been had they not
entered into this Agreement, without altering in a material way the economic
obligations or benefits derived from the payment or receipt of Service Fees
realized during the period this Agreement was in effect.
n. Remedies Cumulative. Except as limited under SECTION 7.1, SECTION
7.2, and SECTION 8.5, no remedy set forth in this Agreement or otherwise
conferred upon or reserved to any Party shall be considered exclusive of any
other remedy available to any Party, but the same shall be distinct, separate
and cumulative and may be exercised from time to time as often as occasion may
arise or as may be deemed expedient.
o. Language Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
p. No Obligation to Third Parties. Except as provided in SECTION 12.1,
none of the obligations and duties of SCN or OCOA under this Agreement shall in
any way or in any manner be deemed to create any obligation of SCN or of OCOA
to, or any rights in, any person or entity not a Party to this Agreement.
q. Communications. OCOA and SCN agree that good communication between
the Parties is essential to the successful performance of this Agreement, and
each pledges to communicate fully and clearly with the other on matters relating
to the successful operation of OCOA's practice at the Practice Offices.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first written above.
SCN:
SPECIALTY CARE NETWORK, INC.
By:
--------------------------------------
Title:
-----------------------------------
OCOA:
XXXXX & XXXXX ORTHOPEDIC ASSOCIATES, LLP
By:
--------------------------------------
Title:
-----------------------------------
-----------------------------------------
PHYSICIAN OWNERS:
-----------------------------------------
XXXXXX XXXXX, M.D.
-----------------------------------------
XXXXX XXXXX, M.D.
-----------------------------------------
XXXX X. XXXXX, M.D.
-----------------------------------------
XXXXXXXXX XXXXXXX, M.D.
-----------------------------------------
XXXXXXX XXXXXXXXX, M.D.
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EXHIBIT 5
FINANCIAL MATTERS
5.1. Management Services Fee. During the term of this Agreement, OCOA,
or any of the Physician Owners (as the case may be) shall pay to SCN a monthly
Management Services Fee (the "Management Services Fee") as follows: (i) from
January 1, 1999, through March 31, 2001, the Management Services Fee shall equal
One Hundred Four Thousand One Hundred Sixty-Seven and No/100 Dollars
($104,167.00) per month; and (ii) from April 1, 2001, through March 31, 2003,
the Management Services Fee shall equal Eighty-Three Thousand Three Hundred
Thirty-Three and No/100 Dollars ($83,333.00) per month.
5.2. Payment of Management Services Fee.
5.2.1 The amounts to be paid to SCN under this EXHIBIT 5 shall
be payable monthly, on the fifteenth (15th) day of each month.
5.2.2 The Physician Owners hereby acknowledge and agree that
if OCOA fails to pay the Management Services Fee owed pursuant to this
Agreement as provided in SECTION 5.2.1, then upon ten (10) days written
notice, SCN shall have the right to collect said Management Services
Fee from the Physician Owners severally and not jointly. During the
period from March 31, 1998, through March 31, 2001, each Physician
Owner shall be personally liable to SCN for his pro-rata share of the
unpaid Management Services Fee based upon the following percentages:
Xxxxxx Xxxxx, M.D., forty-five and 63/100 percent (45.63%); Xxxxx
Xxxxx, M.D., forty-five and 63/100 (45.63%); Xxxx X. Xxxxx, M.D., three
and 25/100 percent (3.25%); Xxxxxxxxx Xxxxxxx, M.D., two and 69/100
percent (2.69%); and Xxxxxxx Xxxxxxxxx, M.D., two and 80/100 percent
(2.80%). After March 31, 2001, each Physician Owner shall be personally
liable to SCN for his pro-rata share of the unpaid Management Services
Fee based upon the greater of (i) their respective ownership interest
percentage in OCOA at the time the Management Services Fee becomes due,
or (ii) twenty percent (20%). The Physician Owners hereby agree to pay
to SCN their respective pro-rata share of the unpaid Management
Services Fee within ten (10) days of SCN's written request for such
payment. In the event that any Management Services Fees are owed by
OCOA but unpaid because of a breach of this Agreement by one (1)
Physician Owner, SCN agrees to look to the breaching Physician Owner,
after exhausting its remedies against OCOA, and not the other Physician
Owners for collection of the unpaid Management Service Fees.
5.3 Physician Owner Change in Practice/Group Affiliation. In the event
that a Physician Owner leaves the employment of or terminates his or her
affiliation with OCOA, then the terminating Physician Owner may join or
establish another group/practice which has or will enter into a Management
Services Agreement with SCN upon such terminating Physician Owner's affiliation
with such new group/practice. In the event that (i) OCOA consents to SCN
entering into the new Management Services Agreement, (ii) entering into the new
Management Services Agreement will not adversely affect the operations and
earnings of SCN, and (iii) the new group/practice can satisfy the
representations and warranties set forth in ARTICLE IX of this Agreement, then
SCN will not unreasonably withhold or refrain from entering into a new
Management Services Agreement with the terminating Physician Owner's new
group/practice. Except as set forth herein, in the event that the Physician
Owner affiliates with a new group/practice that is not a Party to a Management
Services Agreement with SCN, then SCN, at its option, may terminate this
Agreement solely with respect to the terminating Physician Owner. In the event
that SCN does not enter into a new Management Services Agreement, then SCN shall
terminate this Agreement with respect to such Physician Owner, and the
terminating Physician Owner shall be obligated as described in SECTION 5.2.2.
5.4 Death or Disability. In the event that a Physician Owner dies or
becomes Disabled, then the Physician Owner shall have no continuing obligations
under this Agreement.
5-1
