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EXHIBIT 2.21
MANAGEMENT SERVICES AGREEMENT
BY AND AMONG
SPECIALTY CARE NETWORK, INC.,
GREATER CHESAPEAKE ORTHOPAEDIC ASSOCIATES, L.L.C.,
XXXX X. XXXXXXXXX, M.D.
XXXXX X. XXXXX, M.D.
XXXXXX X. XXXXXXXX, M.D.
XXXXXX X. XXXXXX, M.D.
XXXX X. XXXXXXXX, M.D.
XXXX X. X'XXXXXXX, M.D.
AND
XXX X. XXXXX, M.D.
DATED AS OF JANUARY 1, 1999
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TABLE OF CONTENTS
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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. GCOA Matters...................................................................................- 5 -
2.4. Patient Referrals..............................................................................- 5 -
2.5. Professional Judgment..........................................................................- 5 -
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.............................................................................- 6 -
3.6. Data/Information...............................................................................- 6 -
3.7. Billing and Coding Analysis....................................................................- 6 -
3.8. Events Excusing Performance....................................................................- 6 -
3.9. Compliance with Law............................................................................- 6 -
3.10. New Ancillary Services........................................................................- 6 -
ARTICLE IV.
OBLIGATIONS OF GCOA AND PHYSICIAN OWNERS......................................................................- 6 -
4.1. Professional Services..........................................................................- 6 -
4.2. Employment of Physician Employees and Other Employees..........................................- 7 -
4.3. Professional Insurance Eligibility.............................................................- 7 -
4.4. Fees for Professional Services.................................................................- 7 -
4.5. Events Excusing Performance....................................................................- 7 -
ARTICLE V.
EXCLUSIVE ARRANGEMENTS........................................................................................- 7 -
5.1. Exclusive Arrangement..........................................................................- 7 -
5.2. Enforcement....................................................................................- 7 -
5.3. Modification of Covenants and Agreements.......................................................- 7 -
5.4. Rights of SCN..................................................................................- 8 -
5.5. Excluded Activities............................................................................- 8 -
ARTICLE VI.
FINANCIAL ARRANGEMENTS........................................................................................- 8 -
ARTICLE VII.
INTELLECTUAL PROPERTY AND RECORDS.............................................................................- 8 -
7.1. Ownership of SCN's Business Records and Systems................................................- 8 -
7.2. Maintenance of Records.........................................................................- 8 -
7.3. Access to Records..............................................................................- 8 -
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7.4. Patient Records................................................................................- 8 -
ARTICLE VIII.
INDEMNITY.....................................................................................................- 9 -
8.1. Indemnification by GCOA and the Physician Owners...............................................- 9 -
8.2. Indemnification by SCN.........................................................................- 9 -
8.3. Escrow Pending Indemnification Determination...................................................- 9 -
ARTICLE IX.
TERM, TERMINATION AND RETIREMENT..............................................................................- 9 -
9.1. Term of Agreement..............................................................................- 9 -
9.2. Extended Term.................................................................................- 10 -
9.3. SCN Events of Default.........................................................................- 10 -
9.4. GCOA Events of Default........................................................................- 10 -
9.5. GCOA's Remedies...............................................................................- 10 -
9.6. Security for Unearned Management Services Fee.................................................- 10 -
9.7. SCN's Remedies................................................................................- 11 -
ARTICLE X.
REPRESENTATIONS AND WARRANTIES OF GCOA AND PHYSICIAN OWNERS..................................................- 11 -
10.1. Validity.....................................................................................- 11 -
10.2. Authority....................................................................................- 11 -
ARTICLE XI.
REPRESENTATIONS AND WARRANTIES OF SCN........................................................................- 11 -
11.1. Organization.................................................................................- 11 -
11.2. Authority....................................................................................- 12 -
11.3. Absence of Litigation........................................................................- 12 -
ARTICLE XII.
COVENANTS OF GCOA AND PHYSICIAN OWNERS.......................................................................- 12 -
12.1. Necessary Authorizations/Assignment of Licenses and Permit...................................- 12 -
12.2. Compliance with All Laws.....................................................................- 12 -
12.3. Third-Party Payor Programs...................................................................- 12 -
12.4. Change in Business or Credit and Collection Policy...........................................- 12 -
ARTICLE XIII.
GENERAL PROVISIONS...........................................................................................- 13 -
13.1. Assignment...................................................................................- 13 -
13.2. Whole Agreement; Modification................................................................- 13 -
13.3. Notices......................................................................................- 13 -
13.4. Binding on Successors........................................................................- 14 -
13.5. Waiver of Provisions.........................................................................- 14 -
13.6. Governing Law; Venue.........................................................................- 14 -
13.7. No Practice of Medicine......................................................................- 14 -
13.8. Severability.................................................................................- 14 -
13.9. Additional Documents.........................................................................- 14 -
13.10. Attorneys' Fees.............................................................................- 14 -
13.11. Time is of the Essence......................................................................- 14 -
13.12. Confidentiality.............................................................................- 15 -
13.13. Contract Modifications for Prospective Legal Events.........................................- 15 -
13.14. Remedies Cumulative.........................................................................- 15 -
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13.15. Language Construction.......................................................................- 15 -
13.16. No Obligation to Third Parties..............................................................- 15 -
13.17. Communications..............................................................................- 15 -
SCHEDULE 5.5
EXCLUDED ASSETS.............................................................................................5.5- 1
EXHIBIT 6
FINANCIAL MATTERS...............................................................................................6-1
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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"),
GREATER CHESAPEAKE ORTHOPAEDIC ASSOCIATES, L.L.C., a Maryland limited liability
company ("GCOA"), and XXXX X. XXXXXXXXX, M.D., XXXXX X. XXXXX, M.D., XXXXXX X.
XXXXXXXX, M.D., XXXXXX X. XXXXXX, M.D., XXXX X. XXXXXXXX, M.D., XXXX X.
X'XXXXXXX, M.D. and XXX X. XXXXX, M.D. ("Physician Owners"), residents of
Maryland. SCN, GCOA, and the Physician Owners are sometimes referred to
individually herein as a "Party" and collectively herein as the "Parties."
W I T N E S S E T H:
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, GCOA and Physician Owners desire to obtain the services of SCN
in performing such management and support services functions so as to assist
GCOA and its Physician Owners and Physician Employees;
WHEREAS, the Parties have entered into that certain Service Agreement
dated November 12, 1996 (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 I.
DEFINITIONS
For the purpose of this Agreement, the following definitions shall
apply:
"Agent" shall have the meaning as defined in SECTION 13.1.
"Ancillary Service Revenue" means all fees actually collected each
month by or on behalf of GCOA or any of the Physician Owners (as the case may
be) for any and all Ancillary Services furnished to any patient and any revenue
from the sale of any goods related to any and all Ancillary Services.
"Ancillary Services" means an Orthotics Services, MRI Services and Bone
Densitometry Services.
"Ancillary Services Management Fee" has the meaning set forth in
EXHIBIT 6.
"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.
"ASC" has the meaning set forth in SECTION 9.6.
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"Banks" shall have the meaning as defined in SECTION 13.1.
"Bone Densitometry Services" means all services related to bone
densitometry provided at the Practice Offices.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Services.
"Code" means the Internal Revenue Code of 1986, as amended.
"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 GCOA may reasonably anticipate that such
Physician Owner will remain disabled for at least two (2) years following the
commencement of such disability.
"EBITDA" means earnings before interest, tax, depreciation and
interest, determined in accordance with GAAP.
"Xxxxxxxx Management Services Fee" shall have the meaning as defined in
EXHIBIT 6.
"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 GCOA 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 GCOA'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);
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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 Maryland laws.
"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.
"Medical Practice" means the provision of all medical services by GCOA
at the Practice Offices exclusive of any Ancillary Services.
"Medicare" means any medical program established under Title XVIII of
the Social Security Act and administered by the Health Care Financing
Administration.
"MRI Services" means all magnetic resonance imaging services provided
at the Practice Offices.
"Necessary Authorizations" means with respect to GCOA, 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 GCOA's business.
"Non-DHS" means any health service not included in the meaning of
"designated health services," as defined under 42 U.S.C. ss. 1395nn (and federal
regulations promulgated thereunder).
"Orthotics Services" means those services provided to patients
necessary to design and fit an orthotic device for patient use and such other
services as are related and incident to the same.
"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 GCOA or are
otherwise under contract with GCOA 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 GCOA, including those Persons set forth
in the preface above.
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"Practice Offices" means any office location under the control of GCOA
or the Physician Owners at which GCOA or the Physician Owners provide medical
services or any Ancillary Services.
"SCN" means Specialty Care Network, Inc., a Delaware corporation,
together with its successors and assigns.
"SCNM" has the meaning set forth in SECTION 9.6.
"SCNM Note" has the meaning set forth in SECTION 9.6.
"Service Agreement" has the meaning set forth in the recitals.
"Technical Employees" shall mean individuals who provide billable
services on behalf of GCOA and are employees of GCOA.
"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.
"Unearned Management Services Fee" has the meaning set forth in SECTION
9.5.
ARTICLE II.
RELATIONSHIP OF THE PARTIES
II.1. Independent Relationship. GCOA, Physician Owners and SCN intend
to act and perform as independent contractors, and, except as may be provided
under a separate agreement for the development and operation of an ambulatory
surgery center or other Non-DHS, 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, GCOA, and
Physician Owners agree that GCOA 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 GCOA'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 GCOA to assist GCOA in
satisfying its obligations described above.
II.2. Responsibilities of the Parties. As more specifically set forth
herein, SCN shall provide GCOA with certain limited management and financial
advisory services as provided under ARTICLE III. As more specifically set forth
herein, GCOA 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 GCOA and their patients.
II.3. GCOA Matters. Except for the services provided by SCN pursuant to
ARTICLE III, GCOA shall be solely responsible for all matters relating to GCOA,
operational or otherwise.
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II.4. Patient Referrals. The Parties agree that the benefits to GCOA
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 GCOA's patients in
any facility operated by SCN.
II.5. 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 GCOA, Physician Owners, Physician Employees, GCOA Employees
and GCOA'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 GCOA, Physician Owners, Physician Employees and GCOA'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 III0
MANAGEMENT AND FINANCIAL ADVISORY SERVICES TO BE PROVIDED BY SCN
III.1. 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. GCOA will not act in a manner which would prevent
SCN from carrying out its duties under this Agreement. GCOA 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 GCOA 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 GCOA
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 GCOA
desires SCN to provide any of the foregoing services, SCN and GCOA shall
contract separately for such services. In connection with the services provided
by SCN under this ARTICLE III, GCOA 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 GCOA 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
GCOA. SCN shall provide the services set forth in this ARTICLE III both with
respect to the Medical Practice and the Ancillary Services.
III.2. Practice Assessment. Within one hundred-twenty (120) days
following the date of this Agreement, to the extent not already provided by SCN
to GCOA, 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 GCOA's
operations and shall provide GCOA 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.
III.3. Third-Party Payor Matters. SCN shall advise GCOA 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. GCOA shall identify for SCN specific Third-Party
Payor contract and reimbursement issues that will be the basis of such analysis
and advice.
III.4. Malpractice Insurance. Upon written request of GCOA, SCN, for
and on behalf of GCOA, shall negotiate for the purchase of medical malpractice
insurance for GCOA and its Physician Owners and Physician Employees. Upon the
mutual agreement of the Parties, GCOA shall be allowed to participate in any
captive malpractice insurance plan maintained by SCN from time to time.
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III.5. Financial Reporting. If GCOA currently has an electronic data
interface with SCN, SCN shall provide GCOA with monthly reports on charges,
receipts and adjustments and a review of GCOA's accounts receivable. Except as
specifically set forth in this ARTICLE III, SCN shall not provide any other
financial or accounting reporting services to GCOA. SCN's obligations under this
SECTION 3.5 are subject to and dependent upon GCOA providing accurate financial
information to SCN no later than the fourth (4th) business day of each month.
III.6. Data/Information. SCN shall provide GCOA with access to patient
demographics, clinical and financial data bases (excluding outcomes data) and
information related to SCN affiliated practices' "best practices." GCOA 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 GCOA's practice data. Inclusion of GCOA's practice data in the comparative
data analysis is subject to and dependent upon GCOA providing accurate financial
information to SCN no later than the fourth (4th) business day of each month.
III.7. Billing and Coding Analysis. Upon the request of GCOA, SCN shall
perform an analysis of GCOA's coding and billing practices on a fiscal year
basis. The purpose of this analysis will be to evaluate GCOA's compliance with
Applicable Law (in particular Health Care Law) and to make recommendations with
respect to coding and billing practices.
III.8. Events Excusing Performance. SCN shall not be liable to GCOA 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.
III.9. 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.
III.10. New Ancillary Services. GCOA and the Physician Owners shall be
entitled to develop and manage any new service at any of the Practice Offices
not in existence as of the date of this Agreement, with the exception of an
ambulatory surgery center (collectively "New Ancillary Services"), at GCOA's own
expense and the revenue therefrom shall be excluded from the calculation of, or
determination, of SCN's Ancillary Services Management Fee under EXHIBIT 6 of
this Agreement. In the event GCOA or the Physician Owners desire to have SCN
provide capital for or manage any New Ancillary Service, the Parties shall
negotiate and contract separately for such services.
ARTICLE IV0
OBLIGATIONS OF GCOA AND PHYSICIAN OWNERS
IV.1. Professional Services. GCOA, its Physician Owners and Physician
Employees shall provide the professional services to patients in compliance at
all times with ethical standards, laws and regulations applying to GCOA's
professional practice. GCOA shall use its best efforts to determine that each
Physician Employee and Technical Employee associated with GCOA who provides
medical care to patients of GCOA is licensed by the state or states in which he
or she renders professional services.
IV.2. Employment of Physician Employees and Other Employees. GCOA shall
have complete control of and responsibility for the hiring, compensation,
supervision, evaluation and termination of Physician Employees. GCOA shall be
responsible for the payment of GCOA employees' salaries and wages, payroll
taxes, employee benefits and all other taxes and charges now or hereafter
applicable to them.
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IV.3. Professional Insurance Eligibility. GCOA 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.
IV.4. Fees for Professional Services. GCOA shall be solely responsible
for all costs and fees incurred by GCOA, and its employees, including without
limitation Physician Owners, or any officers, directors, partners, members,
employees or agents of GCOA, including without limitation legal, accounting and
other professional services costs and fees.
IV.5. Events Excusing Performance. GCOA 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 GCOA has no control for so long as such
events continue, and for a reasonable period of time thereafter.
ARTICLE V0
EXCLUSIVE ARRANGEMENTS
The Parties recognize that the services to be provided by SCN shall be
feasible only if GCOA operates an active medical practice to which both GCOA and
the physicians associated with GCOA devote their full time and attention. To
that end:
V.1. Exclusive Arrangement. During the term of this Agreement, SCN
shall be GCOA's and Physician Owners' sole provider of the management services
described in this Agreement and neither GCOA, Physician Owners nor any of GCOA's
or Physician Owners' employees shall provide such management services during the
term of this Agreement, and, subject to SECTION 3.11, SCN shall be the sole
provider of any management of any New Ancillary Service to be provided by GCOA
or any of the Physician Owners.
V.2. Enforcement. GCOA and the Physician Owners acknowledge and agree
that the covenants and agreements contained in this ARTICLE V are necessary to
protect the business and goodwill of the SCN and that a breach of these
covenants and agreements will result in irreparable harm and continuing damage
to SCN. As a result, GCOA and the Physician Owners acknowledge and agree that
since a remedy at law for any breach or attempted breach of the provisions of
this ARTICLE V shall be inadequate, SCN shall be entitled to specific
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. The Parties hereby agree that in the event any provision, section, or
subsection of this ARTICLE V 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 that it believes
to be reasonable under the circumstances. GCOA and the Physician Owner(s)
acknowledge and agree that if GCOA and/or the Physician Owners breach the
covenants and agreements contained in SECTION 5.1 and SCN is unable for any
reason to obtain a restraining order from a court of competent jurisdiction
within thirty (30) days after application to enjoin the breach by GCOA and/or
the Physician Owners, it will be difficult to calculate the precise amount of
SCN's damages. As a result, the Parties have determined that, in the event of
such a breach, SCN's damages shall equal to (i) the average monthly Management
Services during the twelve (12) months prior to such breach, 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 a breach
under this SECTION 5.2, the average monthly Management Service Fee shall be
determined for such shorter period.
V.3. Modification of Covenants and Agreements. SCN shall have the
authority to release or reduce in whole or in part the terms of the restrictive
covenants and agreements.
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V.4. Rights of SCN. SCN shall at all times during the term of this
Agreement and thereafter have the right to enter into additional service
agreements with other physicians and practices regardless of where such
physicians and/or practices are located providing for management services and
facilities to such physicians and/or practices.
V.5. Excluded Activities. The restrictive covenants contained in this
ARTICLE V shall not apply to or restrict Excluded Activities defined in SCHEDULE
5.5.
ARTICLE VI
FINANCIAL ARRANGEMENTS
[SEE EXHIBIT 6]
ARTICLE VII.
INTELLECTUAL PROPERTY AND RECORDS
VII.1. 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 GCOA upon any termination of this Agreement;
provided, however, that GCOA 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 GCOA by any
governmental authority or other Party.
VII.2. 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, which 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 GCOA, 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 7.2 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.
VII.3. 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.
VII.4. Patient Records. All patient records shall remain the property
of GCOA, 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, GCOA 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 GCOA 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.
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ARTICLE VIII.
INDEMNITY
VIII.1. Indemnification by GCOA and the Physician Owners. GCOA and the
Physician Owners, jointly and severally, 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 GCOA and/or GCOA'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 X
of this Agreement or the breach of any covenant contained in ARTICLE XII of this
Agreement.
VIII.2. Indemnification by SCN. SCN shall indemnify, hold harmless and
defend GCOA, the Physician Owners, GCOA's 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 SCN and/or its
shareholders, agents, employees and/or subcontractors (other than GCOA 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 XI of this Agreement.
VIII.3. 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 IX
TERM, TERMINATION AND RETIREMENT
IX.1. Term of Agreement.
IX.1.1. .With respect to the Medical Practice, this Agreement shall be
effective as of January 1, 1999, and shall expire on the fifth (5th) anniversary
of the Service Agreement, unless earlier terminated pursuant to the terms
hereof; provided, however, that the Xxxxxxxx Management Services Fee shall be
payable through December 31, 2002.
IX.1.2. .With respect to the Bone Desitometry Services, this Agreement
shall be effective as of January 1, 1999, and shall expire on the August 31,
2003, unless earlier terminated pursuant to the terms hereof.
IX.1.3. .With respect to the MRI Services, this Agreement shall be
effective as of January 1, 1999, and shall expire on the April 30, 2003, unless
earlier terminated pursuant to the terms hereof.
IX.1.4. .With respect to the Orthotics Services, this Agreement shall
be effective as of January 1, 1999, and shall expire on the November 30, 2002,
unless earlier terminated pursuant to the terms hereof.
IX.2. Extended Term. The term of this Agreement with respect to the
Medical Practice or any Ancillary Service shall be extended for additional terms
only upon mutual written agreement of the Parties hereto, which agreement shall
be
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made not less than one hundred eighty (180) days prior to the expiration of the
then current term of the Medical Practice or such Ancillary Service, as
applicable.
IX.3. SCN Events of Default. SCN shall be in default under this
Agreement upon the occurrence of any of the following:
IX.3.1. 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.
IX.3.2. 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 GCOA.
IX.4. GCOA Events of Default. GCOA shall be in default under this
Agreement upon the occurrence of any of the following:
IX.4.1. In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by GCOA, or upon other
action taken or suffered, voluntarily or involuntarily, under any federal or
state law for the benefit of debtors by GCOA, except for the filing of a
petition in involuntary bankruptcy against GCOA which is dismissed within thirty
(30) days thereafter.
IX.4.2. In the event GCOA's Medicare or Medicaid Number shall be
terminated or suspended as a result of the action or inaction of GCOA or a
Physician Employee, and such termination or suspension shall continue for thirty
(30) days, unless GCOA 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.
IX.4.3. In the event GCOA fails to pay (i) the Management Services Fee
provided for hereunder or (ii) any expenses incurred by SCN on behalf of GCOA
when due, and such failure is not cured within fifteen (15) days of written
notice from SCN to GCOA.
IX.5. GCOA's Remedies. Notwithstanding any other provision in this
Agreement, in the event SCN is in default under this Agreement, SCN shall
compensate GCOA for any actual damages suffered by GCOA as a result of such
default; provided, however, that such damages shall not include incidental,
consequential or speculative damages suffered by GCOA as a result of such
default. In addition, SCN shall return to GCOA any unearned portion of the
Management Services Fee (the "Unearned Management Services Fee") paid by GCOA to
SCN pursuant to this Agreement and determined as of the date of SCN's default
pursuant to SECTION 9.3. For purposes of the foregoing, the Unearned Management
Services Fee shall equal the product of (i) ((a) thirty-four (34) less (b) the
number of months from January 1, 1999 and the date of such default by SCN),
multiplied by (ii) Thirty-Four Thousand Eight Hundred Sixty-One and No/100
Dollars ($34,861.00).
IX.6. Security for Unearned Management Services Fee. SCN's obligation
to return any Unearned Management Services Fee in the event of a default under
SECTION 9.3 shall be secured by (a) SCN's membership interest in SCN of
Maryland, LLC ("SCNM"), a Maryland limited liability company engaged in the
ownership and operation of an ambulatory surgery center (the "ASC"); and (b)
that certain promissory note which will be executed by SCNM in favor of SCN to
finance the development and construction of the ASC (the "SCNM Note"). SCN and
GCOA acknowledge that (i) SCN will own a thirty-two percent (32%) membership
interest in SCNM after SCN sells a portion of its membership interest in SCNM to
the Physician Owners in January, 1999, pursuant to an arrangement separate and
apart from the this Agreement, and (ii) the principal amount of the SCNM Note
shall equal approximately One Million Eight Hundred Thousand and No/100 Dollars
($1,800,000.00). For purposes of this SECTION 9.6, SCNM, as a going concern,
shall be deemed to have a total value equal to five (5) times the EBITDA of SCNM
determined for the twelve (12) month period immediately preceding the date
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of SCN's default under this Agreement; provided, however, that if such default
occurs within eighteen (18) months of the date SCNM begins full-time operation
of the ambulatory surgery center, the total value of SCNM shall equal five (5)
times the annualized EBITDA for the three (3) months immediately preceding such
default. SCN agrees that as soon as practicable after the Closing Date it will
execute security agreements and all other documents necessary to perfect GCOA's
security interests in the collateral described in this SECTION 9.6. GCOA agrees
that in the event SCN defaults under this Agreement and fails to return any
Unearned Management Services Fee in a timely manner, GCOA shall first levy
against SCN's interest in SCNM before levying against the SCNM Note.
IX.7. SCN's Remedies. In the event GCOA is in default under this
Agreement, GCOA 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 GCOA's default, the average monthly Management
Service Fee shall be determined for such shorter period.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF GCOA AND PHYSICIAN OWNERS
GCOA and Physician Owners jointly and severally represent, warrant,
covenant and agree with SCN that:
X.1. Validity. GCOA is a Maryland limited liability company. GCOA has
the full power and authority to own GCOA's property, to carry on GCOA'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 Maryland. 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.
X.2. 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 GCOA and each
Physician Owner, enforceable in accordance with its terms. GCOA 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 GCOA 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 GCOA 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 GCOA or the Physician Owners (taken
as a whole) or (b) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to either GCOA or any Physician Owner.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF SCN
SCN represents, warrants, covenants and agrees with GCOA as follows:
XI.1. 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.
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XI.2. 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 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.
XI.3. 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 XII.
COVENANTS OF GCOA AND PHYSICIAN OWNERS
GCOA and the Physician Owners covenant and agree with SCN that:
XII.1. Necessary Authorizations/Assignment of Licenses and Permits.
GCOA 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 GCOA) 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 GCOA).
XII.2. Compliance with All Laws. GCOA and each Physician Owner shall
comply in all material respects with any Applicable Law relating to GCOA's
practice and the operation of any facility.
XII.3. Third-Party Payor Programs. GCOA shall maintain GCOA's material
compliance with the requirements of all Third-Party Payor Programs in which GCOA
will be participating or authorized to participate.
XII.4. Change in Business or Credit and Collection Policy. GCOA shall
not make any changes in the character of GCOA's business or in the credit and
collection policy, which change would, in either case, impair the collectibility
of any of the accounts receivable of GCOA, and, thus, reduce the Professional
Services Revenues of GCOA.
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ARTICLE XIII.
GENERAL PROVISIONS
XIII.1. 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, including but not
limiting the restrictive covenant included in ARTICLE V , for security purposes
or as collateral. GCOA 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, GCOA 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,
until such amounts are delivered to Lender, hold payments in trust for Lender.
Except as set forth above, neither SCN nor GCOA shall have the right to assign
their respective rights and obligations hereunder without the written consent of
the other Party. Without limiting the foregoing, GCOA 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, GCOA (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 GCOA, rights to enforce covenants made by
GCOA, 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
GCOA 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
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 GCOA terminates this
Agreement; (v) agrees that the rights of GCOA 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 GCOA under this Section shall be given to the Agent at the foregoing address
unless GCOA has received written notice of a change thereof; and (vii) agrees
that this SECTION 13.1 may not be modified, and no provision of this SECTION
13.1 may be waived, absent the written approval of the Agent.
XIII.2. Whole Agreement; Modification. This Agreement supersedes all
prior agreements between the Parties with respect to 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.
XIII.3. 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 (3) 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.
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To GCOA: Greater Chesapeake Orthopaedic Associates, L.L.C.
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, M.D.
With a copy to: Michener, Larrimore, et al.
000 Xxxxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Xx., 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 XI 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.
XIII.4. Binding on Successors. Subject to SECTION 13.1, this Agreement
shall be binding upon the Parties hereto, and their successors, assigns, heirs
and beneficiaries.
XIII.5. 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.
XIII.6. Governing Law; Venue. 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 Denver, Colorado, in any
action or proceeding for injunctive relief arising out of this Agreement. Except
as set forth in SECTION 13.13 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 forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto.
XIII.7. 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.
XIII.8. 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.
XIII.9. 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.
XIII.10. 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.
XIII.11. Time is of the Essence. Time is hereby expressly declared to
be of the essence in this Agreement.
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XIII.12. 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 GCOA, GCOA fees or the
terms of any of the managed care contracts, without the written consent of SCN
and GCOA; 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
GCOA with copies of any information regarding GCOA provided by SCN to any third
party); (iv) 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 13.13); or (v)
or is required to be disclosed in public filings made with the Securities and
Exchange Commission or any other government agency.
XIII.13. 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 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.
XIII.14. Remedies Cumulative. Except as limited under SECTION 8.1,
SECTION 8.2, and SECTION 9.5, 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.
XIII.15. 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.
XIII.16. No Obligation to Third Parties. Except as provided in SECTION
13.1, none of the obligations and duties of SCN or GCOA under this Agreement
shall in any way or in any manner be deemed to create any obligation of SCN or
of GCOA to, or any rights in, any person or entity not a Party to this
Agreement.
XIII.17. Communications. GCOA 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 GCOA'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:
-------------------------------------
GCOA:
GREATER CHESAPEAKE ORTHOPAEDIC
ASSOCIATES, L.L.C.
By:
----------------------------------------
Title:
-------------------------------------
PHYSICIAN OWNERS:
-------------------------------------------
XXXX X. XXXXXXXXX, M.D.
-------------------------------------------
XXXXX X. XXXXX, M.D.
-------------------------------------------
XXXXXX X. XXXXXXXX, M.D.
-------------------------------------------
XXXXXX X. XXXXXX, M.D.
-------------------------------------------
XXXX X. XXXXXXXX, M.D.
-------------------------------------------
XXXX X. X'XXXXXXX, M.D.
-------------------------------------------
XXX X. XXXXX, M.D.
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SCHEDULE 5.5
EXCLUDED ASSETS
See attached.
5.5-1
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EXHIBIT 6
FINANCIAL MATTERS
6.1. Management Services Fees.
6.1.1. For the management services rendered by SCN pursuant to this
Agreement with respect to the Medical Practice, SCN shall be entitled to the
following: (i) at Closing, GCOA shall pay SCN a Management Services Fee (the
"Management Services Fee") equal to One Million One Hundred Eighty-Five Thousand
Two Hundred Seventy-One and No/100 Dollars ($1,185,271.00); and (ii) during the
term of this Agreement, GCOA shall pay to SCN an additional monthly Management
Services Fee equal to One Thousand Six Hundred Ninety-Five and 33/100 Dollars
($1,695.33) (the "Xxxxxxxx Management Services Fee"). GCOA shall execute a
promissory note in the form attached hereto as EXHIBIT 6.1 for the Management
Services Fee.
6.1.2. For the management services rendered by SCN pursuant to this
Agreement with respect to the Ancillary Services, during the term of this
Agreement, SCN shall be entitled to a monthly management fee (the "Ancillary
Services Management Fee") equal to seven and one-half percent (7.5%) of
Ancillary Services Revenue.
6.2. Payment of Management Services Fees.
6.2.1 The Xxxxxxxx Management Services Fee and the Ancillary Services
Management Fee shall be payable monthly, on the fifteenth (15th) day of each
month.
6.2.2 The Physician Owners acknowledge and agree that they are Parties,
individually, to this Agreement and that if GCOA fails to pay the Management
Services Fee herein described, SCN shall have the right to collect said
Management Services Fee from the Physician Owners. SCN shall establish the
allocable share of the Management Services Fee applicable to each Physician
Owner. In the event that any Management Services Fees are owed by GCOA 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 GCOA, and not the other Physician Owners for collection of the unpaid
Management Service Fees.
6.3 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 GCOA, 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) GCOA 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 X 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 6.2.2.
6.4 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.
6-1
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EXHIBIT 6.1
PROMISSORY NOTE
See attached.
6.1-1
