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EXHIBIT 10.23
AGREEMENT TO TERMINATE THE MANAGEMENT AGREEMENT
This Agreement to Terminate the Management Agreement ("Termination
Agreement"), executed on April 12, 2000, to be effective as of 11:59 p.m. on
March 31, 2000 (the "Effective Date"), is made by and among IOI MANAGEMENT
SERVICES OF PENNSYLVANIA, INC., a Pennsylvania business corporation ("IOI
Management Corporation"), and LANCASTER ORTHOPEDIC GROUP, P.C., a Pennsylvania
professional corporation ("Medical Practice") (the parties, at times, are
collectively referred to herein as the "Parties").
RECITALS
WHEREAS, currently IOI Management Corporation and Medical Practice are
parties to that certain Management Services Agreement dated December 15, 1997,
pursuant to which IOI Management Corporation provides management services to
Medical Practice (the "Management Agreement"); and
WHEREAS, Medical Practice desires to, and IOI Management Corporation
agrees to, terminate the Management Agreement, and in consideration thereof,
Medical Practice agrees to and shall pay to IOI Management Corporation One
Million Nine Hundred Fifty Thousand Dollars ($1,950,000) upon the execution and
delivery of this Termination Agreement, as described further in Section 2
hereinbelow.
NOW, THEREFORE, for and in consideration of the mutual covenants and
consideration set forth herein, the receipt and sufficiency of which is
acknowledged by all the Parties hereto, the Parties hereto agree as follows:
TERMS AND CONDITIONS
1. Recitals. The above recitals are true and correct as stated and are
incorporated herein by this reference.
2. Termination of Management Agreement. Each of IOI Management Corporation
and Medical Practice agree that effective as of the Effective Date, the
Management Agreement shall be terminated, null and void and of no further force
and effect. In consideration for IOI Management Corporation's agreement to
terminate the Management Agreement, Medical Practice agrees to pay to IOI
Management Corporation One Million Nine Hundred Fifty Thousand Dollars
($1,950,000), payable by wire transfer to IOI Management Corporation's
designated account upon the execution and delivery of this Termination
Agreement. Medical Practice understands and agrees that as of the Effective
Date, neither IOI Management Corporation nor its parent corporation, Integrated
Orthopaedics, Inc. ("IOI"), has any duty or obligation to provide any services
of any nature whatsoever to Medical Practice, except as otherwise expressly
stated in this Termination Agreement. Furthermore, Medical Practice understands
and agrees that as of the Effective Date, IOI Management Corporation and IOI
shall have no liability whatsoever with respect to "Medical Practice Expenses"
(as defined in the Management Agreement) payable after the Effective Date and
that as of the Effective Date, neither IOI Management Corporation nor IOI shall
have any liability with respect to any obligations, costs or expenses relating
to operation of Medical Practice.
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3. March Management Fee. On or before April 20, 2000, IOI Management
Corporation and Medical Practice shall agree upon (i) the amount of all "Medical
Practice Expenses" (as such term is defined in the Management Agreement)
incurred by Medical Practice or IOI Management Corporation with respect to the
calendar month of March, 2000, and (ii) the amount of the "Management Fee" (as
such term is defined in the Management Agreement) due and payable to IOI
Management Corporation with respect to the calendar month March, 2000, and
Medical Practice shall make payment to IOI Management Corporation of the
appropriate amount due on account of such Management Fee by no later than the
close of business on April 20, 2000. Medical Practice shall have no obligation
to pay any Management Fee with respect to any period commencing on or after
April 1, 2000.
4. Financial Packages/Tax Filings. IOI Management Corporation shall
prepare and deliver to Medical Practice, with respect to all periods ending on
or before March 31, 2000, such financial reporting packages, tax filings and
other items as IOI Management Corporation has previously prepared in the
ordinary course of business with respect to Medical Practice; provided, however,
that IOI Management Corporation shall have no obligation to prepare or file the
federal or state income tax returns of Medical Practice for the fiscal year
ended December 31, 1999. IOI Management Corporation represents and warrants to
Medical Practice that IOI Management Corporation has accrued on the books of
Medical Practice the estimated federal and state income tax liability of Medical
Practice for the 1999 fiscal year, and that IOI Management Corporation has
applied or will apply, on a timely basis, for an extension of time to file
Medical Practice's federal and state tax returns for the 1999 fiscal year, and
has made or will make to the Internal Revenue Service and Pennsylvania, on a
timely basis, all required estimated payments in connection therewith. IOI
Management Corporation shall make available to Medical Practice and its
representatives such information as is in the possession of IOI Management
Corporation and is reasonably necessary or appropriate in connection with the
preparation of the federal and state income tax returns of Medical Practice for
the fiscal year ended December 31, 1999.
5. Termination of Joint Policy Board. The parties agree that the "Joint
Policy Board" (as defined in the Management Agreement) is terminated as of the
Effective Date and that IOI Management Corporation's representatives on the
Joint Policy Board have resigned effective as of the Effective Date.
6. Accounts Payable Reconciliation. The Parties acknowledge that as of the
Effective Date, Medical Practice is responsible for payment of all payables of
Medical Practice. However, to ensure a smooth transition from the Effective Date
through the date of execution hereof, the Parties acknowledge that certain
procedures with respect to Medical Practice payables were followed and that, as
a result of such procedures, certain amounts need to be reimbursed to IOI
Management Corporation. In order to effectuate such reimbursement to IOI
Management Corporation and in order to reconcile outstanding Medical Practice
payables issues, the Parties acknowledge and agree as follows:
6.1 Medical Practice has three (3) existing bank accounts, described as
follows: (i) the local "Xxxxxx" lockbox account ("Practice Account #1"); (2) the
local "Bank of Lancaster" lockbox account ("Practice Account #2"); and (3) the
Lancaster "Xxxxx Fargo" account ("Practice Account #3"). Practice Account #3 is
a "zero" balance account that is automatically funded out of that certain IOI
Management Corporation corporate account (the "IOI Corporate Account").
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6.2 Medical Practice acknowledges and agrees that during the period
commencing after the Effective Date and continuing through April 11, 2000: (i)
Medical Practice has paid certain of its accounts payable by cutting checks from
Practice Account #3, that such checks were automatically funded or will be
automatically funded out of the IOI Corporate Account, and that IOI Management
Corporation must be reimbursed for the total amount of all such checks; and (ii)
IOI Management Corporation has directly paid certain payables of Medical
Practice (the total amount of (i) and (ii) shall be referred to herein as the
"Check Funding Amount"). Furthermore, the Parties acknowledge and agree that the
payroll checks of Medical Practice to be disbursed on April 14, 2000, have
already been transmitted and funded from the IOI Corporate Account and/or
Practice Account #3. For this reason, Medical Practice agrees that IOI
Management Corporation must be reimbursed for the total amount of such payroll
funding (the "Payroll Funding Amount"). The Parties hereby agree and acknowledge
that the total of the Check Funding Amount and the Payroll Funding Amount equals
One Hundred Nineteen Thousand Four Hundred Seven Dollars and 49/100 Cents
($119,407.49) (the "Total Reimbursement Amount") and that IOI Management
Corporation shall be reimbursed for the Total Reimbursement Amount pursuant to
the procedures set forth below.
6.3 In order for IOI Management Corporation to receive reimbursement
for the Total Reimbursement Amount, the Parties agree that on the date of
execution hereof, IOI Management Corporation shall sweep the Total Reimbursement
Amount, and only the Total Reimbursement Amount, from Practice Account #1 and/or
Practice Account #2. After sweeping the Total Reimbursement Amount from such
practice accounts, IOI Management Corporation agrees that it shall no longer
have any access to Practice Account #1 nor Practice Account #2 and that Medical
Practice shall have all rights and obligations pertaining to Practice Account #1
and Practice Account #2 following the sweep of the Total Reimbursement Amount.
Following IOI Management Corporation's sweep of the Total Reimbursement Amount,
IOI Management Corporation shall immediately take all necessary steps to (i)
remove IOI Management Corporation, its officers, employees, agents and
representatives, as authorized signatories on Practice Account #1 and Practice
Account #2; and (ii) cause Medical Practice to have sole access to and signatory
authority with respect to Practice Account #1 and Practice Account #2.
6.4 With respect to Practice Account #3, the Parties agree that after
April 11, 2000, Medical Practice shall no longer have any access to and shall no
longer cut any checks from Practice Account #3. Following the execution hereof,
Medical Practice shall immediately take all necessary steps to (i) remove
Medical Practice, its officers, employees, agents and representatives, as
authorized signatories on Practice Account #3; and (ii) cause IOI Management
Corporation to have sole access to and signatory authority with respect to
Practice Account #3. IOI Management Corporation agrees not to close Practice
Account #3 until all checks that have been cut from such account prior to April
12, 2000, have cleared and agrees that the IOI Corporate Account shall continue
to fund Practice Account #3 until all such checks have cleared. The Parties
agree that IOI Management Corporation shall close Practice Account #3 once all
checks written off such account have cleared.
6.5 The Parties acknowledge and agree that Medical Practice has very
recently established a new Medical Practice checking account in its name and
that, commencing on the date of execution hereof, Medical Practice shall draft
checks for its accounts payable out of such new practice account. In connection
with such new account, the Parties acknowledge that Medical Practice will be
utilizing the "Acuity Program", and IOI Management Corporation
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agrees to provide Medical Practice with verbal assistance, as reasonably
requested by Medical Practice, with respect to implementing and operating the
Acuity Program in connection with Medical Practice's payments of its payables
through its new bank account. IOI Management Corporation agrees to provide such
verbal assistance for at least the sixty (60) day period directly following the
execution of this Termination Agreement.
6.6 With respect to that certain Sublease Agreement between IOI
Management Corporation and HealthSouth Holdings, Inc. ("HealthSouth"), the
Parties acknowledge that the original check for the sublease payment owed by
HealthSouth for February, 2000, was lost or misplaced, that HealthSouth
cancelled such original check, and that IOI Management Corporation never
received the sublease payment for February, 2000. The Parties also acknowledge
that HealthSouth delivered a replacement check for Fourteen Thousand Nine
Hundred Dollars and 87/100 Cents ($14,900.87) to Medical Practice to cover the
February, 2000 sublease payment. Medical Practice is currently in possession of
such replacement check and shall have the right to retain and deposit such check
into a Medical Practice account after the execution hereof. However, in order to
reimburse IOI Management Corporation for the amount of such check, the Parties
agree that on the date of execution hereof, IOI Management Corporation shall
sweep Fourteen Thousand Nine Hundred Dollars and 87/100 Cents ($14,900.87) from
Practice Account #1 and/or Practice Account #2 into the IOI Corporate Account.
7. Wide Area Network. For a period commencing on the Effective Date and
continuing for a period of sixty (60) days thereafter, IOI Management
Corporation will continue to grant Medical Practice access and linkage to the
"Wide Area Network" of IOI for the purposes for which Medical Practice currently
utilizes such network, including without limitation the accounts payable and
general ledger functions of Medical Practice and the maintenance of Medical
Practice's web site.
8. Plan Funding Issue. The Parties acknowledge and agree that the plan
administrator (the "Administrator") for IOI Management Corporation's 401(k) plan
is performing an audit of the funding made under such plan with respect to
certain employees for calendar year 1999. After completing the Administrator's
audit, the Administrator will deliver the results of such audit to Medical
Practice and/or IOI Management Corporation. If only one Party receives a copy of
the written results of such audit, such Party shall deliver a copy of same to
the other Party hereto. If as a result of such audit, the Administrator
determines that IOI Management Corporation underpaid certain amounts with
respect to funding the plan, then IOI Management Corporation or IOI will pay any
such determined amounts to the plan, as determined by the Administrator. If as a
result of the audit, the Administrator determines that IOI Management
Corporation overpaid certain amounts with respect to funding the plan, then
Medical Practice shall pay to IOI Management Corporation or make arrangements
for IOI Management Corporation to receive the overpayment amounts, as determined
by the Administrator.
9. Miscellaneous.
9.1 Attorneys' Fees. If any Party institutes litigation or arbitration
to interpret or enforce this Termination Agreement, or to recover damages for
breach of this Termination Agreement, the non-prevailing party shall bear the
attorneys' fees and litigation costs (including any attorneys' fees and costs
for appeals) incurred by the prevailing party.
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9.2 Further Acts. Each Party will do such further acts, including
executing and delivering additional agreements or instruments as the other may
reasonably require, to consummate, perform, evidence or confirm the covenants
and conditions contained in this Termination Agreement.
9.3 Applicable Law and Venue. This Termination Agreement shall be
construed, interpreted and enforced according to the laws of the State of
Pennsylvania without giving effect to the laws of the domicile of any
nonresident party, and venue for any action arising hereunder shall be in
Lancaster County, Pennsylvania.
9.4 Integration. The making, execution and delivery of this Termination
Agreement by the Parties has not been induced by any representations,
statements, warranties, or agreements other than those expressed in this
Termination Agreement. Except as otherwise set forth in this Termination
Agreement and the documents and agreements executed by the Parties hereto in
connection with this Termination Agreement, this Termination Agreement embodies
the entire understanding of the Parties with respect to the subject matter of
this Termination Agreement.
9.5 Preparation of Agreement. Each Party represents and warrants that
it was represented by, or had the opportunity to be represented by, counsel in
connection with the negotiation of this Termination Agreement, and each Party
hereto and its counsel participated in the negotiation and drafting of this
Termination Agreement. Accordingly, this Termination Agreement shall not be
construed more favorably for any party hereto regardless of who is responsible
for its preparation.
9.6 Parties in Interest. This Termination Agreement and all of the
terms, covenants and conditions herein shall bind and inure to the benefit of
the Parties hereto and their respective permitted successors and assigns. This
Termination Agreement may not be assigned by any Party hereto without the other
Party's written consent.
9.7 Severability. If any provision of this Termination Agreement is
found to violate any statute, regulation, rule, order or decree of any
governmental authority, court, agency or exchange, such invalidity shall not be
deemed to affect any other provision hereof or the validity of the remainder of
this Termination Agreement, and such invalid provision shall be deemed deleted
from this Termination Agreement to the minimum extent necessary to cure such
violation.
9.8 Headings. The section and other headings contained in this
Termination Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Termination Agreement.
9.9 Waiver. A waiver of any breach or violation of any term, provision,
or covenant contained herein shall not be deemed a continuing waiver, or a
waiver of any future or past breach or violation, or a waiver of any other term,
provision or covenant of this Termination Agreement.
9.10 Confidentiality. Each of the Parties agrees to keep all terms of
this Termination Agreement and all terms of any other documents executed
pursuant to the terms of this Termination Agreement confidential; except to the
extent disclosure is required by applicable law or by applicable regulatory
filings; except as otherwise mutually agreed to in writing by the
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Parties; and except with respect to communications the undersigned has with: (i)
its advisors, such as accountants or attorneys, to assist in drafting,
interpreting or enforcing the terms of this Termination Agreement and any
documents executed pursuant to the terms of this Termination Agreement; and (ii)
third parties as necessary to carry out the terms of this Termination Agreement
as long as the undersigned divulges only the minimal information necessary to
carry out the terms of this Termination Agreement.
9.11 No Disparagement. Medical Practice agrees that it shall not make
any disparaging statements about IOI Management Corporation, any of IOI
Management Corporation's affiliated corporations, or any directors, officers or
employees of IOI Management Corporation or IOI Management Corporation's
affiliated corporations. Medical Practice agrees that IOI Management Corporation
has a legitimate business interest justifying such no disparagement condition
and agreement. IOI Management Corporation agrees that it shall not make any
disparaging statements about Medical Practice or its shareholders. IOI
Management Corporation agrees that Medical Practice has a legitimate business
interest justifying such no disparagement condition and agreement.
In witness whereof, the Parties hereto have executed this Termination
Agreement to be effective as of the day and year above written.
MEDICAL PRACTICE:
LANCASTER ORTHOPEDIC GROUP,
P.C., a Pennsylvania professional
corporation
By:
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IOI MANAGEMENT CORPORATION:
IOI MANAGEMENT SERVICES OF PENNSYLVANIA, INC., a
Pennsylvania business corporation
By:
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