EXHIBIT 10.16
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
MIDSOUTH PRACTICE MANAGEMENT, INC.,
AND
MEMPHIS CHILDREN'S CLINIC, PLLC
AND
XXXXXXXXX X. XXXXXX, M.D.
XXXXXXX X. XXXXXX, M.D.
XXXXXXX X. XXXXXX, M.D.
XXXXXXX X. XXXXXXXXX, M.D.
XXXXXXX XXXXXXXXX, M.D.
XXXXX X. XXXXXXXX, III, M.D.
XXXXXXX X. XXXXXXXXX, M.D.
XXXXXXX XXX XXXXXX, M.D.
XXXXXX X. XXXXXXX, M.D.
XXXXX XXXXXX, M.D.
Dated as of September 22, 1997
TABLE OF CONTENTS
PRELIMINARY STATEMENTS ....................................................... 6
ARTICLE 1. INTERPRETATION ................................................. 6
Section 1.1. Definitions............................................... 13
Section 1.2. Effect of Definitions..................................... 13
Section 1.3. This Agreement............................................ 13
Section 1.4. Case and Gender .......................................... 13
ARTICLE 2. RELATIONSHIP OF THE PARTIES..................................... 13
Section 2.1. Independent Relationship.................................. 13
Section 2.2. Responsibilities of the Parties........................... 13
Section 2.3. Practice Matters.......................................... 14
Section 2.4. Patient Referrals......................................... 14
Section 2.5. Professional Judgment..................................... 14
ARTICLE 3. ADMINISTRATIVE AND MANAGEMENT SERVICES
OF MIDSOUTH..................................................... 14
Section 3.1. Management Services and Administration.................... 14
Section 3.2. Budgets and Finances ..................................... 17
Section 3.3. Financial Statements and Audits .......................... 18
Section 3.4. Inventory and Supplies ................................... 18
Section 3.5. Management Team Chief Executive .......................... 18
Section 3.6. Personnel ................................................ 18
Section 3.7. Capital Expenditures and Loans ........................... 19
Section 3.8. Compliance with Applicable Law ........................... 19
Section 3.9. Quality Assurance ........................................ 19
Section 3.10. Ancillary Services........................................ 19
Section 3.11. New Medical Services and Additional Practice Offices...... 20
Section 3.12. Manner of Performance..................................... 20
ARTICLE 4. OBLIGATIONS OF THE PRACTICE..................................... 20
Section 4.1. Physicians................................................ 20
Section 4.2. Provision of Medical Services............................. 21
Section 4.3. Professional Standards.................................... 20
Section 4.4. Billing Information....................................... 21
Section 4.5. Medical Practice.......................................... 21
Section 4.6. Additional Physicians..................................... 21
Section 4.7. Utilization Review: Quality Assurance..................... 21
Section 4.8. Non-discrimination: Compliance with Applicable Law........ 21
Section 4.9. Non-discriminatory Patient Selection and Service: Non-
discriminatory Patient Assignment......................... 22
Section 4.10. Standards, Accreditation, Surveys and Inspections......... 22
Section 4.11. Contracts................................................. 22
Section 4.12. Organization and Area of Care............................. 22
Section 4.13. Records and Reports....................................... 22
Section 4.14. The Practice to Provide Necessary Billing Information..... 22
Section 4.15. Continuing Education...................................... 22
Section 4.16. Referrals................................................. 23
Section 4.17. Provider Numbers.......................................... 23
ARTICLE 5. FACILITIES OF THE PRACTICE...................................... 23
Section 5.1. The Practice Facilities................................... 23
Section 5.2. Right to Use Property..................................... 23
ARTICLE 6. COMPENSATION.................................................... 24
Section 6.1. Fees...................................................... 24
Section 6.2. Purchase of Accounts Receivable........................... 24
Section 6.3. Payments on Early Termination of Physician Members........ 29
ARTICLE 7. RESTRICTIVE COVENANTS AND ENFORCEMENT........................... 30
Section 7.1. Exclusive Arrangement..................................... 30
Section 7.2. Restrictive Covenants by the Practice..................... 31
Section 7.3. Restrictive Covenants By Current Physician Employees...... 31
Section 7.4. Restrictive Covenants By Future Physician Employees....... 32
Section 7.5. Physician Employee Liquidated Damages..................... 32
Section 7.6. Rights of MidSouth........................................ 32
Section 7.7. Excluded Activities....................................... 32
Section 7.8. Enforcement............................................... 33
ARTICLE 8. DUTIES OF THE MANAGEMENT TEAM................................... 33
Section 8.1. Formation and Operation of the Management Team............ 33
Section 8.2. Duties and Responsibilities of the Management Team........ 33
ARTICLE 9. INSURANCE AND INDEMNITY......................................... 35
Section 9.1. Insurance to be Maintained by the Practice................ 35
Section 9.2. Insurance to be Maintained by MidSouth.................... 35
Section 9.3. Tail Insurance Coverage................................... 35
Section 9.4. Additional Insured........................................ 36
Section 9.5. Indemnification........................................... 36
ARTICLE 10. TERM AND TERMINATION........................................... 37
Section 10.1. Term of Agreement......................................... 37
Section 10.2. Extended Term............................................. 37
Section 10.3. Termination by the Practice............................... 37
Section 10.4. Termination by MidSouth................................... 38
Section 10.5. Actions after Termination................................. 38
Section 10.6. Closing of Repurchase by the Practice and
Effective Date of Termination............................. 39
ARTICLE 11. INTELLECTUAL PROPERTY AND RECORDS.............................. 40
Section 11.1. Proprietary Information................................... 40
Section 11.2. Ownership of MidSouth's Business Records and Systems...... 40
Section 11.3. Maintenance and Access of Records......................... 41
Section 11.4. Patient Records........................................... 41
Section 11.5. Access to Records......................................... 41
ARTICLE 12. REPRESENTATIONS AND WARRANTIES OF THE
PRACTICE AND PHYSICIAN MEMBERS................................. 41
Section 12.1. Validity.................................................. 41
Section 12.2. Litigation................................................ 42
Section 12.3. Permits................................................... 42
Section 12.4. Authority................................................. 42
Section 12.5. Compliance with Applicable Law............................ 42
Section 12.6. Health Care Compliance.................................... 42
Section 12.7. Fraud and Abuse........................................... 43
Section 12.8. Practice Compliance....................................... 43
Section 12.9. Rates and Reimbursement Policies.......................... 43
Section 12.10. Accounts Receivable....................................... 44
Section 12.11. Limitation of Liability of Members........................ 46
Section 12.12. Exhibits.................................................. 46
ARTICLE 13. REPRESENTATIONS AND WARRANTIES OF MIDSOUTH..................... 46
Section 13.1. Organization.............................................. 46
Section 13.2. Authority................................................. 46
Section 13.3. Absence of Litigation..................................... 47
Section 13.4. Transactions with Affiliates.............................. 47
ARTICLE 14. COVENANTS OF THE PRACTICE AND
PHYSICIAN MEMBERS.............................................. 47
Section 14.1. Exchange, Consolidation and Other Arrangements............ 47
Section 14.2. Necessary Authorizations/Assignment of Licenses
and Permits............................................... 47
Section 14.3. Transaction with Affiliates............................... 47
Section 14.4. Compliance with All Applicable Law........................ 47
Section 14.5. Third Party Payor Programs................................ 48
Section 14.6. Change in Business or Credit and Collection Policy........ 48
Section 14.7. Treatment of Accounts Receivable.......................... 48
Section 14.8. Security Interest......................................... 48
ARTICLE 15. MISCELLANEOUS.................................................. 49
Section 15.1. Assignment................................................ 49
Section 15.2. This Agreement............................................ 50
Section 15.3. No Practice of Medicine................................... 50
Section 15.4. Non-Waiver................................................ 50
Section 15.5. Waivers................................................... 50
Section 15.6. Amendments................................................ 50
Section 15.7. Severability.............................................. 50
Section 15.8. Successors................................................ 50
Section 15.9. Third parties............................................. 50
Section 15.10. Saturdays, Sundays and Holidays........................... 50
Section 15.11. Joint Preparation......................................... 51
Section 15.12. Captions.................................................. 51
Section 15.13. Notices................................................... 51
Section 15.14. Counterparts.............................................. 51
Section 15.15. Further Assurances........................................ 52
Section 15.16. Attorneys' Fee............................................ 52
Section 15.17. Time is of the Essence.................................... 52
Section 15.18. Confidentiality........................................... 52
Section 15.19. Contract Modifications for Prospective Legal
Events and Cost Reductions................................ 52
Section 15.20. Remedies Cumulative....................................... 52
Section 15.21. Construction.............................................. 52
Section 15.22. No Obligation to Third Parties............................ 53
Section 15.23. Compliance with Federal Applicable Law.................... 53
Section 15.24. Patient Referrals......................................... 53
Section 15.25. Independent Contractors................................... 53
Section 15.26. Force Majeure............................................. 53
Section 15.27. Communications............................................ 53
Section 15.28. Governing Applicable Law.................................. 53
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") dated as of
September 22, 1997, by and between MIDSOUTH PRACTICE MANAGEMENT, INC., a
Tennessee corporation ("MidSouth"), MEMPHIS CHILDREN'S CLINIC, PLLC, a Tennessee
professional limited liability company (the "Practice") and the Physicians
Members set forth on Schedule 1 for the limited purposes as set forth herein.
PRELIMINARY STATEMENTS
1. The Practice is a professional limited liability company in the Memphis,
Tennessee area which provides pediatric professional medical care to the general
public through the operation of a pediatric medical clinic.
2. MidSouth is in the business of owning certain assets of and managing
and administering the businesses of medical practices.
3. The Practice desires for MidSouth to provide management and
administrative services for the Practice.
NOW, THEREFORE, in consideration of the foregoing and the promises
contained herein, and ten dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE 1. INTERPRETATION.
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Section 1.1. DEFINITIONS. For the purposes of this Agreement, the following
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definitions shall apply:
1.1.1. "Account Debtor" shall mean an account debtor or any other person
obligated in respect of an Account Receivable.
1.1.2. "Accounts" shall mean, with respect to the Practice, all 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 the Practice, including, but not limited to,
accounts receivable, proceeds of any letters of credit naming the Practice 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.
1.1.3. "Accounts Receivable" shall mean, with respect to the Practice, all
Accounts and any and all rights to payment of money or other forms of
consideration of any kind now owned or hereafter acquired (whether classified
under the Uniform Commercial Code as accounts, chattel paper, general
intangibles or otherwise) for goods sold or leased or arising out of the
delivery of medical, surgical, diagnostic or other professional medical services
rendered by the Practice, including, but not limited to, accounts receivable,
proceeds of any letters of credit naming the Practice 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; provided that, cash, checks and credit card
purchases are not included in the definition of Accounts Receivable.
1.1.4. "Applicable Law" shall mean all provisions of constitutions, laws,
statutes, codes, 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, any Health Care Law, applicable to a
person or an entity or its assets, liabilities or business.
1.1.5. "CHAMPUS" shall mean the Civilian Health and Medical Program of the
Uniformed Services.
1.1.6. "Collecting Bank" shall mean the main office of any financial
institution agreed to by MidSouth for the collection of Purchased Accounts
Receivable.
1.1.7. "Contract" shall mean any material written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease
obligation, plan, practice, restriction, understanding or undertaking of any
kind or character, or other document to which any person is a party or by which
any person is bound.
1.1.8. "Default" shall mean (i) any breach or violation of or default
under this Agreement or any Contract, order, or permit, (ii) any occurrence of
any event that with the passage of time or the giving of notice or both would
constitute a breach or violation of or default under any Contract, order or
permit, or (iii) any occurrence of any event that with or without the passage of
time or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any liability under, any Contract, order or permit.
1.1.9. "Disbursement Account" shall mean the bank account maintained by
MidSouth for payment of the Service Fee and the Purchase Price.
1.1.10. "Effective Time" shall mean that date, as defined in the Exchange
Agreement, when the Exchange becomes effective with the Secretary of State of
the State of Tennessee.
1.1.11. "Exchange" shall mean the transaction contemplated hereunder and in
accordance with Section 351 of the Code between Practice and MidSouth.
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1.1.12. "Exchange Agreement" means that document dated as of
September 17, 1997, by and among MidSouth, the Practice and Physician Members
which combined the organizations.
1.1.13. "Excluded Activities" shall mean: (i) teaching at any educational
institution and attending patients as a part of the Physician Employee's duties
as are normal and customary for such faculty position; provided, however, such
services must be incident to the academic/teaching aspects of the institution
and not incident to the regular examination of patients for a fee whether billed
in the name of the institution or the name of the Physician Employee; (ii)
authoring text books, research papers, or newspaper articles, or appearing on
radio or television shows or any other provision of medical advice via broad
mediums; (iii) engaging in research and development the material components of
which do not constitute medical practice management; (iv) serving as medical
director or administrative employee of any organization offering medical care,
but not providing clinical services or which is not in competition with the
Practice; (v) serving as an expert witness; and (vi) working in an urgent care
center as defined in Section 7.3.
1.1.14. "Excluded Expenses" shall be defined pursuant to Schedule 1.1.14.
1.1.15. "Excluded Revenue" shall mean revenue earned by the Physician
Employees from Excluded Activities.
1.1.16. "Finance Charge Rate" means a rate of interest equal to the lesser
of (i) eighteen percent (18%) per annum or (ii) the maximum rate of interest
allowed by Applicable Law in effect at the usage.
1.1.17. "GAAP" shall mean 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 any other
statements by any other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession. For purposes of
this Agreement, GAAP shall be applied in a manner consistent with the historical
practices used by MidSouth or the Practice, as applicable.
1.1.18. "Governmental Authority" shall mean any national, state or local
government (whether domestic or foreign), any political subdivision thereof or
any other governmental, quasigovernmental, judicial, public or statutory
instrumentality, authority, board, body, agency, bureau or entity or any
arbitrator with authority to bind a party.
1.1.19. "Governmental Lockbox Account" shall mean the account established
at the Collecting Bank by the Practice into which all proceeds of the Practice's
Governmental Receivables are remitted.
1.1.20. "Governmental Receivables" shall mean the Accounts Receivable of
the Practice which (i) arise in the ordinary course of business of the Practice,
(ii) have as their third party payor
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the United States of America or any state or any agency or instrumentality of
the United States of America or any state which makes any payment with respect
to Medicare or Medicaid or with respect to any other program (including CHAMPUS)
established by Applicable Law, and (iii) are required by federal or state law to
be paid to the Practice as a healthcare provider. Governmental Receivables shall
not, however, refer to amounts payable by private insurers under contract to
provide benefits under the Federal Employee Health Benefit Program.
1.1.21. "Health Care Law" shall mean any Applicable Law regulating the
acquisition, construction, operation, maintenance or management of a health care
practice, facility, provider or payor, including without limitation, 42 U.S.C.
(S)1395nn and 42 U.S.C. (S)1320a-7b.
1.1.22. "HMO" shall mean health maintenance organization; an entity that
combines health care services delivery and financing in one prepaid capitated
benefit plan.
1.1.23. "Lender" shall mean any lender to MidSouth that has a security
interest in the Purchased Accounts Receivable from time to time.
1.1.24. "Lockbox Agreements" shall mean that certain lockbox operating
procedural agreement for Governmental Receivables to be entered into between the
Collecting Bank, Lender, Practice, in a form acceptable to counsel for MidSouth
as to Governmental Receivables and that certain lockbox operating procedure
agreement for Non-Governmental Receivables to be entered between the Collecting
Bank, Lender and Practice in a form acceptable to counsel for MidSouth.
1.1.25. "Managed Care Payments" shall mean all payments actually recorded,
whether on a prepayment or accrual basis, for (i) capitation payments to the
Practice or MidSouth from managed care organizations where payment is made
periodically on a per member basis for the partial or total medical care needs
of a patient, co-payments and all HMO incentive bonuses, including hospital
incentive bonuses, and (ii) fees and revenue recorded by or on behalf of the
Practice, whether from the assumption of institutional or professional risk in
managed care risk assumption arrangements or otherwise, including bonus,
incentive and surplus payments from capitated services.
1.1.26. "Management Team" shall mean a committee consisting of four (4)
members established pursuant to and functioning in accordance with the
guidelines set forth in Article 8.
1.1.27. "Management Team Chief Executive" shall mean the MidSouth employee
who shall manage and administer all of the day-to-day business functions of the
Practice subject to the terms of this Agreement.
1.1.28. "Material Adverse Effect" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on (i) the financial position, business or results of
operations of any party and its subsidiaries, taken as a whole, or (ii) the
ability of such party to perform its obligations under this Agreement or the
transactions contemplated by this Agreement, provided that Material Adverse
Effect shall not be deemed to include the impact of (x) changes in Applicable
Law or interpretations thereof by courts
4
or Governmental Authorities, (y) changes in GAAP, and (z) the Exchange and
compliance with the provisions of this Agreement on the operating performance of
the parties or actions taken pursuant to or required by this Agreement.
1.1.29. "Medicaid" shall mean 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.
1.1.30. "Medicare" shall mean any medical program established under Title
XVIII of the Social Security Act and administered by the Health Care Financing
Administration.
1.1.31. "MidSouth" shall mean MidSouth Practice Management, Inc., a
Tennessee corporation.
1.1.32. "Misdirected Payments" means payments made by an Account Debtor to
a location other than as provided in the Notification Letter or that the
Practice otherwise receives on Purchased Accounts Receivable under the terms of
this Agreement.
1.1.33. "Monthly Adjustments" shall mean adjustments to the estimated
payments that are made to reconcile actual amounts due under Section 6.1; these
adjustments are made by the end of the month in which the estimated payments are
made pursuant to Section 6.1(b).
1.1.34. "Necessary Authorizations" shall mean with respect to the Practice,
all certificates of need, authorizations, certificates, consents, approvals,
permits, licenses, notices, accreditations and exemptions, filings and
registrations, and reports required by Applicable Law, which are necessary or
reasonably useful to the lawful ownership and operation of the Practice's
business.
1.1.35. "Non-Governmental Lockbox Account" shall mean the account
established by Practice with the Collecting Bank into which all proceeds from
the Purchased Accounts Receivable, under which a third party is the Account
Debtor (other than Governmental Receivables), are remitted.
1.1.36. "Non-Governmental Receivables" shall mean Accounts Receivable which
are not Governmental Receivables.
1.1.37. "Notification Letter" shall mean a written notification, in a form
acceptable to counsel for MidSouth, from the Practice to third party payors
informing such third party payors that all proceeds due under the Practice's
Accounts are to be remitted to the Non-Governmental Lockbox Account or the
Governmental Lockbox Account, as the case may be.
1.1.38. "Offsets" shall mean any adjustments for uncollectible Accounts,
discounts, Medicare and Medicaid disallowances, worker's compensation,
employee/dependent health care benefit
5
programs, professional courtesies and other activities of the Practice that do
not generate a collectible fee and excise taxes assessed against MidSouth's or
the Practice's gross revenue by the State (it being understood that excise taxes
assessed against the fees paid to MidSouth hereunder as well as Practice Revenue
generated by MidSouth shall be included in Monthly and Yearly Adjustments).
1.1.39. "Opening Balance Sheet" shall mean the balance sheet of MidSouth
immediately after the Effective Time of the Exchange (as defined in the Exchange
Agreement) prepared in accordance with GAAP (except for the absence of certain
note information).
1.1.40. "Other Revenue" shall mean all fees or revenue actually recorded
each month (net of Monthly and Yearly Adjustments) by or on behalf of the
Practice or MidSouth which are not the Practice Revenues or Managed Care
Payments, including, but not limited to, global and technical fees from medical
ancillary services, and fees for medical management and utilization, but
excluding (1) rental income on any leases or subleases between MidSouth and the
Practice; (2) any investment income on funds of the Practice segregated from the
bank accounts referred to herein and available to the Practice; and (3) all
Excluded Revenue.
1.1.41. "Physician Employees" shall mean those individuals (A) who are
employees or Members of the Practice, on a full-time or part-time basis or are
otherwise under contract with the Practice to provide professional services to
patients of the Practice, (B) whose services are billed or billable by and in
the name of the Practice and (C) who are duly licensed as physicians to provide
professional medical services in the State.
1.1.42. "Physician Extender Employees" shall mean (i) nurse anesthetists,
physician assistants, nurse practitioners, podiatrists, psychologists and other
positions, examples of which are set forth on Schedule 1.1.42, and (ii) any
position that generates a professional charge and whose services are billed or
billable by and in the name of the Practice and who are duly licensed to provide
professional medical services in the State.
1.1.43. "Physician Members" shall mean those physicians who are members of
the Practice.
1.1.44. "PPO" shall mean preferred provider organization; a joint venture
by providers to obtain contracts with payors by agreeing to give the payor a
discount in order to participate in the payor's plan.
1.1.45. "Practice" shall mean Memphis Children's Clinic, PLLC, a Tennessee
professional limited liability company.
1.1.46. "Practice Account" shall mean that bank account maintained by the
Practice for payment of Excluded Expenses and the receipt and disbursal of the
Purchase Price.
1.1.47. "Practice Expenses" shall be determined using GAAP as set forth on
Schedule 1.1.47.
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1.1.48. "Practice Facilities" shall mean the properties and facilities
owned by the Practice as described in Schedule 1.1.48 and properties and
facilities acquired by the Practice and managed by MidSouth.
1.1.49. "Practice Net Revenue" shall mean Practice Revenue less Practice
Expenses.
1.1.50. "Practice Revenues" shall mean all fees actually recorded each
month (net of Monthly and Yearly Adjustments), by or on behalf of the Practice
as a result of professional medical services personally furnished to patients by
Physician Employees or other professionals under control of the Practice and
other fees or income generated in their capacity as professionals, whether
rendered in an inpatient or outpatient setting, including but not limited to
Managed Care Payments and payments from other Third Party Payor Programs.
1.1.51. "Purchase Price" shall mean the face amount of the Accounts
Receivable recorded each month, less any non-allowed contractual adjustments and
net of any reserve for uncollectible Accounts Receivable based on the most
recently completed six (6) month historical experience of the Practice or the
predecessor of the Practice, calculated on a rolling basis as the case may be,
as determined by MidSouth.
1.1.52. "Purchased Accounts Receivable" shall mean all Accounts Receivable
of the Practice purchased by MidSouth pursuant to this Agreement.
1.1.53. "Restricted Area" shall mean a thirty (30) mile radius from any
Practice Facility.
1.1.54. "Service Fee" shall mean the monthly fee equal to ten percent
(10%) of the Practice Net Revenue plus the amount of the Practice Expenses paid
by MidSouth; the calculation of the Service Fees shall not include Excluded
Revenues or Excluded Expenses.
1.1.55. "Settlement Date" shall mean the day MidSouth pays for the
Purchased Accounts Receivable which shall not be later than the tenth (10th) day
of each month following the month in which the Account Receivable is created.
1.1.56. "State" shall mean the State of Tennessee.
1.1.57. "Technical Employees" shall mean individuals who provide billable
services on behalf of the Practice and are employees of the Practice.
1.1.58. "Term" shall mean the period from which this Agreement is commenced
to June 30, 2022, unless terminated earlier pursuant to the terms of this
Agreement.
1.1.59. "Third Party Payor Programs" shall mean Medicare, Medicaid,
CHAMPUS, insurance provided by BlueCross 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.
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1.1.60. "Yearly Adjustments" shall mean final adjustments made to reconcile
estimated payments made pursuant to Section 6.1(b), Monthly Adjustments, and
actual Service Fees owed for the year.
SECTION 1.2. EFFECT OF DEFINITIONS. The definitions set forth in Section
---------------------
1.1 above or referenced herein shall apply equally to the singular, plural,
adjectival, adverbial, and other forms of any of the words and phrases defined
regardless of whether they are capitalized.
SECTION 1.3. THIS AGREEMENT. This Agreement consists of the information set
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forth herein, the schedules attached hereto and the certificates, documents and
other instruments required to be delivered hereunder and any reference to this
Agreement shall refer to all of the constituents. The date first set forth above
shall be deemed to be the date hereof for all purposes.
SECTION 1.4. CASE AND GENDER. In this Agreement words in the singular
---------------
number include the plural, and words in the plural number include the singular;
and words of the masculine gender include the feminine and the neuter, and when
the sense so indicates words of the neuter gender may refer to any gender.
ARTICLE 2. RELATIONSHIP OF THE PARTIES.
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SECTION 2.1. INDEPENDENT RELATIONSHIP. The Practice, the Physician Members
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and MidSouth 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 MidSouth herein, MidSouth, the Practice, and the Physician
Members agree that the Practice and the Physician Employees shall retain all
authority to direct the medical, professional, and ethical aspects of the
Practice and the Physician Employees' medical practices. Each party shall be
solely responsible and shall comply with all Applicable Law pertaining to
employment taxes, income withholding, unemployment compensation contributions
and other employment related statutes applicable to that party, including the
payment of any applicable payment for employees; it being understood that
MidSouth shall provide services to the Practice to assist the Practice in
satisfying its obligations described above.
SECTION 2.2. RESPONSIBILITIES OF THE PARTIES. As more specifically set
-------------------------------
forth herein, MidSouth shall manage Practice's offices and facilities and
provide the Practice with offices and facilities, equipment, supplies, certain
support personnel, management, financial and advisory services. As more
specifically set forth herein, the Practice shall be responsible for the
recruitment and hiring of physicians and all issues related to the professional
practice of medicine, medical practice patterns and documentation thereof.
Notwithstanding anything herein to the contrary, no "designated health service,"
as defined in 42 U.S.C. (S)1395nn, including any amendment or successor thereto,
shall be provided by MidSouth under this Agreement. MidSouth shall neither
exercise control over nor interfere with any physician-patient relationship,
which shall be maintained strictly between the physicians of the Practice and
their patients.
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SECTION 2.3. PRACTICE MATTERS. Matters involving the internal agreements
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and finances of the Practice, including the disposition of professional fee
income, tax planning, and investment planning (and expenses relating solely to
these internal business matters) shall remain the sole responsibility of the
Practice.
SECTION 2.4. PATIENT REFERRALS. The parties agree that the benefits to the
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Practice and Physician Members 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 MidSouth to any
of the Practice's patients.
SECTION 2.5. 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 the Practice, the Physician Employees, the Practice's
employees and the Practice'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 the Practice, Physician Employees and the
Practice'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. ADMINISTRATIVE AND MANAGEMENT SERVICES OF MIDSOUTH.
--------------------------------------------------
SECTION 3.1. MANAGEMENT SERVICES AND ADMINISTRATION.
--------------------------------------
(a) General Authority. The Practice hereby appoints MidSouth and MidSouth
-----------------
shall serve as the exclusive manager and administrator of all daily business
functions of the Practice. The Practice agrees that the purpose and intent of
this Agreement is to relieve the Practice and Physician Employees to the maximum
extent possible of the administrative, accounting, personnel and other business
aspects of their practice, with MidSouth assuming responsibility and being given
all necessary authority to perform these functions including, without
limitation, the authority to incur obligations in the name of the Practice to be
paid by Practice as Practice Expenses in accordance with the policies and
procedures adopted by the Management Team. MidSouth shall have the sole
authority to perform the administrative, accounting and business aspects of the
Practice as set forth herein and pursuant to the policies and procedures adopted
by the Management Team. The Practice hereby appoints MidSouth to be its true and
lawful attorney-in-fact to incur all expenses and to perform all functions in
the name and on behalf of the Practice. MidSouth will have no authority,
directly or indirectly, to perform, and will not perform, any medical function.
MidSouth may, however, advise the Practice to the relationship between the
Practice's performance of medical functions and the overall administrative and
business functioning of the Practice. To the extent that a MidSouth employee
assists Physician Employees in performing medical functions, such employees
shall be subject to the professional direction and supervision of Physician
Employees and in the performance of such medical functions shall not be subject
to any direction or control by, or liability to, MidSouth, except as may be
specifically authorized in writing by MidSouth.
9
(b)(l) Billing and Collecting. MidSouth shall, on behalf of the Practice,
----------------------
xxxx patients and Third Party Payor Programs and collect the fees for medical
services rendered by the Practice regardless of when or where such services are
rendered. All xxxxxxxx for Technical Employees' and Physician Employees'
services shall be made in the name of and under the provider number of the
Practice. The Practice hereby appoints MidSouth for the term hereof to be its
true and lawful attorney-in-fact, for the following purposes: (i) to xxxx
patients in the Practice's name and on its behalf; (ii) to collect Accounts
Receivable resulting from billing in the Practice's name and on its behalf;
(iii) to receive payments and prepayments from Third Party Payor Programs; (iv)
to take possession of and endorse in the name of the Practice (and/or in the
name of an individual physician, the payment intended for purpose of payment of
a xxxx) any notes, checks, money orders, insurance payments and other
instruments received in payment of Accounts Receivable; and (v) at the direction
of the Management Team to initiate the institution of legal proceedings in the
name of the Practice to collect any Accounts Receivable and monies owed to the
Practice, to enforce the rights of the Practice as creditors under any Contract
or in connection with the rendering of any service, and to contest adjustments
and denials by governmental agencies (or its fiscal intermediaries) as third
party payors. All adjustments made for uncollectible accounts, professional
courtesies and other activities that do not generate a collectible fee shall be
performed in a reasonable and consistent manner approved by the Management Team.
(b)(2) Bank Accounts. All cash, checks and credit card purchases paid at
-------------
the time of the delivery of medical services by the Practice shall be remitted
to the Practice Account. All payments received by the Practice with respect to
the Purchased Accounts Receivable shall be deposited into the respective
Governmental Lockbox Account or Non-Governmental Lockbox Account. Proceeds
collected in the Governmental Lockbox Account and the Non-Governmental Lockbox
Account shall be automatically swept daily into the Disbursement Account.
MidSouth will transfer monies from the Disbursement Account to the Practice
Account for the payment of the Purchase Price. On the Settlement Date pursuant
to Article VI hereof, Practice shall transfer monies from the Practice Account
to the Disbursement Account to pay the Service Fee due to MidSouth for all cash,
checks, and credit card purchases and other payments received (i.e., prepay
capitation fees) prior to the time of delivery of medical services. The Practice
shall establish and maintain a separate account for the Practice, which is the
Practice Account. The Practice Account shall be controlled solely by the
Practice. The parties acknowledge and agree that in the event that the mix
between Accounts Receivable and non-Accounts Receivable receipts is altered to
the point where proceeds from Accounts Receivable are not sufficient to pay for
the Service Fee, the parties will establish mutually agreeable terms to allow
MidSouth access to the Practice Account to pay the Service Fee. The Practice
shall use the monies in the Practice Account to pay all the Excluded Expenses.
MidSouth will transfer monies to the Practice Account to remit, on a monthly
basis, the Purchase Price for the Purchased Accounts Receivables. The
calculation of the Purchase Price will be made so that the Practice will receive
an amount equal to the face amount of the Accounts Receivable recorded each
month, less any non-allowed contractual and instruments and net of any reserve
for uncollectible Account Receivable based on the most recently completed six
(6) month historical experience of the Practice or the predecessor of the
Practice calculated on a rolling basis, as the case may be, as determined by
MidSouth. MidSouth will provide to the Practice a full accounting and
reconciliation of the Governmental Lockbox Account and the Non-Governmental
Lockbox Account on a monthly
10
basis, and, upon the reasonable request of the Practice, MidSouth shall supply
to the Practice at all other times, as the Practice shall deem necessary, an
accounting and reconciliation of the Governmental Lockbox Account and the Non-
Governmental Lockbox Account.
(c) Files and Records. MidSouth shall design, supervise and maintain, at
-----------------
the premises of the Practice, all files and records relating to the operation of
the Practice, including, but not limited to, accounting, billing, patient
medical records, and collection records. Patient medical records shall remain
the property of the Practice and shall be located at the premises of the
Practice so the medical records are readily accessible for patient care. The
management of all files and records shall comply with the Applicable Law. The
Physician Employees shall have the obligation to oversee the preparation and
maintenance of patient medical records, and to provide any medical information
as shall be necessary and appropriate to record the Practice's clinical function
and to sustain and ensure the availability to Third Party Payor Program
reimbursement for services rendered. MidSouth shall use its reasonable efforts
to preserve the confidentiality of patient medical records and use information
contained in the records only for the limited purpose necessary to perform the
services set forth herein.
(d) Miscellaneous Services. MidSouth shall arrange for necessary clerical,
----------------------
accounting, bookkeeping and computer services, printing, postage and copier
services, medical transcribing services and any other ordinary, necessary or
appropriate service for the operation of the Practice, all of which shall be
Practice Expenses.
(e) Marketing. Subject to approval by the Management Team, MidSouth shall
---------
supervise the design and implementation of an appropriate marketing program on
behalf of the Practice, with appropriate emphasis on public awareness of the
availability of the services of the Practice. The costs of any marketing
services shall be a Practice Expense. The marketing program shall be conducted
in compliance with Applicable Law, regulations and applicable canons or
principles of professional ethics governing the Physician Employees or Physician
Extender Employees.
(f) Tax Returns. MidSouth shall provide of the date necessary for the
-----------
Practice to prepare its annual federal and state income and general excise tax
returns and upon the request of the Practice shall arrange for the preparation
of all returns. The cost of preparing the data and tax returns shall be a
Practice Expense. MidSouth shall have no responsibility for the payment of the
income taxes and the Practice's income taxes shall not be a Practice Expense.
(g) Recruitment of Physicians. Subject to the provisions of Section 4.6.
-------------------------
MidSouth shall assist the Practice in recruiting additional physicians, carrying
out all administrative functions as may be appropriate, including, but not
limited to, advertising for and identifying potential candidates, checking
credentials, and arranging interviews; provided, however, the Practice shall
interview and make the ultimate decision as to the suitability of any physician
to become associated with the Practice. All physicians recruited by MidSouth and
accepted by the Practice shall be the sole employees of the Practice, to the
extent the physicians are hired as employees. Any expenses incurred in the
recruitment of physicians, including, but not limited to, employment agency
fees,
11
relocation and interviewing expenses shall be budgeted as a Practice Expense and
shall be payable by the Practice.
(h) Managed Care Contracts. MidSouth shall negotiate and administer all
----------------------
managed care Contracts on behalf of the Practice and shall consult with the
Practice on all professional or clinical matters relating thereto. The Practice,
at its discretion, shall have the right to enter into or reject such contracts
negotiated by MidSouth. Such contracts shall be and will remain the property of
the Practice.
(i) Legal and Accounting Services. Subject to the provisions of Sections
-----------------------------
3.3 and 3.l(f), MidSouth shall arrange for legal and accounting services
related to operations of the Practice, as approved by the Management Team,
incurred in the ordinary course of business, including the attorneys' fees and
other costs of enforcing any physician employment agreement containing
restrictive covenants and attorneys' fees and other costs and expenses of
litigation, arbitration or other proceedings for malpractice suits against the
Practice and its personnel to the extent the fees, costs and expenses are not
covered by insurance, provided the services shall be approved in advance by the
Management Team Chief Executive. The legal and accounting services expenses
shall be Practice Expenses.
(j) Maintenance. MidSouth shall supervise the proper cleanliness of the
-----------
premises of the Practice Facilities, and maintenance and cleanliness of the
equipment, furniture and furnishings located upon the premises of the Practice,
which shall be a Practice Expense.
(k) Licensing. MidSouth shall pay all professional licensure fees and board
---------
certification fees of Physician Employees and Physician Extender Employees
associated with the Practice, and governmental filings for any and all licenses
and certifications for the Practice, all of which shall be a Practice Expense.
(l) Reports. MidSouth shall supervise the preparation and filing of all
-------
Medicare cost reports and other governmental reports, which shall be a Practice
Expense.
(m) Insurance. MidSouth shall negotiate for the insurance provided for in
---------
Section 9.1. Premiums and deductibles with respect to the insurance policies
shall be a Practice Expense.
SECTION 3.2. BUDGETS AND FINANCES. MidSouth shall prepare annual capital
--------------------
and operating budgets (the "Budgets") reflecting in reasonable detail the
anticipated revenue and expenses, and sources and uses of capital for growth in
the Practice and medical services rendered at the Practice. Said budgets shall
reflect amounts, if any, allocated for capital purchases, improvements,
expansion and any new leasing arrangements. Within sixty (60) days of the date
of this Agreement, MidSouth shall submit a proposed budget to the Management
Team for its approval. In subsequent years, not later than thirty (30) days
prior to the end of the fiscal year, MidSouth shall submit a budget for the
upcoming fiscal year to the Management Team. In the event that the Management
Team does not approve the budget submitted by MidSouth, then the budget for the
"unapproved" year shall be the budget for the most recent agreed year adjusted
on an item-by-item basis by the all cities consumer
12
price index with the items of the most recent agreed budget as the base year.
The budget shall be binding upon MidSouth and the Practice. MidSouth shall
consult with the Practice and the Management Team in the preparation of all
budgets. MidSouth and the Practice acknowledge and agree that once a budget has
been approved, neither MidSouth nor the Practice shall make capital expenditures
or incur capital expenses in excess of budgeted amounts without the prior
approval of the Management Team. In addition, neither party shall pay operating
expenses in excess of the budgeted amounts without the approval of the
Management Team.
SECTION 3.3. FINANCIAL STATEMENTS AND AUDITS. MidSouth shall prepare
--------------------------------------------
annual, unaudited financial statements for the operations of MidSouth (the
"Financial Statements") in form and substance satisfactory to MidSouth. At the
Practice's request, MidSouth shall obtain annual financial statements for the
operations of the Practice which shall be audited by a nationally recognized
certified public accounting firm selected by MidSouth, which shall not be a
Practice Expense. The Practice may obtain its own independent audit of the
Practice, at its own expense, which shall not be a Practice Expense. MidSouth
shall prepare monthly unaudited financial statements containing a balance sheet
and statements of income from the Practice operations and shall deliver the
statements to the Management Team within thirty (30) days after the close of
each calendar month.
SECTION 3.4. INVENTORY AND SUPPLIES. MidSouth shall order and purchase all
----------------------
inventory, supplies, and other ordinary, necessary or appropriate materials
reasonably necessary for the operation of the Practice which are requested by
the Practice and are within the Budget for the applicable fiscal year. Items
ordered hereunder shall be purchased by the Practice, which shall be a Practice
Expense. MidSouth shall not purchase inventory, goods or supplies from any
affiliate of MidSouth without approval of the Management Team after full
disclosure of all terms to the Management Team.
SECTION 3.5. MANAGEMENT TEAM CHIEF EXECUTIVE. Subject to the provisions of
-------------------------------
Section 8.2.10, MidSouth shall hire and appoint the Management Team
Chief Executive who shall serve as an employee of MidSouth and who shall manage
and administer all of the day-to-day business functions of the Practice.
MidSouth shall determine the salary and fringe benefits of the Management Team
Chief Executive. At the direction, supervision and control of MidSouth, the
Management Team Chief Executive, subject to the terms of this Agreement, shall
implement the policies established by the Management Team and shall generally
perform the duties and have the responsibilities of a chief executive officer.
SECTION 3.6. PERSONNEL.
---------
3.6.1. Physician Employees and Physician Extender Employees shall be
employees of the Practice, and any and all salaries, benefits, (including
contributions under any employee benefits plan), severance benefits and other
direct or indirect costs of all employees shall be payable by the Practice,
which shall not be a Practice Expense. Except that MidSouth shall advance to the
Practice the amount necessary to compensate the Physician Extender Employees and
the Physician Employees, who are not Physician Members, for the first month of
the term of this Agreement in an
13
amount equal to the regular payroll payments made to such Physician Extender
Employees and Physician Employees, who are not Physician Members. The sum
advanced shall be divided into twelve (12) equal parts and deducted from
Purchase Price paid to Practice each month until the advance is repaid. The
advance shall not be a Practice Expense.
3.6.2. Subject to the provisions of Article 2, all other personnel
necessary to carry out the duties of MidSouth hereunder or reasonably necessary
for the conduct of the Practice shall be employees of MidSouth and shall be
under the supervision of the Management Team Chief Executive or his designee.
MidSouth shall determine the salaries and fringe benefits of all personnel,
within the budget policies and procedures adopted by the Management Team, the
cost of which will be payable by the Practice as a Practice Expense. Personnel
performing patient care services shall be subject to the professional
supervision of the Physician Employees. If the Practice is dissatisfied with the
services of any person, the Practice shall consult with MidSouth. MidSouth shall
in good faith determine whether the performance of that employee could be
brought to acceptable levels through counsel and assistance, or whether the
employee should be terminated.
SECTION 3.7. CAPITAL EXPENDITURES AND LOANS. All capital expenditures shall
------------------------------
be approved by the Management Team. MidSouth shall determine whether approved
capital expenditures shall be funded by MidSouth through borrowings, leases,
loans, or other financing methods through independent third-party financial
institutions, or investments by MidSouth for reinvestment.
SECTION 3.8. COMPLIANCE WITH APPLICABLE LAW. MidSouth shall comply with all
------------------------------
Applicable Law, including, but not limited to, federal, state and local laws,
regulations and restrictions in the conduct of its obligations under this
Agreement affecting billing and reimbursement, referrals, patient privacy and
confidentiality, management of hazardous materials and infectious waste.
MidSouth shall implement procedures designed to detect and deter potential
violations of Applicable Law including (i) distributing annually a set of
guidelines for Physician Employees and Physician Extender Employees regarding
proper compliance with all Applicable Law; (ii) establishing a "Compliance
Committee" with representatives from the Management Team and MidSouth; and (iii)
engaging qualified professional advisors to review operations and acquisitions
by MidSouth or its subsidiaries. In the event that changes in such laws occur,
resulting in a need for modification of the manner in which MidSouth operates,
MidSouth shall make such appropriate modifications to maintain compliance with
such laws.
SECTION 3.9. QUALITY ASSURANCE. MidSouth shall assist the Practice in
-----------------
fulfilling its obligations to its patients to maintain a professionally
recognized quality of medical and professional services.
SECTION 3.10. ANCILLARY SERVICES. MidSouth shall operate ancillary services
------------------
as approved by the Management Team upon the receipt of an opinion from counsel
that the proposed ancillary service does not violate any Applicable Law,
including, but not limited to, 42 U.S.C. (S)1395nn ("Xxxxx I and Xxxxx II").
14
SECTION 3.11. NEW MEDICAL SERVICES AND ADDITIONAL PRACTICE OFFICES. If the
----------------------------------------------------
Practice desires to have a new ancillary service provided at any of the
Practice's offices or desires to establish a new Practice office, a proposal of
such ancillary service or the establishment of such new office shall be
submitted to the Management Team. Should the Management Team approve the
provision of such new ancillary service or the establishment of such new
Practice office, MidSouth at its option, shall have the exclusive right to: (i)
provide services necessary to support the Practice in the Practice's delivery of
such new ancillary services at the Practice office or new Practice office, as
applicable, and (ii) invest and have ownership in any new ancillary services for
which facility fees may be generated; provided, however, if the type of service
is an ancillary service that would be improper under any Applicable Law for
MidSouth to offer to the Practice's patients, then MidSouth shall not have the
option to provide such service. Should MidSouth decline to provide the necessary
support service or ownership for the new ancillary service or new Practice
office, the Practice shall be entitled to perform such service at the Practice's
own expense and the revenue therefrom shall not be included in the calculation
of MidSouth's Service Fees under this Agreement.
SECTION 3.12. MANNER OF PERFORMANCE. MidSouth shall provide (or cause to be
---------------------
provided) to the Practice the services set forth above. MidSouth shall
efficiently manage the Practice and perform its duties hereunder in the manner
as it deems appropriate, exercising reasonable judgment, to meet the daily
requirements of the operations of the Practice in accordance with the provisions
of this Agreement and the general standards approved by the Management Team. The
Practice shall not act in a manner which would prevent MidSouth from efficiently
managing the Practice.
ARTICLE 4. OBLIGATIONS OF THE PRACTICE.
---------------------------
In providing its professional services to patients, the Practice shall
have the following obligations:
SECTION 4.1. PHYSICIANS. The Practice shall notify MidSouth, upon execution
----------
of this Agreement, of the identities of the Physician Employees and their
respective areas of practice. A list of the Physician Employees and the practice
are shall be attached hereto as Schedule 4.1. The Practice shall enter into
physician employment agreements with all Physician Employees. Any new employment
agreements shall be reviewed prior to execution, and MidSouth shall promptly be
provided with copies of the executed employment agreements and any revisions or
amendments thereto. All Physician Employees shall be licensed in all states in
which the Physician Employee practices.
SECTION 4.2. PROVISION OF MEDICAL SERVICES. The Practice shall perform, or
-----------------------------
subcontract to perform as necessary, all medically necessary services for
patients, including managed care patients, in accordance with the terms of
managed care agreements and subject to the utilization review protocols. All
subcontracts shall be reviewed by MidSouth prior to their execution.
SECTION 4.3. PROFESSIONAL STANDARDS. The Practice and its Physician
----------------------
Employees shall provide the professional services to patients described in
Section 4.2. above in compliance at all
15
times with ethical standards, Applicable Law and regulations relating to the
Practice's professional practice. The Practice shall also make all reports and
inquiries to any national practitioners data bank and/or any state data bank
required by Applicable Law. The Practice shall use its best efforts to determine
that each Physician Employee and Technical Employee associated with the
Practice, who provides medical care to patients of the Practice, is licensed by
the state or states in which he or she renders professional services. If any
disciplinary or medical malpractice action is initiated against any such
individual, the Practice shall immediately provide MidSouth with copies of any
third-party documents served on the Practice or letters delivered to the
Practice (not otherwise privileged). The information shall be deemed
confidential information and shall, notwithstanding disclosure, remain subject
to all privileges and immunities provided by Applicable Law. MidSouth shall take
all steps reasonably necessary to assure that their privileges and immunities
remain intact. Pursuant to Section 4.l0, the Practice shall carry out a
program to monitor the quality of medical care provided by the Practice.
SECTION 4.4. BILLING INFORMATION. The Practice shall promptly provide
-------------------
MidSouth with all billing information requested by MidSouth to enable MidSouth
to xxxx and collect the Practice's charges, and the Practice shall procure
consents to assignments and other approvals and documents necessary to enable
MidSouth to obtain payment or reimbursement from third party payors and/or
patients.
SECTION 4.5. MEDICAL PRACTICE. The Practice shall use and occupy the
----------------
Practice Facilities exclusively for the practice of medicine and shall comply
with all Applicable Law and standards of medical care. It is expressly
acknowledged by the parties that the medical practice or practices conducted at
the Practice Facilities shall be conducted solely by physicians or medical
practitioner associated with the Practice, and no other physician or medical
practitioner shall be permitted to use or occupy the Practice Facilities without
the prior written consent of MidSouth.
SECTION 4.6. ADDITIONAL PHYSICIANS. The Practice shall use its best efforts
---------------------
to provide any additional physicians required by the level of patient activity
anticipated by MidSouth and communicated to the Practice.
SECTION 4.7. UTILIZATION REVIEW; QUALITY ASSURANCE. The Practice shall
-------------------------------------
contractually bind each Physician Employee and Physician Extender Employee to
cooperate with and participate in applicable programs and systems of quality of
care assessment, grievance procedures, peer review and utilization review.
Information developed in the course of physician quality assurance and peer
review activities shall be maintained by the Practice as privileged and
confidential, except where its disclosure is consented to by the Practice or is
required by Applicable Law.
SECTION 4.8. NON-DISCRIMINATION; COMPLIANCE WITH APPLICABLE LAW. All
--------------------------------------------------
employment policies, standards and procedures of the Practice shall be in
accordance with non-discrimination provisions of the Applicable Law. In the
event that any government Contract or regulation requires reports or disclosures
of MidSouth and its contractors, the Practice, upon MidSouth's request, shall
16
make, execute and deliver all reports, disclosures or other written information,
guarantees or assurances as may be reasonably requested by MidSouth to assure
timely compliance.
SECTION 4.9. NON-DISCRIMINATORY PATIENT SELECTION AND SERVICE; NON-
-----------------------------------------------------
DISCRIMINATORY PATIENT ASSIGNMENT. No Patient shall be discriminated against in
---------------------------------
accordance with Applicable Law.
SECTION 4.10. STANDARDS, ACCREDITATION, SURVEYS AND INSPECTIONS. The
-------------------------------------------------
Practice shall meet all medical practice, licensure and ethical standards, which
are pertinent to its activities or which by Contract it has agreed to abide. The
Practice shall in good faith cooperate with inspections and on-site surveys of
the Practice as may be conducted by governmental agencies, accrediting
organizations or payors. MidSouth shall, to the extent possible, give the
Practice advance notice of the inspections and surveys and schedule the
inspections during reasonable business hours.
SECTION 4.11. CONTRACTS. The Practice, the Physician Employees and the
---------
Physician Extender Employees shall abide by the terms of any Managed Care
Agreements entered into by on behalf of and with the consent of the Practice,
including, without limitation, self-insured, PPO, EPO, HMO and indemnity
agreements.
SECTION 4.12. ORGANIZATION AND AREA OF CARE. The Practice shall comply with
-----------------------------
policies and procedures pertinent to scheduling, billing, reconciliation of
capitation, and other administrative matters relating to the organization of the
non-professional aspects of the delivery of care as may be established, from
time to time, by MidSouth after consultation with the Practice.
SECTION 4.13. RECORDS AND REPORTS. The Practice shall assist MidSouth in
-------------------
maintaining and, where by Applicable Law or legal process require, in divulging
records and information concerning its health care services. The Practice shall
give MidSouth full access to all of its medical and financial records for the
Practice Account.
SECTION 4.14. THE PRACTICE TO PROVIDE NECESSARY BILLING INFORMATION. The
-----------------------------------------------------
Practice agrees to provide MidSouth with all billing information for fee-for-
service and managed care patients, including, but not limited to, the name of
the patient, the date of service, the nature and extent of services provided and
any supporting medical information necessary to obtain payment or reimbursement
for services.
SECTION 4.15. CONTINUING EDUCATION. The Practice shall ensure that all
--------------------
Physician Employees and Physician Extender Employees maintain competence in, and
remain currently well-informed as to recent developments about, their
particular areas of medical practice, interest and specialization. Accordingly,
subject to the Practice at all times providing sufficient physicians to care for
the needs of patients, the Physician Employees and Physician Extender Employees
shall attend seminars, keep current with journals and take other reasonable
steps to remain proficient in their particular specialties. All seminars
necessary to maintain licensure or competence shall be the responsibility of the
Practice and the individual Physician Employees and Physician Extender
Employees. At a minimum, the Practice shall ensure that each Physician Employee
and each
17
Physician Extender Employee participates in such continuing medical education as
is necessary for the Physician Employee and each Physician Extender Employee to
remain licensed.
SECTION 4.16. REFERRALS. The Practice and the Physician Employees shall
---------
make referrals to specialists in a manner consistent with (a) pertinent policies
and procedures (which shall be developed in consultation with the Management
Team), (b) the terms and conditions of government programs or managed care
agreements applicable to the care of the patient, and (c) any Applicable Law,
including, but not limited to, Xxxxx I and Xxxxx II, as amended.
SECTION 4.17. PROVIDER NUMBERS. The Practice shall procure and maintain
----------------
medical group provider numbers, including without limitation, Medicare and
Medicaid provider numbers, necessary or appropriate to obtain payment or
reimbursement on the Practice's behalf
ARTICLE 5. FACILITIES OF THE PRACTICE.
---------------------------
SECTION 5.1. THE PRACTICE FACILITIES. MidSouth agrees to maintain in good
-----------------------
order the properties and facilities owned by the Practice on the date of this
Agreement and/or more fully described in Schedule 1.1.48 attached hereto (the
"Practice Facilities "), and shall pay for lease payments, costs of repairs,
maintenance and improvements, utility (telephone, electric, gas, water)
expenses, normal janitorial services, refuse disposal and all other costs and
expenses reasonably incurred in conducting operations of the Practice during the
term of this Agreement. MidSouth shall use its best efforts to create comparable
properties and facilities if the Practice Facilities are damaged by fire or
other casualty or taken through eminent domain. All of these costs shall be
Practice Expenses; however, the costs of debt service on any real property owned
by the Practice shall not be a Practice Expense. Nothing contained herein is
intended to require MidSouth to provide the foregoing services if the services
are required to be provided by the landlord (without costs) under a lease for a
specific property. The Management Team shall make all determinations regarding
the condition, use and needs for the offices, facilities and improvements. The
Management Team shall determine any changes to the office and facility locations
of the Practice.
SECTION 5.2. RIGHT TO USE PROPERTY. MidSouth shall have access to the
---------------------
foregoing facilities and premises of the Practice during the term of this
Agreement, or, with respect to property leased by the Practice, during the term
of any lease or sublease of the premises and any additional premises leased,
subleased or acquired by the Practice during the term of this Agreement. The
Practice shall not enter into any new leases or subleases or agree to amend any
currently existing lease or sublease without the express written consent of the
Management Team. The right to have access to the premises shall not constitute a
lease or sublease of the premises, shall not constitute an assignment of any of
the Practice's rights under existing leases, and shall not be construed as an
assignment or other transfer of any rights of the Practice to its owned property
or any rights under any existing leases.
18
ARTICLE 6. COMPENSATION.
------------
SECTION 6.1. FEES. MidSouth shall be paid as follows:
----
(a) The Practice shall pay to MidSouth a Service Fee equal to ten percent
(10%) of the Practice Net Revenue plus the amount of Practice Expenses incurred
by MidSouth.
(b) The amounts to be paid to MidSouth under this Section 6. l shall be
payable monthly and shall reflect the Service Fee for funds deposited into the
Practice Account, at the time that MidSouth pays the Practice for the Purchased
Accounts Receivable as described in Section 6.2 below. The Practice shall
receive the Purchase Price as defined below, plus other payments received by the
Practice to the extent such payments are not reflected as Accounts Receivable of
the Practice. The amount of the Service Fee payable shall be estimated based
upon the previous month's operating results of the Practice. Monthly Adjustments
to the estimated payments shall be made to reconcile actual amounts due under
this Section 6.1 or the Purchase Price payable under Section 6.2 or the Purchase
Price payable under Section 6.2 for the preceding month, by the end of the
following month during each calendar year ("Monthly Adjustments"). Upon
preparation of annual financial statements as provided in Section 3.3 hereof,
final adjustments to the Service Fees due under this Section 6.1 for the
preceding year or the Purchase Price payable under Section 6.2 shall be made and
any additional payments owing to MidSouth or the Practice shall then be made to
the party owed the additional sum of money ("Yearly Adjustments"). The Yearly
Adjustments and any amount owed shall be calculated and paid within ninety (90)
days following the close of MidSouth's fiscal year. The Physician Members
acknowledge and agree that they are parties, individually, tO this Agreement and
that if the Practice fails to pay the Service Fees herein described, MidSouth
shall have the right to collect the Service Fees from the Physician Members. The
Management Team shall establish the relative amount of the Service Fee
applicable to each Physician Member. Parties agree tO cooperate in good faith
and on a timely basis to take all necessary actions to transfer all monies due
to the other party on the Settlement Date, or through the Monthly Adjustments
or Yearly Adjustments as necessary.
SECTION 6.2. PURCHASE OF ACCOUNTS RECEIVABLE.
-------------------------------
Section 6.2.l. On the date hereof, MidSouth has purchased the Accounts
Receivable set forth on Schedule 6.2.1 attached hereto (the "Initial Purchased
Accounts Receivable"). The Initial Purchased Accounts Receivable shall be billed
and collected in accordance with the provisions of the Agreement. During the
Term of this Agreement, the Practice hereby agrees to sell and assign to
MidSouth and MidSouth agrees to purchase, all of the Practice's Accounts
Receivable generated each month ("Purchased Accounts Receivable"). Purchased
Accounts Receivable shall not include, and MidSouth shall not purchase, any
cash, checks or credit card receivables.
Section 6.2.2. The purchase price for the Purchased Accounts Receivable
(the "Purchase Price") will be equal to the face amount of the Accounts
Receivable recorded each month in a final billable form, less (i) any non-
allowed contractual adjustments imposed by Third Party Payors
19
Program, and (ii) any reserve for uncollectible Accounts Receivable. The
Purchase Price will be estimated each month to take into account contractual
adjustments and uncollectible Accounts Receivable based on the most recently
completed six (6) month historical experience of the Practice or the predecessor
of the Practice, calculated on a rolling basis, as determined by MidSouth. It is
the intent of the parties that the Purchase Price reflect the actual net
realizable value of the Accounts Receivable.
Section 6.2.3. The Practice will sell all Accounts Receivable to MidSouth
and each purchase will be deemed to be made on the day after which the Accounts
Receivable are created. MidSouth shall pay the estimated Purchase Price for the
Purchased Accounts Receivable no later than the tenth (lOth) day of each month
following the month in which the Purchased Accounts Receivable are created (the
"Settlement Date"). MidSouth and the Practice will determine the actual Purchase
Price based on the actual amount realized from the Purchased Accounts Receivable
on an annual basis as set forth in Section 6.1(b). MidSouth shall pay the
Practice for all Purchased Accounts Receivable by check, wire transfer or
intrabank transfer to the Practice Account. The purchase of Accounts Receivable
shall be evidenced by the Practice sending MidSouth (i) a copy of each invoice
with respect to each third-party payor on the Purchased Accounts Receivable; and
(ii) any other information or documentation (including all required Uniform
Commercial Code ("UCC") releases or financing statements) MidSouth may
reasonably need to identify the Purchased Accounts Receivable and obtain payment
from the Account Debtors; provided that the failure to send any documentation
shall not affect the obligation of the Practice to sell the Purchased Accounts
Receivable or MidSouth to purchase the Purchased Accounts Receivable. As
consideration for the acquisition of the Purchased Accounts Receivable by
MidSouth pursuant to this Section 6.2. MidSouth promises to pay and shall be
obligated to pay the Purchase Price for the Purchased Accounts Receivable at the
time and in the manner provided above. To the extent permissible by Applicable
Law, the Practice will be deemed to have sold to MidSouth all of the Practice's
right, title and interest in the Purchased Accounts Receivable and in any
proceeds thereof, and MidSouth will be the sole and absolute owner thereof and
will own all of the Practice's rights and remedies represented by the Purchased
Accounts Receivable (including, without limitation, rights to payment from the
respective Account Debtors on the Purchased Accounts Receivable), and MidSouth
will have obtained all of the Practice's rights under all guarantees,
assignments and securities with respect to all of the Purchased Accounts
Receivable.
Section 6.2.4. MidSouth hereby grants the Practice a subordinated security
interest in the amount necessary to fund MidSouth's obligation to pay the
Purchase Price for the Purchased Accounts Receivable which will be transferred
on a daily basis pursuant to Section 6.2.3. until the Purchase Price is paid.
Practice's security interest shall only be subordinate to the Lender's security
interest in the Purchased Accounts Receivable. MidSouth shall execute any and
all documentation necessary to evidence Practice's subordinated security
interest in the Purchased Account's Receivable until the Purchase Price has been
paid.
Section 6.2.5. Upon expiration or termination of this Agreement for any
reason; (i) all Accounts Receivable purchased by MidSouth shall remain the
property of MidSouth; and (ii) all
20
Accounts Receivable purchased and not paid for at the termination or expiration
of this Agreement shall be paid for by the 10th day of the following month for
all Purchased Accounts Receivable as of the date of the expiration or
termination date, less the amount of any Service Fees earned by MidSouth at the
termination or expiration pursuant to Section 6.1 of this Agreement.
Section 6.2.6. In connection with the initial purchase of Accounts
Receivable by MidSouth and pursuant to this Agreement, the Practice will execute
all financing statements or amendments under the UCC (naming MidSouth as secured
party and Lender as assignee) as MidSouth may reasonably request with respect to
any Purchased Accounts Receivable.
Section 6.2.7. The Practice agrees to cooperate with MidSouth in the
collection of the Purchased Accounts Receivable transferred pursuant to Section
6.2. At the option of and upon the request of MidSouth, the Practice shall
execute any and all documentation necessary for the transfer of amounts
constituting Purchased Accounts Receivables and/or the establishment of the
Lockbox Agreement as follows:
(a) COLLECTION OF GOVERNMENTAL RECEIVABLES. With respect to payments on
--------------------------------------
Governmental Receivables, at the request and option of MidSouth, the Practice
agrees that the following procedures shall apply:
(i) The Practice shall enter into a Lockbox Agreement applicable to
Governmental Receivables in a form acceptable to counsel for MidSouth and in a
form reasonably acceptable to the Practice which shall establish a Governmental
Lockbox Account. The Governmental Lockbox Account shall be an account in the
name of the Practice. All payments with respect to the Practice's Governmental
Receivables are to be made directly to the Governmental Lockbox Account. In the
event MidSouth exercises this option, the Practice shall instruct each Account
Debtor with respect to the Practice's Governmental Receivables to remit all such
payments directly to such Governmental Lockbox Account pursuant to a
Notification Letter. In addition, the Practice shall attach written instructions
to each invoice representing such Governmental Receivables generated subsequent
to the date of this Agreement which will instruct such third-party payor or
Account Debtor that payment under such invoice is to be paid to the Governmental
Lockbox Account. The Practice agrees that it shall not deposit any funds other
than payments on Governmental Receivables into, nor make any withdrawals from,
the Governmental Lockbox Account without the prior written consent of MidSouth.
The Practice further agrees that it shall not during the term of this Agreement
terminate, modify or amend in any manner the Lockbox Agreement applicable to the
Governmental Lockbox Account.
(ii) In accordance with the Lockbox Agreement pertaining to Governmental
Receivables, the Practice shall instruct the Collecting Bank to transfer
automatically all amounts deposited in Governmental Lockbox Account constituting
good funds to the Disbursement Account in accordance with Section 3.l(b)(2).
The Practice shall have no right or interest in the Disbursement Account. The
Practice shall not, so long as this Agreement has not been terminated pursuant
to Section 10.3 or so long as any Purchased Accounts Receivable remains
outstanding, change or cancel such
21
automatic transfer order at any time, or, without the prior written consent of
MidSouth, change either the identity of Governmental Lockbox Account or the
instructions to each Account Debtor on the related Governmental Receivable
regarding making payments to such account. Any such action shall be considered a
breach of this Agreement for which MidSouth shall be entitled to all remedies at
Applicable Law and in equity, including obtaining an injunction.
(iii) The Practice will cooperate with MidSouth and its agents in the
identification of sums deposited into Governmental Lockbox Account, which
cooperation shall continue until all Purchased Accounts Receivable sold
hereunder have been collected.
(iv) The Practice agrees to pay, on demand, a finance charge equal to the
Finance Charge Rate, on any payment on a Governmental Receivable received by the
Practice that is not deposited in Governmental Lockbox Account within two (2)
business days after receipt by the Practice. Except that the finance charge
shall not apply to payments made on Purchased Accounts Receivables which are
made as part of a cash, check or credit card payment at the time of the delivery
of medical services by the Practice which are remitted to the Practice Account
("Joint Payment"). All Joint Payments shall be allocated and remitted to the
appropriate party on the Settlement Date.
(b) COLLECTION OF NON-GOVERNMENTAL RECEIVABLES. With respect to
------------------------------------------
payments on Non-Governmental Receivables, at the request and option of MidSouth,
the Practice agrees that the following procedures shall apply:
(i) The Practice, Collecting Bank and Lender (if requested by Lender) shall
enter into a Lockbox Agreement applicable to Non-Governmental Receivables in a
form acceptable to counsel for Practice, MidSouth and Lender, which shall
establish a Non-Governmental Lockbox Account. The Non-Governmental Lockbox
Account shall be an account in the name of the Practice. Practice agrees to
enter into additional agreements with the Lender to acknowledge the Lender's
security interest in the Purchased Accounts Receivable and to set forth the
procedures to account for and reconcile the Non-Governmental Lockbox Account.
All payments with respect to the Practice's Non-Governmental Receivables are to
be made directly to the Non-Governmental Lockbox Account. In the event MidSouth
exercises this option, the Practice shall instruct each Account Debtor with
respect to the Practice's Non-Governmental Receivables to remit all such
payments directly to such Non-Governmental Lockbox Account pursuant to a
Notification Letter. In addition, the Practice shall attach written instructions
to each invoice representing such Non-Governmental Receivables generated
subsequent to the date of this Agreement which will instruct such third-party
payor or Account Debtor that payment under such invoice is to be paid to the
Non-Governmental Lockbox Account. So long as this Agreement has not been
terminated pursuant to Section 10.3, the Practice agrees that it shall not
deposit any funds other than payments on Non-Governmental Receivables into, nor
make any withdrawals from, the Non-Governmental Lockbox Account without the
prior written consent of MidSouth. The Practice further agrees that it shall
not during the term of this Agreement terminate, modify or amend in any manner
the Lockbox Agreement applicable to the Non-Governmental Lockbox Account.
22
(ii) In accordance with the Lockbox Agreement, Practice shall instruct the
Collecting Bank to transfer all amounts deposited in the Non-Governmental
Lockbox Account constituting good funds to the Disbursement Account in
accordance with Section 3.1(b)(2). So long as this Agreement has not been
terminated pursuant to Section 10.3, or so long as any Purchased Accounts
Receivable remains outstanding, and in any event, during the term of this
Agreement, at any time, or, without the prior written consent of MidSouth, the
Practice shall not change the instructions to each Account Debtor on the related
Non-Governmental Receivable regarding making payments to the Lockbox Account.
Any action shall be considered a breach of this Agreement for which MidSouth
shall be entitled to all remedies under Applicable Law and in equity, including
obtaining an injunction.
(iii) The Practice will cooperate with MidSouth and its agents in the
identification of sums deposited into the Non-Governmental Lockbox Account,
which cooperation shall continue until all Purchased Accounts Receivable sold
hereunder have been collected.
(iv) The Practice agrees to pay, on demand, a finance charge equal to the
Finance Charge Rate, on any Non-Governmental Receivable received by the Practice
that is not deposited in the Non-Governmental Lockbox Account within two (2)
business days after receipt by the Practice. Except that the finance charge
shall not apply to payments made on Purchased Accounts Receivables which are
made as part of a cash, check or credit card payment at the time of the delivery
of medical services by the Practice which are remitted to the Practice Account.
All Joint Payments shall be allocated and remitted to the appropriate party on
the Settlement Date.
(c) PROCEDURES WITHOUT LOCKBOX. It is MidSouth's intention to utilize the
--------------------------
Governmental Lockbox Account and Non-Governmental Lockbox Account procedure as
provided in Section 6.2.6(a) and (b) unless circumstances change which would
make the Governmental Lockbox Account and Non-Governmental Lockbox Account
procedures inappropriate. The procedures under this subsection (c) for the
collection of Accounts Receivable without a lockbox will not be instituted
without approval of the Management Team. The Practice and MidSouth shall
instruct the Collecting Bank to transfer automatically all amounts constituting
good funds in the account or accounts of the Practice established for the
collection of Governmental Receivables and Non-Governmental Receivables to the
Bank Account established with the Lender pursuant to a standing order in a form
acceptable to MidSouth's legal counsel (the "Bank Account"). In the event
MidSouth exercises this option, the Practice shall instruct each Account Debtor
with respect to the Purchased Accounts Receivable to remit all payments directly
to the Collecting Bank account or accounts pursuant to a Notification Letter. In
addition, the Practice shall attach written instructions to each invoice
representing the Purchased Account Receivable generated subsequent to the date
of this Agreement instructing such third-party payor or Account Debtor that
payment under the invoice is to be paid to the Collecting Bank account or
accounts. So long as this Agreement has not been terminated pursuant to Section
10.3 or so long as any Purchased Accounts Receivable remain outstanding, the
Practice shall not change or cancel such standing order at any time, or, without
the prior written consent of MidSouth, change the instructions to each Account
Debtor on each Governmental Receivable end Nor-Governmental Receivable to make
its payments to such account. Any such action shall be considered a breach of
this Agreement for which MidSouth shall be entitled to all remedies under
Applicable Law and in equity, including obtaining an injunction.
23
(d) MISDIRECTED PAYMENTS. (i) If after the date of this Agreement, an
--------------------
Account Debtor shall make a payment on the Purchased Accounts Receivable to a
location other than is provided in the Notification Letter or the Practice
otherwise receives payments on Purchased Accounts Receivable under the terms of
this Agreement ("Misdirected Payments"), the Practice (at its own cost and
expense) shall promptly take all necessary steps to effect collection of the
Misdirected Payment from any other party claiming an interest therein or having
possession thereof and (A) hold the Misdirected Payment in trust for MidSouth,
(B) segregate the Misdirected Payment, (C) use its best efforts not to commingle
the Misdirected Payment with the Practice's own funds or other assets, and (D)
deliver the Misdirected Payment no later than two (2) business days from the day
of receipt to the Collecting Bank account or accounts, as applicable.
(ii) The Practice agrees to pay, on demand, the Finance Charge Rate on any
Misdirected Payment received by the Practice that is not deposited in the
appropriate account within two (2) business days after receipt by the Practice.
Except that the finance charge shall not apply to payments made on Purchased
Accounts Receivables which are made as part of a cash, check or credit card
payment at the time of the delivery of medical services by the Practice which
are remitted to the Practice Account. All Joint Payments shall be allocated and
remitted to the appropriate party on the Settlement Date.
(e) All Purchased Accounts Receivable of the Practice pursuant to this
Section 6.2 hereof will, as the Purchased Accounts Receivable are purchased, be
treated as Practice Revenues for accounting and financial purposes.
SECTION 6.3. EARLY TERMINATION OF PHYSICIAN MEMBERS. The Physician Members
--------------------------------------
hereby acknowledge that the terms and conditions of this Agreement are based
upon numerous factors, including the Physician Members continuing to practice
medicine in the future. ln connection therewith, each Physician Member agrees as
follows:
(a) RETIREMENT. If at any time during the Term hereof, a Physician Member
----------
desires to retire, or assume full-time teaching responsibilities, the Physician
Member shall notify MidSouth in writing at least twelve (12) months prior to the
date of such retirement or start of teaching position; provided, however, that
if such retiring physician elects to, and has located a replacement physician
suitable to the Practice, MidSouth shall waive the remaining months of said
twelve (12) month notice period, and such retirement shall be effective upon
the earlier of twelve (12) months from the date of notice or commencement of the
replacement physician's employment. Upon such retirement or start of the
teaching position, the Physician Member shall have no further obligations under
this Agreement; provided, however, the restrictive covenants provided for under
Article Section 7 shall remain in full force and effect. In fulfilling any such
full-time teaching responsibilities, the Physician Member will be permitted to
attend patients in a manner normal and customary for such faculty position;
provided, however, such services must be incident to the academic/teaching
aspects of the institution, and not incident to the regular examination of
patients for a fee whether billed in the name of the institution or the name of
the attending physician. It is not the intent of the parties to permit a retired
physician to conduct a medical practice through an academic institution.
24
(b) PHYSICIAN MEMBER CHANGE IN PRACTICE/GROUP AFFILIATION. In the event
-----------------------------------------------------
that a Physician Member leaves the employment of or terminates his or her
affiliation with the Practice, the terminating Physician Member may join or
establish another group/practice which has or will enter into a service
agreement with MidSouth, subject to any other existing agreements between
Physician Member and Practice. Upon entering into such new service agreement
with MidSouth, the terminating Physician Member shall, except as limited by
separate employment agreements between the Practice and the Physician Members,
be released from any obligation under this Agreement. MidSouth shall have the
right to enter into a new service agreement without satisfying the requirements
of Article 7 hereof. In the event the (i) Practice consents to MidSouth
entering into a new service agreement; (ii) service agreement will not adversely
affect the operations and earnings of MidSouth; and (iii) new group/practice can
satisfy the representations and warranties set forth in Article 12 hereof, then
MidSouth will not unreasonably withhold or refrain from entering into a new
service agreement with the terminating Physician Member's new group/practice.
Except as set forth herein, in the event the Physician Member affiliates with a
new group/practice that is not a party to a service agreement with MidSouth,
then MidSouth, will terminate this Agreement solely with respect to the
terminating Physician Member; provided, however, that the provisions of
Article 7 hereof shall apply. In the event that MidSouth does not enter into a
new service agreement, then MidSouth shall terminate this Agreement with respect
to the Physician Member, and the terminating Physician Member shall be obligated
as set forth in Article 7 hereof.
(c) DEATH OR DISABILITY. In the event that a Physician Member dies or
-------------------
becomes disabled, then the Physician Member shall have no continuing obligations
under this Agreement; provided, however, in the event of disability, the
restrictive covenants described in Article 7 hereof shall remain in full force
and effect.
ARTICLE 7. RESTRICTIVE COVENANTS AND ENFORCEMENT.
-------------------------------------
MidSouth and the Practice recognize that the benefits each is to receive
under this Agreement shall be realized only if the Practice operates an active
medical practice to which the Physicians Members associated with the Practice
devote their full time and attention to the extent of their arrangement with the
Practice. Accordingly, MidSouth and the Practice desire to set forth the
following reasonable restrictions and agreements regarding competition by the
Physicians Members during the term of this Agreement and after the termination
of this Agreement.
SECTION 7.1. EXCLUSIVE ARRANGEMENT. During the term of this Agreement,
---------------------
MidSouth shall be the Practice's and the Physician Members' sole provider of the
management services described in this Agreement and neither the Practice, the
Physician Members nor any of the Practice's or the Physician Members' employees
shall provide similar management services. During the term of this Agreement,
the Practice and the Physician Members agree that neither the Practice nor
Physician Members will enter into any similar agreement with any physician
practice management company or entity.
25
SECTION 7.2. RESTRICTIVE COVENANTS BY THE PRACTICE. The Practice agrees
-------------------------------------
that, during the term hereof, neither the Practice or its Physician Members will
engage, directly or indirectly, as a principal owner, Member (other than a
holder of fewer than 5% of the outstanding shares of a publicly-traded company),
partner, joint venturer, employee, agent, equity owner, or in any other capacity
whatsoever, in any corporation, partnership, joint venture, or other business
association or entity that operates ambulatory surgery or diagnostic centers,
imaging centers, physical therapy centers, or rehabilitation centers, or
provides management services of the nature provided by MidSouth pursuant to this
Agreement, within a thirty (30) mile radius from any of the Practice Facilities
(the "Restricted Area"). Provided that this Agreement may allow any Physician
Member to own any ownership interest in the above facilities which was acquired
prior to the execution this Agreement. If this Agreement is terminated by
MidSouth for breach by the Practice, pursuant to 10.4 hereof, neither the
Practice nor its current or future Physician Members shall establish, operate,
or provide physician services at any medical office, clinic, ambulatory surgery
or diagnostic centers, imaging centers, physical therapy centers, rehabilitation
centers or other health care facility providing services substantially similar
to those provided by the Practice within the Restricted Area for a period of
twenty-four (24) months ("Restricted Period") after the termination of the
Agreement.
SECTION 7.3. RESTRICTIVE COVENANTS BY CURRENT PHYSICIAN MEMBERS.
--------------------------------------------------
Contemporaneous with the execution of this Agreement, the Practice shall obtain
and enforce formal agreements from its current Physician Members, pursuant to
which each agrees during the term of their respective employment and for the
Restricted Period after any termination of employment with the Practice, they
will not (i) establish, operate or engage, directly or indirectly, as a
principal owner. Member (other than a holder of fewer than 5% of the outstanding
shares of a publicly-traded company), partner, joint venturer, employee, agent,
equity owner, or in any other capacity whatsoever, in any corporation,
partnership, joint venture, or other business association or entity that
operates ambulatory surgery or diagnostic centers, imaging centers, physical
therapy, or rehabilitation centers providing services similar to those provided
by the Practice within the Restricted Area; or (ii) solicit, induce or attempt
to induce any Practice patient, employee, consultant or other persons associated
or affiliated with MidSouth or any Affiliate of MidSouth to leave the care of a
Physician Employee, to leave the employment of, or to discontinue their
association with the Practice, MidSouth or such affiliate of the Practice or
MidSouth within the Restricted Area. Provided that the employment agreements may
exclude from the restrictive covenant the employment of Physician Members in
facilities that have historically been deemed urgent care facilities on a part-
time basis for nights, weekends and holidays for periods that do not exceed on a
monthly basis the equivalent of ten percent (10%) of their normal working time
for the Practice on a monthly basis and which do not interfere with their
employment by the Practice during the term of the employment agreement and after
the termination of the employment agreement. Provided also, that the employment
agreements may exclude from the restrictive covenant the employment of Physician
Members in facilities that have historically been deemed emergency room
facilities once the Physician Member's employment has been terminated if the
Physician Member has no private practice. The employment agreements shall
provide that MidSouth is an intended third-party beneficiary to such agreements
and that such third-party beneficiary rights may be assigned to any Lender. The
Practice agrees to enforce the restrictive covenants. The cost and expense of
such enforcement shall be a Practice Expense, and all damages and other amounts
recovered thereby shall be included in the Revenues. In the event
26
that after a request by MidSouth, the Practice does not pursue any remedy that
may be available to it by reason of a breach or Default of a restrictive
covenant, upon the request of MidSouth, the Practice shall assign to MidSouth
such causes of action and/or other rights it has related to such breach or
Default and shall cooperate with and provide reasonable assistance to MidSouth
with respect thereto; in which case, all costs and expenses incurred in
connection therewith shall be borne by MidSouth and shall be excluded as a
Practice Expense, and MidSouth shall be entitled to all damages and other
amounts recovered thereby. Provided that this Agreement may allow any Physician
Member to own any ownership interest in the above facilities which was acquired
prior to the execution this Agreement. If the Practice and/or any Physician
Member violate the covenants set forth in this Section 7.3, then the duration of
the restrictions contained in this Section 7.3 shall be extended an additional
month against the violator for each month during which such violation occurred
but was not discovered by MidSouth, beginning upon the date that MidSouth learns
of the violation and so notifies the Practice and/or the Physician Member in
writing.
SECTION 7.4. RESTRICTIVE COVENANTS BY FUTURE PHYSICIAN MEMBERS. The
-------------------------------------------------
Practice shall obtain and enforce formal agreements from each of its future
Physician Members hired or contracted, pursuant to which each agrees to be bound
by an agreement containing the terms and conditions a contained in Section 7.3
hereof.
SECTION 7.5. PHYSICIAN MEMBERS LIQUIDATED DAMAGES. The restrictive
------------------------------------
covenants described above may provide that the Physician Members (current or
future) may be released from their Restrictive Covenants by paying liquidated
damages in an amount as follows:
(a) if the Practice were the breaching party or the party desiring to be
released from the covenant, the Practice shall be liable to MidSouth for an
amount equal to the estimated fee payable to MidSouth hereunder for one hundred
twenty (120) months following the termination; and
(b) if a Physician Member was the breaching party or the party desiring to
be released from the covenant, then $200,000.00 per breaching party or party
desiring to be released from the covenant must be paid to MidSouth in order to
obtain Physician Member's release from Article 7 of this Agreement.
SECTION 7.6. RIGHTS OF MIDSOUTH. During the term of this Agreement and
------------------
thereafter, MidSouth shall at all times of this Agreement 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.
SECTION 7.7. EXCLUDED ACTIVITIES. Physician Members shall be allowed to
-------------------
participate in Excluded Activities and retain Excluded Revenues, at any time so
long as the Excluded Activities do not interfere with any rights,
responsibilities or obligations as contained in this Agreement or any employment
agreement by and between the Practice and the Physician Member.
27
SECTION 7.8. ENFORCEMENT. MidSouth, the Practice and the Physician Members
-----------
acknowledge and agree that since a remedy under Applicable Law for any breach or
attempted breach of the provisions of this Article 7 shall be inadequate,
MidSouth shall be entitled to specific performance and injunctive or other
equitable relief in the event of any breach or attempted breach, in addition to
whatever other remedies may exist under Applicable Law or in equity. All parties
hereto also waive any requirement for the securing or posting of any bond in
connection with the obtaining of any injunctive or other equitable relief. If
any provision of Article 7 relating to any applicable Restrictive Period, scope
of activity restricted or the Restricted Area described therein shall be
declared by a court of competent jurisdiction to exceed the maximum time period,
scope of activity restricted or geographical area the court deems reasonable and
enforceable under Applicable Law, the time period, scope of activity restricted
and/or area of restriction held reasonable and enforceable by the court shall
thereafter be the Restrictive Period, scope of activity restricted and/or the
Restricted Area applicable to the restrictive covenant provisions in this
Article 7. The invalidity or non-enforceability of this Article 7 in any respect
shall not affect the validity or enforceability of the remainder of this Article
7 or of any other provisions of this Agreement.
ARTICLE 8. DUTIES OF THE MANAGEMENT TEAM.
-----------------------------
SECTION 8.1. FORMATION AND OPERATION OF THE MANAGEMENT TEAM. The parties
----------------------------------------------
shall establish a Management Team which shall be responsible for developing
management and administrative policies for the overall operation of the
Practice. No party shall have the authority to undertake any actions described
in Section 8.2 below without the authority of the Management Team. The
Management Team shall consist of four (4) members. MidSouth shall designate, in
its sole discretion, two (2) members of the Management Team, one of which shall
be the Management Team Chief Executive; provided, however, in MidSouth's sole
discretion MidSouth may replace the Management Team Chief Executive as one of
its designees in the event MidSouth institutes disciplinary measures against the
Management Team Chief Executive in connection with his employment with
MidSouth. The Practice shall designate, in its sole discretion, two (2)
physician members of the Management Team. The chairman of the Management Team
shall be a designee of the Practice selected by the Practice. Except as may
otherwise be provided, the act of a majority of the members of the Management
Team shall be the act of the Management Team. Attached hereto as Schedule 8.1
are the initial "Policies and Procedures" to be used by the Management Team
until the Management Team amends the Policies and Procedures. The chairman of
the Management Team shall be responsible for organizing the agenda for the
Management Team meetings referred to in this Article 8. In the event that a
deadlock occurs on a matter brought before the Management Team, then the
relative parties, duties and responsibilities with respect to such matter shall
remain status quo.
SECTION 8.2. DUTIES AND RESPONSIBILITIES OF THE MANAGEMENT TEAM. The
--------------------------------------------------
Management Team shall have the following duties and obligations:
28
8.2.1. Capital Improvements and Expansion. Any renovation and expansion
----------------------------------
plans and capital equipment expenditures with respect to the Practice shall be
reviewed and approved by the Management Team and shall be based upon economic
feasibility, physician support, productivity and then current market conditions
and the budget. If the Management Team determines that the acquisition of
additional equipment or facilities is appropriate, then MidSouth shall use its
best efforts to arrange for the financing and acquisition of the property.
8.2.2. Annual Budgets. All annual capital and operating budgets prepared by
--------------
MidSouth, as set forth in Section 3.2, shall be subject to the review and
approval of the Management Team.
8.2.3. Exceptions to Inclusion in the Revenue Calculation. The exclusion of
--------------------------------------------------
any revenue from Revenues, whether now or in the future, shall be subject to the
unanimous approval of the Management Team, and the treatment of any expense as
Practice Expense which is not otherwise addressed herein or in any budget shall
be subject to the unanimous approval of the Management Team.
8.2.4. Advertising. All advertising and other marketing of the services
-----------
performed at the Practice Facilities or any hospital or similar facility shall
be subject to the prior review and approval of the Management Team.
8.2.5. Fees. As a part of the annual operating budget, in consultation with
----
the Practice and MidSouth, to the extent allowed by Applicable Law, the
Management Team shall review the fee schedule or capitation arrangement for all
hospital, physician and ancillary services rendered by the Practice. In
addition, the Management Team shall approve the credit collection policies of
the Practice and MidSouth for the Practice's Accounts Receivable.
8.2.6. Provider and Payor Relationships. Decisions regarding the
--------------------------------
establishment or maintenance of relationships with institutional health care
providers and payors shall be made by the Practice in consultation with the
Management Team.
8.2.7. Strategic Planning. The Management Team shall develop long-term
------------------
strategic planning objectives.
8.2.8. Capital Expenditures. The Management Team shall determine the
--------------------
priority of major capital expenditures.
8.2.9. Physician Hiring. The Management Team shall recommend the number and
----------------
type of physicians required for the efficient and effective operation of the
Practice.
8.2.10. Management Team Chief Executive. The retention, and/or selection of
-------------------------------
the Management Team Chief Executive pursuant to Section 3.5 by MidSouth shall be
subject to the reasonable input of the Management Team. If the Practice is
dissatisfied with the services provided by the Management Team Chief Executive,
the Practice shall refer the matter to the Management Team. MidSouth and the
Management Team shall each in good faith determine whether the
29
performance of the Management Team Chief Executive could be brought to
acceptable levels through counsel and assistance, or whether the Management Team
Chief Executive should be terminated.
8.2.11. Grievance Referrals. The Management Team shall consider and make
-------------------
final decisions regarding grievances pertaining to matters not specifically
addressed in this Agreement as referred to it by the Practice's Board of
Directors.
ARTICLE 9. INSURANCE AND INDEMNITY.
-----------------------
SECTION 9.1. INSURANCE TO BE MAINTAINED BY THE PRACTICE. Throughout the
------------------------------------------
term of this Agreement, subject to the provisions of Section 3.1(m) providing
for malpractice premiums and deductibles to be a Practice Expense, the Practice
shall maintain comprehensive professional liability insurance with limits of not
less than $1,000,000 per claim and with aggregate policy limits of not less than
$3,000,000 per Physician Employee and Physician Extender Employee and a separate
limit for the Practice with the carrier which shall be determined by Practice
upon recommendation by the MidSouth. The Practice shall be responsible for all
liabilities in excess of the limits of the policies, and under no circumstances
shall any excess be deemed a Practice Expense. MidSouth shall have the option,
with Management Team approval, of providing the professional liability insurance
through an alternative program, provided the program meets the requirements of
the Insurance Commissioner of the State. If the Practice's existing professional
liability insurance program is canceled and replaced by a professional liability
insurance program initiated by MidSouth, MidSouth shall pay over to the
Practice any unearned professional liability insurance premiums paid by the
Practice to the extent the Practice's carrier pays the amounts to MidSouth. Any
insurance program for the Practice shall include director and officer liability
insurance for the Practice, and the cost of the coverages shall be a Practice
Expense.
SECTION 9.2. INSURANCE TO BE MAINTAINED BY MIDSOUTH. Throughout the term of
--------------------------------------
this Agreement, MidSouth will use reasonable efforts, unless determined not
necessary by the Management Team, to provide and maintain, as a Practice
Expense, comprehensive general liability and property insurance covering the
Practice premises and operations.
SECTION 9.3. TAIL INSURANCE COVERAGE. Tail insurance coverage shall be
-----------------------
purchased in the following manner:
9.3.1. The Practice will cause each Physician Employee associated with the
Practice to enter into an agreement with the Practice that upon termination of
the physician's relationship with the Practice, for any reason, tail insurance
coverage will be purchased by the individual physician to the extent that it can
not be purchased by the Practice. The provisions may be contained in employment
agreements, restrictive covenant agreements or other agreements entered into by
the Practice and the Physician Employees, and the Practice hereby covenants with
MidSouth to enforce the provisions relating to the tail insurance coverage or to
provide the coverage, which will be a Practice Expense.
30
9.3.2. The Practice shall obtain continuing liability insurance under
either a tail policy or an acts policy with the same limits and deductibles as
the comprehensive professional liability insurance at the time of the
termination of this Agreement pursuant to Article 10, which will not be a
Practice Expense.
SECTION 9.4. ADDITIONAL INSURED. The Practice and MidSouth agree to use
------------------
their reasonable best efforts to have each other named as an additional insured
on the other's respective professional liability insurance programs, which will
be a Practice Expense.
SECTION 9.5. INDEMNIFICATION.
----------------
9.5.1. The Practice Indemnification.
----------------------------
(a) The Practice shall indemnify, hold harmless and defend MidSouth, its
officers, directors, Members and employees, from and against any and all
liability, loss, damage, claim, causes of action, and expenses (including
reasonable attorneys' fees), to the extent not covered by insurance in the name
of the Practice, caused or asserted to have been caused, directly or indirectly,
by or as a result of the performance of medical services or the performance of
any intentional acts, negligent acts or omissions by the Practice and/or its
Members, agents, employees and/or subcontractors (other than MidSouth or any
other party engaged by MidSouth) during the term hereof, or as a result of a
breach of the representations and warranties contained in Article 12 of this
Agreement or a breach of any covenant in Article 14 of this Agreement.
(b) The Practice shall not be liable to MidSouth for any claims under
Section 9.5.1(a) above until the claims exceed in the aggregate S25,000.00 that
would otherwise be subject to indemnification under said provisions, and then
only for the amount by which the claims exceed $25,000.00.
9.5.2. MidSouth Indemnification. MidSouth shall indemnify, hold harmless
------------------------
and defend the Practice, its officers, Members, directors and employees, from
and against any and all liability, loss, damage, claim, causes of action, and
expenses (including reasonable attorneys' fees), to the extent not covered by
insurance in the name of MidSouth, caused or asserted to have been caused,
directly or indirectly, by or as a result of the performance of any intentional
acts, negligent acts or omissions by MidSouth and/or its Members, agents,
employees and/or subcontractors (other than the Practice) during the term of
this Agreement or as a result of a breach of the representations and warranties
contained in Article 13 of this Agreement. In addition, MidSouth shall
indemnify, hold harmless and defend the Practice, its officers, Members,
directors and employees, from and against any and all liability, loss, damage,
claim, causes of action, and expenses (including reasonable attorneys' fees)
caused by any claim against the Practice relating to liabilities of the Practice
assumed by MidSouth as a result of the Exchange which were disclosed by the
Practice in the Exchange Agreement and for which the Practice does not have an
obligation to indemnify MidSouth as provided above.
9.5.3. Indemnification Payment Escrow. In the event that either party makes
------------------------------
a claim for indemnification under either the Exchange Agreement or this
Agreement (the "Indemnified Party"),
31
then the party who must provide indemnity (the "Indemnifying Party"), shall have
the right, to the extent it owes indemnifications, to pay amounts owed to the
Indemnified Party under the Exchange Agreement or 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) an agreed upon panel of arbitrators, has been made regarding the
Indemnified Party's right to indemnification. In the event that the Indemnified
Party is entitled to indemnification, then such escrowed funds shall be paid to
the Indemnified Party in partial or complete satisfaction of such
indemnification obligation. Any excess funds remaining in the escrow account
after the payment of the indemnification obligation or any funds held in escrow
account if it is determined that no indemnification obligation is owed shall be
paid to the Indemnifying Party.
ARTICLE 10. TERM AND TERMINATION.
--------------------
SECTION 10.1. TERM OF AGREEMENT. This Agreement shall commence on the date
-----------------
hereof and shall expire on August 31, 2022 unless earlier terminated pursuant to
the provisions hereof (the "Term").
SECTION 10.2. EXTENDED TERM. Unless earlier terminated as provided for in
-------------
this Agreement, the term of this Agreement shall be automatically extended for
an additional term of five (5) years and for a new term thereafter, unless
either party delivers to the other party, not less than one hundred eighty (180)
days prior to the expiration of the preceding term, written notice of the
party's intention not to extend the term of this Agreement.
SECTION 10.3. TERMINATION BY THE PRACTICE. The Practice may terminate this
---------------------------
Agreement as follows:
(a) In the event of the filing of a petition in voluntary bankruptcy or an
assignment for the benefit of creditors by MidSouth, or upon other action taken
or suffered, voluntarily or involuntarily, under any federal or state Applicable
Law for the benefit of creditors by MidSouth, except for the filing of a
petition in bankruptcy by or against MidSouth which is dismissed within ninety
(90) days thereafter, the Practice may give notice of the immediate termination
of this Agreement and the Practice and Physician Members will be released from
the restrictive covenants contained in Article 7;
(b) In the event MidSouth shall Default in the performance of any duty or
obligation imposed upon it by this Agreement and the Default continues for a
period of ninety (90) days after written notice thereof has been given to
MidSouth by the Practice (or in the event the Default cannot be cured within the
period and MidSouth is diligently pursuing a cure, the period shall be extended
so long as MidSouth diligently and in good faith continues to cure the Default
until completion), or if MidSouth shall fail to remit the payments due as
provided in this Agreement and the failure to remit continues for a period of
two (2) business days after written notice thereof, the Practice may terminate
this Agreement and the Practice and Physician Members will be released from the
restrictive covenants contained in Article 7.
32
(c) In the event that MidSouth has not successfully completed an initial
public offering of MidSouth common stock or MidSouth has not merged with a
publicly traded entity with an initial market price of stock having a total
market value of the Practice's equity interest received at the initial public
offering or merger valued at least equal to $2,325,000 within thirty-six (36)
months from the date of this Agreement, the Practice Members may, at that time,
terminate this Agreement and the Practice and Physician Members will be released
from the restrictive covenants contained in Article 7; and
(d) In the event that MidSouth has not added the equivalent of five (5)
full time pediatricians and made its best efforts to add the equivalent of an
additional ten (10) full time pediatricians for a total equivalent of fifteen
(15) full time pediatricians within twenty-four (24) months from the date of
this Agreement, the Practice may, at that time, terminate this Agreement and
Practice and Physician Members will be released from the restrictive covenants
contained in Article 7.
SECTION 10.4. TERMINATION BY MIDSOUTH. MidSouth may terminate this
-----------------------
Agreement as follows:
(a) In the event of the filing of a petition in voluntary bankruptcy or an
assignment for the benefit of creditors by the Practice, or upon other action
taken or suffered, voluntarily or involuntarily, under any Applicable Law for
the benefit of creditors by the Practice, except for the filing of a petition in
involuntary bankruptcy against the Practice which is dismissed within ninety
(90) days thereafter, MidSouth may give notice of the immediate termination of
this Agreement;
(b) In the event the Practice shall Materially Default in the performance
of any duty or obligation imposed upon it by this Agreement, and the Default
continues for a period of ninety (90) days after written notice thereof has been
given to the Practice by MidSouth (or in the event the Default cannot be cured
within the period, the period shall be extended so long as the Practice
diligently and in good faith continues to cure the Default until completion), or
the Practice fails to remit the payments due as provided in this Agreement and
the failure to remit continues for a period of thirty (30) days after written
notice thereof, MidSouth may terminate this Agreement; or
(c) In the event the Practice's Medicare or Medicaid provider number shall
be terminated or suspended as a result of the action or inaction of the Practice
or a Physician Employee, and such termination or suspension continues for thirty
(30) days after notice of the termination or suspension, MidSouth may give
notice of the immediate termination of this Agreement, unless the Practice, at
that time, is acting in good faith (and shall provide reasonable evidence of the
action being taken) to reverse such termination or suspension. Notwithstanding
any good faith effort on the part of the Practice to reverse such termination or
suspension, if such termination or suspension is not reversed within ninety (90)
days after notice of the termination or suspension of the Medicare or Medicaid
provider number by Medicare or Medicaid, MidSouth shall have the right to
terminate this Agreement immediately.
33
SECTION 10.5. ACTIONS AFTER TERMINATION. Upon termination of this
-------------------------
Agreement by either party, the Practice (and/or its Physician Members) shall:
(a) Purchase from MidSouth at book value all intangible assets set forth on
the Opening Balance Sheet, as adjusted through the last day of the month most
recently ended prior to the date of the termination or expiration to reflect
amortization or depreciation of the "service agreement costs" and intangibles in
accordance with GAAP if terminated by MidSouth or upon the expiration of this
Agreement. If the Agreement is terminated by Practice for MidSouth's breach of
the Agreement, all intangible assets shall be repurchased at the fair market
value;
(b) Purchase all improvements, additions or leasehold improvements to
Practice Facilities which have been made by MidSouth and which relate solely to
the performance of its obligations under this Agreement at book value;
(c) Assume all debt and all contracts, payables incurred as Practice
Expenses and leases which are obligations of MidSouth and which relate
principally to the performance of its obligations under this Agreement or the
properties subleased by MidSouth;
(d) Purchase from MidSouth at book value all of the equipment acquired in
the Exchange, including all replacements and additions thereto made by MidSouth
pursuant to the performance of its obligations under this Agreement, and all
other assets, including inventory, Purchased Accounts Receivable and supplies,
tangibles and intangibles, set forth on the Opening Balance Sheet as adjusted
through the last day of the month most recently ended prior to the date of the
termination or expiration in accordance with GAAP to reflect operations of the
Practice (including physician practice acquisitions), depreciation, amortization
and other adjustments of assets shown on the Opening Balance Sheet; and
(e) Prior to any initial public offering of MidSouth's Common Stock or
MidSouth's merger into publicly traded company, endorse in blank and deliver to
MidSouth all shares of common stock and all debt instruments, whether or not
convertible into common stock of MidSouth acquired by Physician Members or
Practice in the merger for a credit of five (5) dollars per share. Subsequent to
any initial public offering of MidSouth's Common Stock or MidSouth's merger into
a publicly traded company, Member Physicians or Practice shall have the option
of endorsing in blank and delivering the amount of publicly traded stock at the
value on the transaction date or in the alternative to pay cash equal to the
value of the publicly traded stock on the transaction date, except in the event
of a termination by the Practice pursuant to Section 10.3 in which case Practice
shall retain any stock received as part of the Exchange.
SECTION 10.6. CLOSING OF REPURCHASE BY THE PRACTICE AND EFFECTIVE DATE OF
-----------------------------------------------------------
TERMINATION. The Practice shall pay cash to repurchase the assets (the
-----------
"Repurchase Price"); provided, however, prior to an initial public offering of
the common stock of MidSouth, the Practice shall receive a credit against the
Repurchase Price of a sum equal to the price per share of the common stock of
MidSouth received by the Physician Members of the Practice in the Exchange times
the number of shares of common stock of MidSouth that the Physician Members
received in the Exchange.
34
Subsequent to an initial public offering, the Repurchase Price shall be all
cash. The amount of the Repurchase Price shall be reduced by the amount of debt
and liabilities of MidSouth assumed by the Practice and shall also be reduced by
any payment MidSouth has failed to make under this Agreement. The Practice and
any physician associated with the Practice shall execute all documents as may be
required to assume the liabilities set forth in Section 10.5, to remove MidSouth
from any liability with respect to the repurchased assets and with respect to
any property leased or subleased by MidSouth, and to carry out the transactions
contemplated herein. The closing date for the repurchase shall be determined by
the Practice, but shall in no event occur later than ninety (90) days from the
date of the notice of termination. The termination of this Agreement shall
become effective upon the closing of the sale of the assets. On the date of
termination, but only in the event that the termination of the Agreement was the
result of a breach by MidSouth, the Practice and the Members shall be released
from the restrictive covenants provided for in Article 7. MidSouth shall have
the right, in its sole and absolute discretion, to waive the repurchase
requirements of the Practice, in which event, the termination of this Agreement
shall become effective upon the execution and delivery of the waiver. From and
after any termination, each party shall provide the other party with reasonable
access to books and records then owned by it to permit the requesting party to
satisfy reporting and contractual obligations which may be required of it.
Except as otherwise provided herein, the restrictive covenants contained in
Article 7 shall survive the termination of this Agreement.
ARTICLE 11. INTELLECTUAL PROPERTY AND RECORDS.
---------------------------------
SECTION 11.1. PROPRIETARY INFORMATION. The Practice acknowledges that
-----------------------
MidSouth possess significant proprietary and confidential know-how, technology
and business information, including but not limited to, utilization protocols,
practice guidelines and proprietary management software and data ("Proprietary
Information"), which MidSouth has developed and will continue to develop on its
own, in its relationship with vendors, practitioner groups, integrated delivery
systems and other providers. The Practice and MidSouth acknowledge that one of
their mutual objectives is the development of Proprietary Information to be used
in connection with MidSouth's operations or which MidSouth intends to use or
license in its relationship with third parties, including other medical groups,
integrated delivery systems and other providers. In addition, the Practice
acknowledges that as of the Closing Date, by virtue of execution and delivery of
the Exchange Agreement, MidSouth will have acquired all of the Practice's
existing Proprietary Information, excluding patient medical records. Therefore,
the parties agree that MidSouth shall own all new Proprietary Information, as
well as existing Proprietary Information, excluding patient medical records,
regardless of whether the new Proprietary Information is developed by one or
more physicians in the Practice or Affiliates. The Practice agrees to execute
and deliver such documentation as may be requested by MidSouth from time to time
to evidence such ownership. During the term of this Agreement, MidSouth shall
license and provide access to all existing Proprietary Information to the
Practice.
SECTION 11.2. OWNERSHIP OF MIDSOUTH'S BUSINESS RECORDS AND SYSTEMS. All
----------------------------------------------------
business records, information, software and systems of MidSouth relating to the
provision of its services under this Agreement shall remain the property of
MidSouth and may be removed by MidSouth upon
35
any termination of this Agreement; provided, however, that the Practice 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 tax or other liabilities imposed on the Practice by any Governmental
Authority or other party.
SECTION 11.3. MAINTENANCE AND ACCESS 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
Management Team from the date of the last activity recorded in such records. In
particular, the parties agree, to the extent necessary to permit receipt of
reimbursement for services by the Practice, 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 the contracting party to comply with the requirements of the
previous sentence. During the term of this Agreement, and thereafter, the
Practice or its designee shall have reasonable access during normal business
hours to the Practice's and MidSouth's financial and accounting, including, but
not limited to, records of collections, expenses and disbursements as kept by
MidSouth in performing MidSouth's obligations under this Agreement, and the
Practice may copy any or all records at its expense. Nothing in this Section
11.3 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.
SECTION 11.4. PATIENT RECORDS. Upon termination of this Agreement, the
---------------
Practice shall retain all patient medical records maintained by the Practice or
MidSouth in the name of the Practice.
SECTION 11.5. ACCESS TO RECORDS. During the term of this Agreement, and
-----------------
thereafter, the Practice or its designee shall have reasonable access during
normal business hours to the Practice's and MidSouth's financial records,
including, but not limited to, records of collections, expenses and
disbursements as kept by MidSouth in performing MidSouth's obligations under
this Agreement, and the Practice may copy any or all records at its expense.
ARTICLE 12. REPRESENTATIONS AND WARRANTIES OF THE PRACTICE AND
--------------------------------------------------
PHYSICIAN MEMBERS.
-----------------
The Practice and the Physician Members, to the best of their knowledge,
severally and not jointly, with respect to himself for herself only, represent,
warrant, covenant and agree with MidSouth regarding subsections 12.1, 12.2,
12.4, 12.5 and 12.7 and Practice agrees with MidSouth regarding all other
subsections contained in Article 12 that:
SECTION 12.1. VALIDITY. The Practice is a Tennessee professional limited
--------
liability company and is duly qualified to do business as a foreign professional
limited liability company where such qualification is necessary or required. The
Practice has the full power and authority to own the
36
Practice property, to carry on the Practice business as presently being
conducted, to enter into this Agreement, and to consummate the transactions
contemplated hereby. Each Physician Member is an adult citizen and resident of
the State of Tennessee or Mississippi. Each Physician Member has the full power
and authority to own his or her property, carry on his or her business as
presently conducted, to enter into this Agreement, and to consummate the
transactions contemplated hereby.
SECTION 12.2. LITIGATION. Except as disclosed pursuant to the Exchange
----------
Agreement, there is no suit, action, proceeding at Applicable Law or in equity,
arbitration, administrative proceeding or other proceeding pending, or
threatened against, or affecting the Practice or any Physician Employee, or to
the best of the Practice's and each Physician Member's knowledge, any provider
or other health care professional associated with or employed by the Practice as
pertains to any claim involving the provision of health care related services,
and there is no basis for any of the foregoing.
SECTION 12.3. PERMITS. The Practice and all health care professionals
-------
associated with or employed by the Practice have all permits and licenses and
other Necessary Authorizations required by all Applicable Law, except where
failure to secure such licenses, permits and other Necessary Authorizations does
not have a Material Adverse Effect; have made all regulatory filings necessary
for the conduct of Practice's business; and are not in violation of any of said
permitting or licensing requirements.
SECTION 12.4. POWER AND AUTHORITY. The Practice has the full authority to
-------------------
execute and deliver this Agreement. The execution and delivery of this
Agreement, the performance by the Practice of its obligations hereunder, and the
transactions contemplated hereby, have been duly authorized and approved by all
necessary actions of the Practice and Members except for the necessary third-
party consents which will be obtained subsequent to the Closing Date. This
Agreement constitutes, and all agreements and other instruments and documents to
be executed and delivered by the Practice pursuant to this Agreement, will
constitute, legal, valid and binding obligations of the Practice, enforceable in
accordance with its terms and conditions except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditor's rights generally, and is subject to general principles of equity
(regardless of whether any enforceability is considered in a proceeding in
equity or at law).
SECTION 12.5. COMPLIANCE WITH APPLICABLE LAW. To the best of the Practice's
------------------------------
and each Physician Member's knowledge and belief, the Practice and each
Physician Employee has operated in compliance with all Applicable Law and
neither the Practice nor any provider associated with or employed by the
Practice has received payment or any remuneration whatsoever to induce or
encourage the referral of patients or the purchase of goods and/or services as
prohibited under 42 U.S.C. (S)1320a-7b(b) or 42 U.S.C. (S)1395nn, or otherwise
perpetrated any Medicare or Medicaid fraud or abuse, nor has any fraud or abuse
been alleged within the last five (5) years by any Governmental Authority, a
carrier or a Third Party Payor Program.
SECTION 12.6. HEALTH CARE COMPLIANCE. The Practice is presently
----------------------
participating in or otherwise authorized to receive reimbursement from or is a
party to Medicare, Medicaid, and other
37
Third Party Payor Programs. All necessary certifications and contracts required
for participation in such programs are in full force and effect and have not
been amended or otherwise modified, rescinded, revoked or assigned as of the
date hereof, and no condition exists or to the knowledge of the Practice no
event has occurred which in itself or with the giving of notice or the lapse of
time or both would result in the suspension, revocation, impairment, forfeiture
or non-renewal of any Third Party Payor Program. The Practice is in full
compliance with the Material requirements of all the Third Party Payor Programs
applicable thereto.
SECTION 12.7. FRAUD AND ABUSE. The Practice, the Practice Employees and
---------------
other persons and entities providing professional services for the Practice have
not, to the knowledge of the Practice and each Physician Member engaged in any
activities which are prohibited by or are in violation of the rules,
regulations, policies, Contracts or Applicable Law pertaining to any Third Party
Payor Program, or which are prohibited by rules of professional conduct
("Governmental Rules and Regulations"), 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 the Practice'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 of 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 of any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid.
SECTION 12.8. PRACTICE COMPLIANCE. The Practice has all licenses necessary
-------------------
to operate the Practice in accordance with the requirements of any Applicable
Law and has all Necessary Authorizations for the use and operation of the
Practice, all of which are in full force and effect. There are no outstanding
notices of deficiencies relating to the Practice issued by any Governmental
Authority or third party payor requiring conformity or compliance with any
Applicable Law or condition for participation of the Governmental Authority or
third party payor, and after reasonable and independent inquiry and due
diligence and investigation, the Practice has neither received notice nor has
any knowledge or reason to believe that the Necessary Authorizations may be
revoked or not renewed in the ordinary course.
SECTION 12.9. RATES AND REIMBURSEMENT POLICIES. The jurisdiction in which
--------------------------------
the Practice is located does not currently impose any restrictions or
limitations on rates which may be charged to private pay patients receiving
services provided by the Practice, except as restricted by the American Medical
Association Code of Ethics or state regulations. The Practice does not have any
rate appeal currently pending before any Governmental Authority or any
administrator of any Third Party Payor Program. The Practice has no knowledge of
any Applicable Law which has been
38
enacted, promulgated or issued within the eighteen (18) months preceding the
date of this Agreement or any legal requirement proposed or currently pending in
the jurisdiction in which the Practice is located which could have a Material
Adverse Effect on the Practice or may result in the imposition of additional
Medicaid, Medicare, charity, free care, welfare, or other discounted or
government assisted patients at the Practice or require the Practice to obtain
any necessary authorization which the Practice does not currently possess.
SECTION 12.10. ACCOUNTS RECEIVABLE. To the extent material and to the best
-------------------
of Practice's knowledge and information with respect to the Purchased Accounts
Receivable, as of the date of purchase:
12.10.1. All documents and agreements relating to the Purchased Accounts
Receivable that have been delivered to MidSouth with respect to the Purchased
Accounts Receivable are true and correct; the Practice has billed the applicable
Account Debtor and the Practice has delivered or caused to be delivered to the
Account Debtor all requested supporting claim documents and, if any error has
been made, the Practice will promptly correct the same and, if necessary, rebill
or, if requested by MidSouth, cooperate with MidSouth to rebill the Purchased
Accounts Receivable.
12.10.2. The Purchased Accounts Receivable are exclusively owned by the
Practice and there is no security interest or lien in favor or any third party,
or the recording or filing against the Practice, as debtor, covering or
purporting to cover any interest of any kind in any Purchased Accounts
Receivable, except as has been released by each party holding the adverse
interest in the Purchased Accounts Receivable. Upon payment of the Purchase
Price with respect to the Purchased Accounts Receivable and with respect to
Governmental Receivables, to the extent permissible by Applicable Law, all
right, title and interest of the Practice with respect thereto shall be vested
in MidSouth, free and clear of any lien, security interest, claim or encumbrance
of any kind, and the Practice agrees to defend the same against the claims of
all persons.
12.10.3. The Purchased Accounts Receivable (i) are payable, in an amount
not less than their face amount, as adjusted pursuant to the provisions of
Article 6, by the Account Debtor identified by the Practice as being obligated
to do so, (ii) are based on an actual and bona fide retention of services or
sale of goods to the patient by the Practice in the ordinary course of business,
(iii) are denominated and payable only in legal currency of the United States,
and (iv) are accounts or general intangibles within the meaning of the UCC of
the state in which the Practice has its principal place of business, or are
rights to payment under a policy of insurance or proceeds thereof, and are not
evidenced by any instrument or chattel paper. There are no payors other than the
Account Debtor identified by the Practice as the payor primarily liable on any
Purchased Accounts Receivable.
12.10.4. The Purchased Accounts Receivable are not (i) subject to any
action, suit, proceeding or dispute (pending or threatened), set-off,
counterclaim, defense, abatement, suspension, deferment, deductible, reduction
or termination by the Account Debtors other than routine adjustments and
disallowances made in the ordinary course of business, (ii) past or within sixty
(60) days of, the statutory limit for collection applicable to the Account
Debtor, (iii) subject to an invoice which provides for payment more than forty-
five (45) days from the date of such invoice, (iv) an
39
account which arises out of a sale or other transaction by and between the
Practice or an affiliate of Practice, (v) an account in which the Account
Debtor has commenced a voluntary case, or an involuntary proceeding has been
instituted, under the federal bankruptcy Applicable Law, as now constituted or
hereafter amended, or made an assignment for the benefit or creditors, or an
account in which a decree or order for relief has been entered by a court having
jurisdiction in the premises in respect to the Account Debtor, (vi) an account
in which the goods giving rise to the Purchased Accounts Receivable have not
been shipped and delivered to and accepted by the Account Debtor or the services
giving rise to the Purchased Accounts Receivable have not been performed by the
Practice and accepted by the Account Debtor or the Purchased Accounts
Receivables otherwise do not represent a final sale, (vii) is evidenced by an
instrument or chattel paper unless such instrument or chattel paper is
delivered to MidSouth with all appropriate endorsements in favor of MidSouth, or
(viii) other than a complete bona fide transaction which requires no further act
under any circumstances on the part of Practice to make the Purchased Accounts
Receivable payable by the Account Debtor.
12.10.5. The Practice does not have any guaranty of, letter of credit
providing credit support for, or collateral security for, the Purchased Accounts
Receivable, other than any such guaranty, letter of credit or collateral
security as has been assigned to MidSouth, and any such guaranty, letter of
credit or collateral security is not subject to any lien in favor of any other
person.
12.10.6. The goods or services provided and reflected by the Purchased
Accounts Receivable were medically necessary for the patient in the opinion of
the Practice and the patient received such goods or services.
12.10.7. The face amount of the Purchased Accounts Receivable for the
services constituting the basis for the Purchased Accounts Receivable are
consistent with the usual, customary and reasonable fees charged by other
similar medical service providers in the Practice's community for the same or
similar service.
12.10.8. Each Account Debtor with respect to the Purchased Accounts
Receivable purchased by MidSouth (i) is not currently the subject of any
bankruptcy, insolvency or receivership proceeding, nor is it generally unable to
make payments on its obligations when due, (ii) is located in the United States,
and (iii) is one of the following: (w) the individual, or party legally
responsible for the individual, who received the health care services; (x) a
party which in the ordinary course of its business or activities agrees to pay
for healthcare services received by individuals, including, without limitation,
Medicare, Medicaid, governmental bodies, commercial insurance companies and
non-profit insurance companies (such as Blue Cross and Blue Shield entities)
issuing health, personal injury, workers compensation or other types of
insurance; (y) employers or unions which self-insure for employee or member
health insurance, prepaid healthcare organizations, preferred provider
organizations, health maintenance organizations or any other similar person, or
(z) a third party payor of the type described in the definition of Governmental
Receivables.
12.10.9. The sale of the Purchased Accounts Receivable hereunder is made in
good faith and without actual intent to hinder, delay or defraud present or
future creditors of the Practice.
40
12.10.10. Except with respect to Governmental Receivables, the insurance
policy, Contract or other instrument obligating an Account Debtor to make
payment with respect to the Purchased Accounts Receivable (i) does not contain
any provision prohibiting the transfer of such payment obligation from the
patient to the Practice, or from the Practice to MidSouth, except as set out in
Schedule 12.10.10, (ii) has been duly authorized by the Practice and to the
knowledge of the Practice has been duly authorized by the Account Debtor and,
together, with the Purchased Accounts Receivable, constitutes the legal, valid
and binding obligation of the Account Debtor in accordance with its terms, (iii)
together with the applicable Purchased Accounts Receivable, does not contravene
in any Material respect any requirement of Applicable Law applicable thereto,
and (iv) was in full force and effect and applicable to the patient at the time
the services constituting the basis for the Purchased Account Receivable were
performed.
The Purchased Accounts Receivable are purchased without recourse, except
for the representations, warranties and covenants made by the Practice and the
Physician Members with respect thereto. None of the foregoing representations
and warranties with respect to the Purchased Accounts Receivable shall be deemed
to constitute a guaranty by the Practice that the Purchased Accounts Receivable
will be collected by MidSouth. The Practice shall not be responsible for any
damages for any breach of a representation or warranty under this Section 12
until MidSouth has suffered a loss on the purchase of Purchased Accounts
Receivable. Damages for such breach shall be limited to the amount of MidSouth's
loss on the purchase of the Purchased Accounts Receivable.
SECTION 12.11. LIMITATION OF LIABILITY OF MEMBERS. Notwithstanding any
----------------------------------
provision herein to the contrary, the maximum liability for damages of any
Member for the inaccuracy of any representation or warranty made by him or her
contained in this Agreement or in the Asset Exchange Agreement shall be limited
to the consideration received by the Member under the Asset Exchange Agreement.
It is the intent of this Section 12.11 that once MidSouth has recovered the
Purchase Price received by a Member from the Member (whether the basis for such
recovery is the inaccuracy of a representation in this Agreement, the inaccuracy
of a representation in the Exchange Agreement, or the breach of the Exchange
Agreement or any combination of the above), MidSouth will have no further rights
or remedies against the Member.
SECTION 12.12. EXHIBITS. All the facts recited in Exhibits annexed hereto
--------
shall be deemed to be representations of fact by the Practice as though recited
in this Article 12.
ARTICLE 13. REPRESENTATIONS AND WARRANTIES OF MIDSOUTH.
------------------------------------------
SECTION 13.1. ORGANIZATION. MidSouth is a corporation duly organized,
------------
validly existing and in good standing under the Applicable Law of the State of
Tennessee. MidSouth 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.
SECTION 13.2. AUTHORITY. MidSouth 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 does not, and the
41
consummation of the transactions contemplated hereby will not, violate any
provisions of the charter or bylaws of MidSouth 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 MidSouth is a party or by which it is bound.
SECTION 13.3. 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 MidSouth's knowledge, threatened with respect to the transactions
contemplated by this Agreement.
SECTION 13.4. TRANSACTIONS WITH AFFILIATES. MidSouth shall not enter into
----------------------------
any transaction or series of transactions, whether or not related to or in the
ordinary course of business, with any Affiliate of the Practice or MidSouth,
other than on terms and conditions substantially as favorable to MidSouth as
would be obtainable by MidSouth at the time in a comparable arm's-length
transaction with a person not an Affiliate.
ARTICLE 14. COVENANTS OF THE PRACTICE AND PHYSICIAN MEMBERS.
-----------------------------------------------
SECTION 14.1. EXCHANGE, CONSOLIDATION AND OTHER ARRANGEMENTS. The Practice
----------------------------------------------
shall not incorporate, merge or consolidate with any other entity or individual
or liquidate or dissolve or windup the Practice's affairs or enter into any
partnership, 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.
SECTION 14.2. NECESSARY AUTHORIZATIONS/ASSIGNMENT OF LICENSES AND PERMITS.
-----------------------------------------------------------
The Practice and each Physician Employee, and each Physician Extender Employee
shall maintain all licenses, permits, certifications, or other Necessary
Authorizations and shall not assign or transfer any interest in any license,
permit, certificate or other Necessary Authorization granted to it by any
Governmental Authority, nor shall the Practice or any Physician Employee assign,
transfer, or remove or permit any other individual or entity to assign, transfer
or remove any records of the Practice or any Physician Employee, including
without limitation, patient records, medical and clinical records (except for
removal of such patient records required under any Applicable Law).
SECTION 14.3. TRANSACTION WITH AFFILIATES. Neither the Practice nor any
---------------------------
Physician Member shall enter into any transaction or series of transactions,
whether or not related or in the ordinary course of business, with any Affiliate
of the Practice or MidSouth, other than on terms and conditions substantially as
favorable to the Practice or the Physician Member, as would be obtainable by the
Practice or the Physician Member at the time in a comparable arms-length
transaction with a person not an Affiliate.
SECTION 14.4. COMPLIANCE WITH ALL APPLICABLE LAW. The Practice and each
----------------------------------
Physician Member shall use their best efforts to comply with all Applicable Law
and regulations relating to the Practice's practice and the operation of any
facility, including, but not limited to, all Applicable Law
42
relating to the acquisition or operation of a health care practice. Furthermore,
neither the Practice nor any Physician Member shall intentionally violate any
Applicable Law.
SECTION 14.5. THIRD PARTY PAYOR PROGRAMS. The Practice shall maintain its
--------------------------
compliance with the requirements of all Third Party Payor Programs in which
Practice will be participating or authorized to participate.
SECTION 14.6. CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The
--------------------------------------------------
Practice shall not make any change in the character of Practice business or in
the credit and collection policy, which change would, in either case, impair the
collectability of any Purchased Accounts Receivable or any Accounts Receivable
received by MidSouth pursuant to the Exchange or otherwise modify, amend or
extend the terms of any such account other than in the ordinary course of
business.
SECTION 14.7. TREATMENT OF ACCOUNTS RECEIVABLE. The Practice will (i) treat
--------------------------------
transfers to MidSouth of Purchased Accounts Receivable hereunder as a sale for
all purposes, including tax and accounting (and shall accurately reflect such
sale in its financial statements), and will advise all persons who inquire about
the ownership of the Purchased Accounts Receivable that they have been sold to
MidSouth; (ii) not treat any Purchased Accounts Receivable as an asset on the
Practice's books and records; (iii) record in the Practice's books, records and
computer files pertaining thereto that the Purchased Accounts Receivable have
been sold to MidSouth; (iv) pay all taxes, if any, relating to the transfer of
the Purchased Accounts Receivable after the same have been purchased by
MidSouth; (v) not impede or interfere with MidSouth's collection of the
Purchased Accounts Receivable; (vii) not amend. waive or otherwise permit or
agree to any deviation from the terms or conditions of the Purchased Accounts
Receivable; (viii) use all reasonable efforts to obtain all consents from
patients which are required by Applicable Law in order for MidSouth, or any
servicing entity retained by MidSouth, to secure information needed to obtain or
to expedite payment from the respective Account Debtors; and (ix) have billed
the Purchased Accounts Receivable on the same bases and using the same policies
and practices that it has used in the past unless MidSouth has been advised in
writing of a change prior to the purchase of the Purchased Accounts Receivable.
MidSouth or its designated representatives from time to time may verify the
Purchased Accounts Receivable, inspect, check, take copies or extracts from the
Practice's books, records and files, and the Practice will make the same
available to MidSouth or such representatives at any reasonable time for such
purposes.
SECTION 14.8. SECURITY INTEREST. If, contrary to the mutual intent of the
-----------------
Practice and MidSouth, any purchase of Purchased Accounts Receivable is not
characterized as a sale, the Practice shall, effective as of the date hereof, be
deemed to have granted and the Practice does hereby grant to MidSouth a first
priority security interest in and to any and all of the Purchased Accounts
Receivable and the proceeds thereof to secure the repayment of all amounts
advanced to the Practice hereunder with accrued interest thereon, and this
Agreement shall be deemed to be a security agreement. With respect to such grant
of a security interest, MidSouth may at its option exercise from time to time
any and all rights and remedies available to it under the UCC or otherwise. The
Practice agrees that five (5) days shall be reasonable prior notice of the date
of any public or private sale or other disposition of all or part of the
Purchased Accounts Receivable. The Practice represents
43
and warrants that the location of the Practice's principal place of business,
and all locations where the Practice maintains records with respect to its
accounts are set forth under its name in Section 15.12 hereof. The Practice
agrees to notify MidSouth in writing thirty (30) days prior to any change in any
such location. The exact name of the Practice is as set forth at the beginning
of this Agreement, and except as set forth on the signature page hereof, the
Practice has not changed its name in the last five (5) years, and during such
period the Practice did not use, nor does the Practice now use, any fictitious
or trade name. The Practice shall notify MidSouth in writing thirty (30) days
prior to any change in any such name.
ARTICLE 15. MISCELLANEOUS.
-------------
SECTION 15.1. ASSIGNMENT. MidSouth shall have the right to assign without
----------
the consent of the Practice all of its rights hereunder to any person, firm or
corporation (i) under common control with MidSouth, (ii) to any lending
institution, for security purposes or as collateral, from which MidSouth obtains
financing, (iii) that is an affiliate of MidSouth, including, but not limited
to, a parent, subsidiary, or brother-sister corporation, or (iv) that merges,
reorganizes, or otherwise consolidates with MidSouth and further agrees that
upon receipt of notice from such assignee, the Practice shall pay to the
assignee or cause to be paid to the assignee all amounts due and payable to
MidSouth pursuant to this Agreement. Without limiting the foregoing, the
Practice acknowledges that, as collateral for certain obligations, MidSouth has
assigned all of its rights hereunder to a Lender as Agent (the "Agent") for
itself and other banks and institutional lenders from time to time (collectively
the "Banks") and has granted the Agent for the benefit of the Banks a lien and
security interest upon all real and personal property owned by MidSouth
("Pledged Assets"). As an inducement for the Banks to extend or continue the
extension of credit to MidSouth, the Practice (i) acknowledges that the
collateral assignment to the Agent covers all rights of MidSouth hereunder,
including, but not limited to, rights arising from warranties and
representations made by the Practice, rights to enforce covenants made by the
Practice, and rights to receive all payments due MidSouth; (ii) agrees to regard
the Agent as the owner of any and all of the assigned rights upon written notice
to the Practice of this election from the Agent; (iii) agrees that neither the
Agent nor any of the Banks has obligation for the performance of the duties of
MidSouth 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 MidSouth's part at the address provided by the
Agent in writing to Practice, and to allow cure periods as provided in Section
10.3 thereafter for the cure of Default before the Practice terminates this
Agreement; (v) agrees that the rights of the Practice under this Agreement,
including, but not limited to, the right to the use of the Pledged Assets, are
and shall be junior to any security interest that the Agent and the Banks, their
successors or assigns may have in the Pledged Assets 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 the Practice under this Section 15.1 shall be
given to the Agent at the foregoing address unless the Practice has received
written notice of a change thereof; and (vii) agrees that this Section 15.1 may
not be modified, and no provision of this Section 15.1 may be waived, absent the
written approval of the Agent and Banks. Further, if a majority of the Members
of MidSouth entitled to vote on a sale of all of the assets or substantially all
of the assets or common stock of MidSouth authorize the sale or transfer of all
or substantially all of the assets or common
44
stock of MidSouth to a third party (the "Acquiring Party"), this Agreement shall
be deemed automatically assigned and transferred to the Acquiring Party without
the necessity of obtaining the consent of the Practice. Except as set forth
above, neither MidSouth nor the Practice shall have the right to assign their
respective rights and obligations hereunder without the written consent of the
other party.
SECTION 15.2. THIS AGREEMENT. This Agreement sets forth the entire
--------------
agreement of the parties with respect to the subject matter hereof and it
supersedes and discharges all prior agreements (written or oral) and
negotiations and all contemporaneous oral agreements concerning the subject
matter. There are no oral conditions precedent to the effectiveness of this
Agreement.
SECTION 15.3. NO PRACTICE OF MEDICINE. The parties acknowledge that
-----------------------
MidSouth 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 MidSouth 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 MidSouth shall be deemed
waived and unenforceable to the minimum extent required to comply with
Applicable Law.
SECTION 15.4. NON-WAIVER. Neither the failure of nor any delay by any party
----------
to this Agreement to enforce any right hereunder or to demand compliance with
its terms is a waiver of any right hereunder. No action or inaction taken
pursuant to this Agreement on one or more occasions is a waiver of any right
hereunder or constitutes a course of dealing that modifies this Agreement.
SECTION 15.5. WAIVERS. No waiver of any right or remedy under this
-------
Agreement shall be binding on any party unless it is in writing and is signed by
the party to be charged. No waiver of any right or remedy under any term of this
Agreement shall in any event be deemed to apply to any subsequent Default under
the same of any other term contained herein.
SECTION 15.6. AMENDMENTS. No amendment,modification or termination of this
----------
Agreement shall be binding on any party hereto unless it is in writing and is
signed by the party to be charged.
SECTION 15.7. SEVERABILITY. The terms of this Agreement are severable and
------------
the invalidity of all or any part of any term of this Agreement shall not render
invalid the remainder of this Agreement or the remainder of the term. If any
term of this Agreement is so broad as to be unenforceable, the term shall be
interpreted to be only so broad as is enforceable.
SECTION 15.8. SUCCESSORS. The terms of this Agreement shall be binding upon
----------
and inure to the benefit of the parties, their respective successors, assigns,
heirs and beneficiaries.
SECTION 15.9. THIRD PARTIES. Nothing herein expressed or implied is
-------------
intended or shall be construed to give any person other than the parties hereto
any rights or remedies under this Agreement.
45
SECTION 15.10. SATURDAYS, SUNDAYS AND HOLIDAYS. Where this Agreement
-------------------------------
authorizes or requires a payment or performance on a Saturday, Sunday or public
holiday, the payment or performance shall be deemed to be timely if made on the
next succeeding business day.
SECTION 15.11. JOINT PREPARATION. This Agreement shall be deemed to have
-----------------
been prepared jointly by the parties hereto. Any ambiguity herein shall not be
interpreted against any party hereto and shall be interpreted as if each of the
parties hereto had prepared this Agreement.
SECTION 15.12. CAPTIONS. The captions and section numbers appearing in this
--------
Agreement are inserted only as a matter of convenience. They do not define,
limit or describe the scope or intent of the provisions of this Agreement.
SECTION 15.13. NOTICES. All notices required or permitted by this Agreement
-------
shall be in writing and shall be deemed to have been given (a) when received if
given in person, (b) on the date of acknowledgment of receipt if sent by telex,
facsimile or other wire transmission, (c) one business day after being sent by
overnight delivery service, or (d) three (3) days after being deposited in the
United States mail, certified or registered mail, postage prepaid, addressed as
follows:
To MidSouth Practice Management, Inc.: 000 Xxxxx Xxxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxxxxxx
With a copy to: Black Bobango & Xxxxxx
A Professional Corporation
000 Xxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
To Practice or Members: Memphis Children's Clinic, PLLC
0000 Xxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
With a copy to: Xxx Xxxxxxx, Xx.
Armstrong, Allen, Prewitt,
Gentry, Xxxxxxxx & Xxxxxx
00 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
or to such other address as either party shall notify the other.
SECTION 15.14. COUNTERPARTS. This Agreement may be executed in any number
------------
of counterparts, all of which shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing one or more counterparts.
46
SECTION 15.15. FURTHER ASSURANCE. Each of the parties hereto agrees to
-----------------
execute any document or documents that may be requested from time to time by the
other party to implement or complete the party's obligations pursuant to this
Agreement.
SECTION 15.16. ATTORNEYS' FEES. If legal action is commenced by either
---------------
party to enforce or defend its rights under this Agreement, the prevailing party
in the action shall be entitled to recover its costs and reasonable attorneys'
fees in addition to any other relief granted.
SECTION 15.17. TIME IS OF THE ESSENCE. Time is hereby expressly declared to
----------------------
be of the essence in this Agreement.
SECTION 15.18. CONFIDENTIALITY. Except for disclosure to its bankers,
---------------
underwriters or lenders, or as necessary or desirable for conduct of business,
including negotiations with other acquisition candidates, neither party hereto
shall disseminate or release to any third party any information regarding any
provision of this Agreement, or any financial information (past, present or
future) regarding the other that was obtained by the other in the course of the
negotiation of this Agreement or in the course of the performance of this
Agreement, without the other party's written approval; 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, or (iii) which is required to be disclosed by
Applicable Law, including securities Applicable Law or pursuant to court order.
SECTION 15.19. CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS AND COST
------------------------------------------------------------
REDUCTIONS. In the event Applicable Law, now existing or enacted or promulgated
----------
after the effective date of this Agreement, are interpreted by judicial
decision, a regulatory agency or legal counsel in a manner so as to indicate
that the structure of this Agreement may be in violation of Applicable Law or
regulations, the Practice and MidSouth shall amend this Agreement as necessary.
To the maximum extent possible, any amendment shall preserve the underlying
economic and financial arrangements between the Practice and MidSouth. In
addition, the parties agree that in the event an opportunity is presented to
reduce the tax costs of either party, the parties will present the matter to the
Management Team, and the parties will cooperate with each other to reduce the
costs to the other party, including considering and negotiating in good faith
amendments to this Agreement.
SECTION 15.20. REMEDIES CUMULATIVE. 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.
SECTION 15.21. CONSTRUCTION. The parties acknowledge that each party and
------------
its counsel have reviewed, negotiated and revised this Agreement and that the
normal rule of construction to the
47
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
SECTION 15.22. NO OBLIGATION TO THIRD PARTIES. None of the obligations and
------------------------------
duties of MidSouth or the Practice under this Agreement shall in any way or in
any manner be deemed to create any obligation of MidSouth or of the Practice to,
or any rights in, any person or entity not a party to this Agreement, except as
related to assignments pursuant to Section 15.1.
SECTION 15.23. COMPLIANCE WITH FEDERAL APPLICABLE LAW. Notwithstanding
--------------------------------------
anything herein to the contrary, any clinical laboratory or other service shall
be operated in full compliance with Section 6204 of the Omnibus Budget
Reconciliation Act of 1989, as amended.
SECTION 15.24. PATIENT REFERRALS. The parties agree that the benefits to
-----------------
the Practice 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 MidSouth to any of the Practice's
patients in any facility or laboratory controlled, managed or operated by
MidSouth.
SECTION 15.25. INDEPENDENT CONTRACTORS. It is the intention of the parties
-----------------------
that each shall be independent contractors, and this Agreement shall not
constitute the formation of a partnership, joint venture, an employment or
master-servant relationship.
SECTION 15.26. FORCE MAJEURE. Neither party shall be liable to the other
-------------
for failure to perform hereunder in the event of strikes, lock-outs, calamities,
acts of God, unavailability of supplies or other events over which the party has
no control for so long as the events continue, and for a reasonable period of
time thereafter.
SECTION 15.27. COMMUNICATIONS. The Practice and MidSouth 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 the Practice.
SECTION 15.28. GOVERNING APPLICABLE LAW. The validity, interpretation and
------------------------
performance of this Agreement shall be governed by and construed in accordance
with the Applicable Law of the State of Tennessee. Each of the parties submits
to the jurisdiction of any state or federal court sitting in Memphis,
Tennessee, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect to the action or proceeding may
be heard and determined in any such court. Each party 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.
[REMAINDER OF THE PAGE IS INTENTIONALLY LEFT BLANK]
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
MIDSOUTH PRACTICE MANAGEMENT, INC.
a Tennessee corporation
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxx
-------------------------------
Title: President
------------------------------
Address: 000 Xxxxx Xxxx Xxxx.
----------------------------
Suite 111
----------------------------
Xxxxxxx, XX 00000
----------------------------
MEMPHIS CHILDREN'S CLINIC, PLLC
a Tennessee member managed professional
limited liability company
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxxx
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxx Xx.
----------------------------
Xxxxxxx, XX 00000
----------------------------
By: /s/ Xxx Xxxxxx
--------------------------------
Name: Xxx Xxxxxx
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxx Xx.
----------------------------
Xxxxxxx, XX 00000
----------------------------
49
By: /s/ Xxxxx Xxxxxx, M.D.
--------------------------------
Name: Xxxxx Xxxxxx, M.D.
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxxxx, Xxxxx 000
----------------------------
Xxxxxxxxxx, XX 00000
----------------------------
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxxx
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxx Xx.
----------------------------
Xxxxxxx, XX 00000
----------------------------
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxxx Xxxxxx Xxxx
----------------------------
Xxxxxxx, XX 00000
----------------------------
By: /s/ Xxxxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxxxx X. Xxxxxx
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxxx Xxxxxx Xxxx
----------------------------
Xxxxxxx, XX 00000
----------------------------
By: /s/ Xxxxxxx X. Xxxxxx, M.D.
--------------------------------
Name: Xxxxxxx X. Xxxxxx, M.D.
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxxx Xxxxxx Xxxx
----------------------------
Xxxxxxx, XX 00000
----------------------------
50
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxxxxxxxx Xxxx
----------------------------
Xxxxxxx, XX 00000
----------------------------
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxxx Xxxxxx Xxxx
----------------------------
Xxxxxxx, XX 00000
----------------------------
By: /s/ Xxxxx X. Xxxxxxxx, III, M.D.
--------------------------------
Name: Xxxxx X. Xxxxxxxx, III, M.D.
-------------------------------
Title: Member
------------------------------
Address: 0000 Xxxx Xx.
----------------------------
Xxxxxxx, XX 00000
----------------------------
51
JOINDER AGREEMENT
The following Physician Members hereby agree to be bound to the Management
Services Agreement by and between MidSouth Practice Management, Inc. and Memphis
Children's Clinic, PLLC dated as of September 17, 1997 solely for the purposes
of being bound by Articles I, Section 6.3, Article 7, and Section 10.5 of the
Agreement and to receive the benefits and rights afforded them under the
Management Services Agreement.
Physician Members:
/s/ Xxxxxxxxx X. Xxxxxx, M.D.
-----------------------------------
Xxxxxxxxx X. Xxxxxx, M.D.
/s/ Xxxxxxx X. Xxxxxx, M.D.
-----------------------------------
Xxxxxxx X. Xxxxxx, M.D.
/s/ Xxxxxxx X. Xxxxxx, M.D.
-----------------------------------
Xxxxxxx X. Xxxxxx, M.D.
/s/ Xxxxxxx X. Xxxxxxxxx, M.D.
-----------------------------------
Xxxxxxx X. Xxxxxxxxx, M.D.
/s/ Xxxxxxx Montaghian, M.D.
-----------------------------------
Xxxxxxx Montaghian, M.D.
/s/ Xxxxx X. Xxxxxxxx, III, M.D.
-----------------------------------
Xxxxx X. Xxxxxxxx, III, M.D.
/s/ Xxxxxxx X. Xxxxxxxxx, M.D.
-----------------------------------
Xxxxxxx X. Xxxxxxxxx, M.D.
/s/ Xxxxxxx Xxx Xxxxxx, M.D.
-----------------------------------
Xxxxxxx Xxx Xxxxxx, M.D.
/s/ Xxxxxx X. Xxxxxxx, M.D.
-----------------------------------
Xxxxxx X. Xxxxxxx, M.D.
/s/ Xxxxx Xxxxxx, M.D.
-----------------------------------
Xxxxx Xxxxxx, M.D.
52
SCHEDULE 1
LIST OF PHYSICIAN MEMBERS
MEMPHIS CHILDREN'S CLINIC, PLLC
1. Xxxxxxxxx X. Xxxxxx, M.D.
2. Xxxxxxx X. Xxxxxx, M.D.
3. Xxxxxxx X. Xxxxxx, M.D.
4. Xxxxxxx X. Xxxxxxxxx, M.D.
5. Xxxxxxx Xxxxxxxxx, M.D.
6. Xxxxx X. Xxxxxxxx, III, M.D.
7. Xxxxxxx X. Xxxxxxxxx, M.D.
8. Xxxxxxx Xxx Xxxxxx, M.D.
9. Xxxxxx X. Xxxxxxx, M.D.
10. Xxxxx Xxxxxx, M.D.
53
SCHEDULE 1.1.14
EXCLUDED EXPENSES
"Excluded Expenses" shall be the sole obligation of the Practice and shall
mean:
(1) Salaries, advances or other distributions made to Physician Employees
or Physician Extender Employees;
(2) Expenses of Physician Employees and Physician Extender Employees to
meet continuing education requirements, including related travel expenses; and
(3) Any indemnification obligation of the Practice.
(4) Any other items specifically designated as Excluded Expenses elsewhere
in this Agreement including but not limited to the following items:
(a) Accounting, legal and other professional fees attributed to the
Practice or to Physician Employees; provided, however, legal and accounting
expenses incurred in the ordinary course of Practice's business and approved by
the Management Team will be the Practice Expenses.
(b) Contribution expenses, cash or non-cash, which include, but are
not limited to costs of sponsoring sports teams, political contributions,
unapproved marketing expenses, and contributions to hospitals and staff.
(c) Automobile expenses including payments, repairs and maintenance,
mileage, depreciation, etc.
(d) Entertainment expenses of any kind.
(e) Benefits including health insurance, life insurance, (except to
the extent allowed under subparagraph h of the definition of Practice Expenses,
etc.) vacation time, sick time, paid leave of absence, contributions to and
administration of physician retirement plans (pension, 401(k), XXX, others),
etc. for Physician Members, Physician Employees and Physician Extender
Employees. Benefits shall not include malpractice insurance.
(f) Employment tax expenses including Federal and State Unemployment
taxes, FICA taxes, Medicare taxes, etc. for Physician Members, Physician
Employees and Physician Extender Employees.
(g) Home office expenses including the acquisition costs,
depreciation, repairs and maintenance, and ongoing operating expenses of:
computers, software, copying machines, fax machines, telephones and telephone
lines, cellular telephones, etc.; and the costs of having an office in one's
home including allocated rent, utility and depreciation expenses.
54
(h) Meal expenses.
(i) Medical supplies and drugs either used or distributed by a
Physician Employee without billing for such supplies and drugs at standard
rates.
(j) Presentation expenses of any kind including, professional
services, slide production, travel, meals, entertainment, etc.
(k) Personal postage expenses.
(l) Personal laundry expenses.
(m) Personal assistant expenses (including the time staff spends on
personal errands for Physician Employees).
(n) Uninsured damages or claims paid or expenses related thereto from
any Applicable Lawsuit or claim against the Practice, or any Physician Member,
or Physician Employee, including but not limited to malpractice claims or
litigation.
(5) Any expenses or responsibilities of the Practice which are not
expressly designated herein as Practice Expenses.
55
SCHEDULE 1.1.42
PHYSICIAN EXTENDER EMPLOYEES
The Practice does not have any employees who meet the requirements of this
definition.
56
SCHEDULE 1.1.47
PRACTICE EXPENSES
"Practice Expenses" shall include:
(a) Salaries, benefits, (including contributions under any MidSouth
employee benefits plan, severance benefits as set by the Management Team and
other direct costs of all employees of MidSouth necessary to carry out the
duties of MidSouth hereunder or otherwise directly attributable to the
performance of management services to the Practice, and the amount shall
specifically include any severance obligations due to employees whose employment
terminates on or after the Closing Date under the Exchange.
(b) Direct costs of all outside consultants retained by MidSouth with the
advance approval of the Management Team to provide services at or in connection
with the Practice.
(c) Obligations of MidSouth or the Practice under leases or subleases for
the Practice Facilities and any personal property used by the Practice.
(d) The expenses and charges incurred for the Practice Facilities,
including without limitation, utilities, telephone charges, etc.
(e) Personal property and intangible taxes assessed against MidSouth's
assets utilized by the Practice from and after the date of the Agreement.
(f) The costs of any goods purchased for resale by or on behalf of the
Practice.
(g) Interest expense or prepayment premiums on indebtedness incurred by
MidSouth to finance or refinance any of its obligations hereunder or services
provided (interest expense will be charged for funds borrowed from outside
sources).
(h) Insurance expenses to the extent provided in Section 3.1(m) and
Article 9.
(i) Other expenses incurred by MidSouth in carrying out its obligations
under this Agreement or incurred by the Practice which are budgeted as Practice
Expenses.
(j) Except as excluded in part (4) of Schedule 1.1.14, the depreciation
expense or amortization expense associated with the assets of MidSouth, whether
acquired as a result of the Exchange or otherwise, and the write-off of any
asset or any portion thereof on the balance sheet of MidSouth.
57
SCHEDULE 1.1.48
PRACTICE FACILITIES
Facility No. 1: Medical Office Building B
Methodist Hospital Germantown
0000 Xxxxxx Xxxxxx
Xxxxxx #000 xxx #000
Xxxxxxxxxx, Xxxxxxxxx 00000
Facility No. 2: Memphis Children's Xxxxxx Xxxxxx Xxxxxxxx
0000 Xxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Facility No. 3: Memphis Children's Clinic Office Building
0000 Xxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Facility No. 4: Memphis Children's Xxxxxx Xxxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
58
SCHEDULE 4.1
PHYSICIAN EMPLOYEES
1. Xxxxxx X. Xxxx, Xx., M.D.
2. Xxxxxx X. Xxxxx, M.D.
3. Xxxxx X. Xxxxx, M.D.
4. Xxxxxxx X Xxxxx, M.D.
5. Xxxxxxxx X. Xxxxxxxxx, M.D.
6. Xxxxx X. Xxxxx, M.D.
7. Xxxxxx X. Xxxxxxx, M.D.
59
SCHEDULE 8.1
MANAGEMENT TEAM POLICIES AND PROCEDURES
8.1.1. Number, Tenure and Qualification. The Management Team shall consist
--------------------------------
of four (4) members. MidSouth shall designate, in its sole discretion, two (2)
members of the Management Team. The Practice shall designate, in the Practice's
sole discretion, two (2) members of the Management Team. One of MidSouth's
designees shall be the Management Team Chief Executive; provided, however, that
MidSouth may replace the Management Team Chief Executive, in its sole
discretion, as one of its Management Team designees if MidSouth institutes
disciplinary measures against the Management Team Chief Executive arising out of
his employment by MidSouth. The initial Management Team shall be chosen at the
time of the closing of the Exchange. Thereafter, the respective Management Team
members shall be chosen at such time and in such manner as shall be determined
by the respective party making the appointment.
8.1.2. Duties and Responsibilities of the Management Team. The Management
--------------------------------------------------
Team shall have the duties and responsibilities more particularly described in
Article 8 of this Agreement.
8.1.3. Regular Meetings of the Management Team. Regular meetings of the
---------------------------------------
Management Team shall be held on the first Monday of each calendar quarter at
such times and places as the Management Team by resolution may determine and
specify, and if so determined no notice thereof need be given.
8.1.4. Special Meetings. Special meetings of the Management Team may be
----------------
held at any time or place whenever called by written request of at least two (2)
Management Team members, notice thereof being given to each Management Team
member by the Management Team members calling the meeting, or they may be held
at any time without formal notice provided all of the Management Team members
are present or those not present shall at any time waive or have waived notice
thereof.
8.1.5. Notice. Notice of any special meeting shall be given at least ten
------
(10) days previously thereto by written notice delivered in accordance with the
provisions of 15.13 of the Agreement.
8.1.6. Meetings by any Form of Communication. The Management Team shall
-------------------------------------
have the power to permit any and all Management Team members to participate in a
regular or special meeting by, or conduct the meeting through the use of any
means of communication which all Management Team members participating may
simultaneously hear each other during the meeting. A Management Team member
participating in a meeting by this means is deemed to be present in person at
the meeting.
8.1.7. Quorum. All of the members of the Management Team as constituted
------
from time to time shall constitute a quorum for the transaction of business, but
a lesser number may adjourn any meeting and the meeting may be held as adjourned
without further notice. When a quorum is present at any meeting, a majority of
the members present thereat shall decide any question brought before such
meeting, except as otherwise provided by this Agreement or by these policies and
procedures. The fact that a Management Team member has an interest in a matter
to be voted on at the meeting shall not prevent his vote from being counted for
purposes of a quorum.
60
8.1.8. Vacancies. Any vacancy occurring in the Management Team shall be
---------
filled by the party which chose the vacated Management Team member(s).
8.1.9. Removal. Any Management Team member may be removed without cause by
-------
the party which chose the Management Team member.
8.1.10. Committees. The majority of the Management Team may appoint an
----------
executive committee or such other committees as it may deem advisable, composed
of one (1) or more Management Team members, and may delegate authority to such
committees as is not inconsistent with this Agreement. The members of such
committee shall serve at the pleasure of the Management Team.
8.1.11. Presumption of Assent. A Management Team member who is present at a
---------------------
meeting of the Management Team at which action on any matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretaries of the MidSouth and the Practice immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
Management Team who voted in favor of such action.
8.1.12. Informal Action by Management Team Members. Any action required to
------------------------------------------
be taken at a meeting of the Management Team, or any other action which may be
taken at a meeting of the Management Team, may be taken without a meeting if all
Management Team members consent to taking such action without a meeting. If all
Management Team members consent to taking such action without a meeting, the
affirmative vote of a majority of the Management Team members is the act of the
Management Team. The action must be evidenced by one or more written consents
describing the action taken, signed by each Management Team member, indicating
each signing Management Team member's vote or abstention on the action, and
shall be included in the minutes or filed with the Management Team records
reflecting the action taken.
61
