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EXHIBIT 10.36
MANAGEMENT SERVICES AGREEMENT
by and among
New Otolaryngology Medical and Surgical Associates, Ltd.
PSC Management Corp.
and
Physicians' Specialty Corp.
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TABLE OF CONTENTS
SECTION 1. KEY DEFINITIONS...............................................................................1
1.1 GAAP..............................................................................................1
1.2 NET PRACTICE REVENUES.............................................................................2
1.3 PHYSICIAN EXPENSES................................................................................2
1.4 PHYSICIAN SHAREHOLDERS............................................................................2
1.5 PRACTICE EMPLOYEES................................................................................2
1.6 PRACTICE EXPENSES.................................................................................2
SECTION 2. ADVISORY BOARD................................................................................4
2.1 FORMATION AND OPERATION OF THE ADVISORY BOARD.....................................................4
2.2 FUNCTIONS OF THE ADVISORY BOARD...................................................................4
SECTION 3. OBLIGATIONS OF MANAGER........................................................................6
3.1 PROVISION OF SERVICES.............................................................................6
3.2 MEDICAL OFFICES...................................................................................6
3.3 FURNITURE, FIXTURES AND EQUIPMENT.................................................................6
3.4 FINANCIAL PLANNING AND GOALS......................................................................6
3.5 BUSINESS OFFICE SERVICES..........................................................................7
3.6 DEPOSIT OF NET PRACTICE REVENUES..................................................................8
3.7 REVENUE REPORTS...................................................................................8
3.8 SUPPORT SERVICES..................................................................................9
3.9 ADMINISTRATOR.....................................................................................9
3.10 PERSONNEL........................................................................................9
3.11 PROFESSIONAL SERVICES...........................................................................10
3.12 PATIENT AND FINANCIAL RECORDS...................................................................10
3.13 N/A.............................................................................................10
3.14 PHYSICIAN RECRUITMENT...........................................................................11
3.15 EXPANSION OF PRACTICE...........................................................................11
3.16 PERFORMANCE OF BUSINESS OFFICE SERVICES.........................................................11
3.17 FORCE MAJEURE...................................................................................11
3.18 PAYMENT OF PRACTICE EXPENSES AND MANAGEMENT FEE.................................................11
3.19 BUDGETS.........................................................................................12
3.20 STRATEGIC FOCUS OF MANAGER......................................................................13
SECTION 4. OBLIGATIONS OF PRACTICE......................................................................13
4.1 PHYSICIAN EXPENSES...............................................................................13
4.2 PROFESSIONAL STANDARDS...........................................................................13
4.3 PROVIDER AND PAYOR RELATIONSHIPS.................................................................15
4.4 PHYSICIAN CONTRACTS AND POWERS OF ATTORNEY.......................................................15
4.5 RESTRICTIVE COVENANTS............................................................................16
4.6 PROFESSIONAL DUES AND EDUCATION EXPENSES.........................................................18
4.7 PROVISION OF SERVICES BY PRACTICE................................................................18
4.8 PHYSICIAN SHAREHOLDER AGREEMENT.................................................................18
SECTION 5. FINANCING MATTERS............................................................................19
5.1 MECHANICS OF DRAWS...............................................................................19
5.2 ASSIGNMENT OF SECURITY INTEREST..................................................................19
SECTION 6. TERM AND TERMINATION.........................................................................21
6.1 TERM.............................................................................................21
6.2 TERMINATION......................................................................................21
6.3 REMEDIES UPON TERMINATION........................................................................22
6.4 REPURCHASE OF EQUIPMENT AND SUPPLIES.............................................................23
SECTION 7. REPRESENTATIONS AND WARRANTIES...............................................................23
7.1 REPRESENTATIONS AND WARRANTIES OF PRACTICE.......................................................23
7.2 REPRESENTATIONS AND WARRANTIES OF MANAGER........................................................24
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SECTION 8. INSURANCE AND INDEMNITY......................................................................24
8.1 INSURANCE TO BE MAINTAINED BY PRACTICE...........................................................25
8.2 INDEMNIFICATION BY MANAGER.......................................................................25
8.3 INDEMNIFICATION BY PRACTICE......................................................................25
8.4 INDEMNIFICATION PROCEDURE........................................................................25
8.5 KEY MAN INSURANCE................................................................................26
SECTION 9. ASSIGNMENT...................................................................................26
SECTION 10. COMPLIANCE WITH REGULATIONS.................................................................27
10.1 PRACTICE OF MEDICINE............................................................................27
10.2 SUBCONTRACTS....................................................................................27
SECTION 11. INDEPENDENT RELATIONSHIP....................................................................27
11.1 INDEPENDENT CONTRACTOR STATUS...................................................................27
11.2 REFERRAL ARRANGEMENTS...........................................................................28
SECTION 12. GUARANTEES..................................................................................28
SECTION 13. NAME; LICENSE...............................................................................29
SECTION 14. MISCELLANEOUS...............................................................................29
14.1 NOTICES.........................................................................................30
14.2 ADDITIONAL ACTS.................................................................................31
14.3 GOVERNING LAW...................................................................................31
14.4 CAPTIONS, ETC...................................................................................31
14.5 SEVERABILITY....................................................................................31
14.6 CHANGES IN REIMBURSEMENT........................................................................31
14.7 MODIFICATIONS...................................................................................31
14.8 NO RULE OF CONSTRUCTION.........................................................................32
14.9 COUNTERPARTS....................................................................................32
14.10 BINDING EFFECT.................................................................................32
14.11 ENFORCEMENT RIGHTS.............................................................................32
14.12 COSTS OF ENFORCEMENT...........................................................................32
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MANAGEMENT SERVICES AGREEMENT
MANAGEMENT SERVICES AGREEMENT, effective as of September 22, 1997 (the
"Effective Date"), by and among NEW OTOLARYNCOLOGY MEDICAL AND SURGICAL
ASSOCIATES, LTD., an Illinois medical corporation (the "Practice"); PSC
MANAGEMENT CORP., a Delaware corporation ("Manager"); and PHYSICIANS' SPECIALTY
CORP., a Delaware corporation ("Parent").
WITNESSETH:
WHEREAS, Manager is a wholly-owned subsidiary of Parent and is in the
business of managing medical practices and providing management services to
individual physicians and physician practice groups;
WHEREAS, subject to the terms and conditions of this Agreement,
Practice desires to engage Manager to provide to Practice management services,
facilities, personnel, equipment and supplies necessary for the medical practice
conducted by Practice, and Manager desires to accept such engagement;
WHEREAS, Parent joins in this Agreement to guarantee the performance by
Manager of its obligations hereunder.
NOW THEREFORE, in consideration of the premises and the covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged by the
parties to this Agreement, Practice, Manager and Parent (collectively, the
"Parties") hereby agree as follows:
SECTION 1. KEY DEFINITIONS.
For purposes of this Agreement, the following are certain important
defined terms used in this Agreement (a complete list of defined terms is set
forth on Appendix A.
1.1 GAAP. The term "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, in
statements and pronouncements of the Financial Accounting Standards Board, in
such other statements by such other entity, or other practices and procedures as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination. For purposes of
this Agreement, GAAP shall be applied in a manner consistent with the practices
used by Parent and Manager.
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1.2 NET PRACTICE REVENUES. The term "Net Practice Revenues" shall
mean all revenues, computed on an accrual basis as defined by GAAP, (after
taking into account adjustments for uncollectible accounts, discounts, Medicare,
Medicaid, CHAMPUS, workers' compensation, professional courtesy discounts and
other write-offs) generated by or on behalf of Practice or its employees as a
result of professional medical services furnished to patients, and other fees or
income generated by such persons in their capacity as Physician Shareholders,
Practice Employees and employees of Practice, whether rendered in an inpatient
or outpatient setting and whether generated from health maintenance
organizations, preferred provider organizations, Medicare, Medicaid or rendered
to other patients, including, but not limited to, payments received under any
capitation arrangement. The term "Net Practice Revenues" shall also include any
ancillary services revenues for services provided at the Medical Offices.
1.3 PHYSICIAN EXPENSES. The term "Physician Expenses" is defined
in Section 4.1 of this Agreement.
1.4 PHYSICIAN SHAREHOLDERS. The term "Physician Shareholders"
shall mean those individuals who are duly licensed to practice medicine in the
State and who are shareholders of Practice.
1.5 PRACTICE EMPLOYEES. The term "Practice Employees" shall mean:
(a) those individuals who are duly licensed to practice medicine in the State
and who are employees of Practice (other than Physician Shareholders), and those
individuals who are otherwise under contract with Practice to provide physician
and/or medical services to patients, specifically including nurse practitioners,
certified registered nurse anesthetists, physician assistants, Fellows, surgical
assistants, certified nurse midwives, individuals with a Masters in Social Work
degree, physical therapists, audiologists and similar speech, hearing and
language professionals, and psychologists with a Masters or a Doctorate degree;
and (b) those individuals (other than those described in Section 1.5(a))
required by law, regulatory authority or policy as of the Effective Date, who
must be billed through and by a licensed physician and who are therefore
required to be employees of the Practice.
1.6 PRACTICE EXPENSES. The term "Practice Expenses" shall mean all
expenses incurred in the operation of the medical practice of Practice at the
Medical Offices (as defined in Section 3.1) or otherwise, whether by Manager or
by Practice, including, but not limited to: (a) depreciation (including without
limitation depreciation on the assets acquired under the Asset Acquisition
Agreement of even date herewith), amortization, salaries, benefits and other
direct costs of all employees and independent contractors of Practice (but not
including salaries, benefits or other direct costs of Practice Employees (as
defined in Section 1.5) or Physician Shareholders (as defined in Section 1.4));
(b) rent and other obligations under leases or subleases for the Medical Offices
and equipment used by Practice; (c) personal property taxes, use taxes and
intangible taxes assessed against assets used by Practice; (d) charitable
contributions budgeted and approved by Manager and Practice; (e) interest
expense on indebtedness of or specifically related to
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the medical practice of Practice, including, without limitation, capital
expenditures, provided if funded by Manager such interest charge will be at the
same rate as Manager's senior borrowing rate, and no interest will be charged
with respect to the assets acquired under the Asset Acquisition Agreement of
even date herewith; (f) utility expenses relating to the Medical Offices; (g)
twelve and one-half percent (12 1/2%) of Net Practice Revenues to Manager as its
management fee in payment for its services and non-allocable costs incurred by
Manager attributable to the provision of management services; (h) other expenses
incurred by Practice or Manager in carrying out their respective obligations
under this Agreement, except as otherwise provided herein; (i) amounts paid by
Manager in reimbursement of Practice, pursuant to Section 4.1, for salaries and
benefits paid by Practice for those individuals described in Section 1.5(b); and
(j) any reserves reasonably deemed prudent by Manager for anticipated costs or
expenses of the medical practice of Practice.
The term "Practice Expenses" shall not include, among other things: (1)
any federal, state or local income taxes of Practice or Manager, or the costs of
preparing federal, state or local tax returns; (2) any salaries or benefits
payable to Practice Employees or Physician Shareholders, except as covered under
subsection (i) above; (3) physician licensure fees, board certification fees and
costs of membership in professional associations for Practice Employees and
Physician Shareholders; (4) costs of continuing professional education for
Practice Employees and Physician Shareholders; (5) costs associated with legal,
accounting and professional services incurred by or on behalf of Practice other
than as described in the first sentence of Section 3.11; (6) costs of medical
malpractice insurance for Practice, its Physician Shareholders and Practice
Employees, and any liability judgments assessed against Practice, Practice
Employees or Physician Shareholders in excess of policy limits; (7) direct
personal expenses of Physician Shareholders or Practice Employees of a kind
which are customarily charged to physician shareholders and practice employees
(including, but not limited to, cellular phone expenses, car allowances, costs
of employees providing personal services to particular Physician Shareholders or
Practice Employees, and like expenses personal in nature); (8) capital
expenditures except to the extent of depreciation and amortization; or (9) any
costs or expenses not designated in this Agreement as being Practice Expenses or
costs and expenses designated as the responsibility of Manager.
Practice Expenses incurred in any budget period in excess of 120% of
budgeted amounts (measured on an aggregate, not line item, basis) resulting in
more than a 20% decrease in the budgeted pre-tax income of Practice shall be the
sole obligation of Manager, unless incurrence of such expenses is approved by
the Advisory Board described in Section 2.1 below, such approval not to be
unreasonably withheld if the expenses are commercially reasonable in nature and
amount under the circumstances.
1.7 STATE. The term "State" shall mean the State of Illinois,
which is where the medical practice of Practice is located.
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SECTION 2. ADVISORY BOARD.
2.1 FORMATION AND OPERATION OF THE ADVISORY BOARD. Manager and
Practice shall establish an Advisory Board responsible for advising Manager in
connection with the development of management and administrative policies for
the overall operation of the medical practice of Practice. The Advisory Board
shall consist of four (4) members. Manager shall designate, in its sole
discretion and from time to time, two (2) members of the Advisory Board.
Practice shall designate, in its sole discretion and from time to time, two (2)
members of the Advisory Board. Except as may otherwise be provided, the act of a
majority of the members of the Advisory Board shall be the act of the Advisory
Board.
2.2 FUNCTIONS OF THE ADVISORY BOARD. The Advisory Board shall
review, evaluate and make recommendations to Practice and Manager with respect
to the following matters:
(a) Annual Budgets. All annual capital and operating
budgets prepared by Manager, as set forth in Sections 3.4 and 3.19, shall be
subject to review and approval by the Advisory Board, which shall make
recommendations to Manager with respect to proposed changes therein.
(b) Physician Employment and Recruitment. The Advisory
Board shall advise Manager and Practice with respect to the types of physicians
required forthe efficient operation of the medical practice of Practice and the
content of all physician employment and recruitment contracts to be utilized by
Practice. Before any offer of employment is extended by Practice, Practice shall
provide Manager at least fifteen (15) days prior notice.
(c) Strategic Planning. The Advisory Board shall make
recommendations to Manager regarding the development of long-term strategic
planning objectives for Practice.
(d) Capital Expenditures. The Advisory Board shall make
recommendations to Manager regarding the priority of major capital expenditures
for the medical practice of Practice.
(e) Capital Improvements and Expansion. Any renovation
and expansion plans and capital equipment expenditures with respect to the
operations of the medical practice of Practice shall be reviewed by the Advisory
Board and shall be based, in the judgment of Manager, upon economic feasibility,
physician support, productivity and then-current market conditions.
(f) Provider and Payor Relationships. The Advisory Board
shall review and advise Manager and Practice with respect to the establishment
or maintenance of relationships with institutional healthcare providers and
payors.
(g) Ancillary Services. The Advisory Board shall review
and make recommendations to Manager and Practice regarding the provision of
ancillary services
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based upon the pricing, access to and quality of such services.
(h) Patient Fees, Collection Policies. At least annually,
the Advisory Board shall, based upon recommendations by Manager and Practice,
review and adopt the fee schedule for all physicians and ancillary services
rendered by Practice.
(i) Advertising. The Advisory Board shall advise Manager
with respect to all advertising and other marketing of services performed at the
Medical Offices of Practice, including design and erection of exterior signs.
All such advertising and marketing shall be in accordance with the Illinois
Medical Practice Act, as amended and the rules of the Department of Professional
Regulation established thereunder.
(j) Exceptions to Inclusion in Net Practice Revenues. The
Advisory Board will review and make recommendations to Manager and Practice with
respect to the proposed exclusion of any revenue from Net Practice Revenues.
(k) Grievance Referrals. The Advisory Board shall
consider, review and make recommendations to Manager and Practice with respect
to any matters arising in connection with the operations of Practice that are
not specifically addressed in this Agreement and as to which Manager or Practice
requests consideration by the Advisory Board.
(l) Quality Assurance and Utilization Review. The
Advisory Board shall advise Manager and Practice regarding all quality assurance
and utilization review programs undertaken by Practice either independently or
in connection with any managed care contracts maintained by Practice, and
Manager shall assist the Practice in performing the quality assurance and
utilization review functions of the Practice in consultation with the Advisory
Board.
Notwithstanding any contrary provision of this Agreement, it is acknowledged and
agreed that other than as provided in Section 2.2(a), recommendations of the
Advisory Board are intended for the advice and guidance of Manager and Practice
and that the Advisory Board does not have the power to bind Manager or Practice.
Where discretion with respect to any matter is vested in Practice under the
terms of this Agreement, Practice shall have ultimate responsibility for the
exercise of such discretion, notwithstanding any recommendation of the Advisory
Board. Where discretion with respect to any matter is vested in Manager under
the terms of this Agreement, Manager shall have ultimate responsibility for the
exercise of such discretion, notwithstanding any recommendation of the Advisory
Board. Manager and Practice shall, however, take such recommendations of the
Advisory Board into account in good faith in the exercise of such discretion.
SECTION 3. OBLIGATIONS OF MANAGER.
3.1 PROVISION OF SERVICES. Practice hereby engages Manager for the
term of this Agreement, and Manager hereby accepts such engagement, to provide
to Practice the business management services, personnel, equipment and supplies
provided for in this
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Section 3 (collectively "Management Services"). Manager shall provide the
Management Services at the medical offices located at those locations set forth
on Exhibit 3.1, or at such other place or places as may be agreed upon by the
parties. The medical offices or such other places at which the Management
Services are to be provided are referred to as the "Medical Offices."
3.2 MEDICAL OFFICES. Manager shall pay out of Net Practice
Revenues all rent due from the Effective Date forward with respect to the
Medical Offices, and all costs of repairs, maintenance and improvements,
telephone, electric, gas and water utility expenses, insurance, normal
janitorial services, refuse disposal and all other costs and expenses reasonably
incurred in connection with the operations of Practice including, but not
limited to, related real or personal property lease payments and expenses, taxes
and insurance. Manager shall consult with Practice with respect to the
condition, use and needs of the Medical Offices, as expanded, improved or
relocated from time to time. The Medical Office shall be used by the Practice
and by the Manager in providing its services under this Agreement.
3.3 FURNITURE, FIXTURES AND EQUIPMENT. Manager agrees to provide
or have provided to medical offices those supplies and items of furniture,
fixtures and equipment as are determined by Manager, after consultation with
Practice, to be necessary and/or appropriate for Practice's operations at the
Medical Offices during the term of this Agreement (all such items of furniture,
fixtures and equipment are collectively referred to hereinafter as the "FFE")
subject, however, to the following conditions:
(a) Practice shall have the use of the FFE only during
the term of this Agreement and title to the FFE shall be and remain in Parent
and/or Manager at all times during such term.
(b) Manager shall be responsible for, and pay for out of
Net Practice Revenues, all repairs, maintenance and replacement of the FFE.
3.4 FINANCIAL PLANNING AND GOALS. Manager will prepare, in
consultation with Practice, annual capital and operating budgets reflecting, in
reasonable detail anticipated revenues and sources and uses of capital for
growth in the medical practice of Practice.
3.5 BUSINESS OFFICE SERVICES. Practice hereby appoints Manager as
its sole and exclusive manager and administrator of all business functions and
services related to Practice's services during the term of this Agreement.
Without limiting the generality of the foregoing, in providing the Management
Services, Manager shall perform the following functions:
(a) Manager shall evaluate, negotiate and administer all
managed care contracts on behalf of Practice and shall consult with Practice on
matters relating thereto.
(b) Manager shall provide ongoing assessment of business
activity including product line analysis, outcomes monitoring and patient
satisfaction.
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(c) Manager shall be responsible for ordering and
purchasing all medical and office supplies reasonably required in the day-to-day
operation of the medical practice of Practice at the Medical Offices.
(d) Manager shall make application and negotiate for the
procurement of professional liability insurance covering persons in the coverage
amounts set forth in Section 8.1. This coverage shall be made available to
Practice. Practice, however, shall have the right to obtain coverage from an
alternative provider reasonably acceptable to Manager.
(e) Manager shall xxxx and collect from payors,
intermediaries and patients all professional fees for medical services and for
ancillary services performed at the Medical Offices by Practice and Practice's
employees and agents, including, but not limited to, Physician Shareholders and
Practice Employees. For the term of this Agreement, Practice hereby grants
Manager power of attorney and appoints Manager as its true and lawful
attorney-in-fact for the following purposes:
(i) To xxxx payors, fiscal intermediaries or
patients in Practice's name, under its provider number(s) when obtained and on
its behalf, and until such time as Practice has obtained its provider number(s),
xxxx, in the Physician Shareholders' and Practice Employees' names under their
respective provider numbers and on their behalf, and in connection with such
billing services Manager covenants and agrees that it will use its best efforts
to perform the billing correctly and in accordance with applicable laws and
regulations based on information that Practice and the Physician Shareholders
and Practice Employees provide to Manager for such purpose;
(ii) To collect accounts receivable and claims
for reimbursement that are generated by such xxxxxxxx in Practice's name and on
Practice's behalf, and in the name and on behalf of all Physician Shareholders
and Practice Employees;
(iii) To place such accounts for collection,
settle and compromise claims, and institute legal action for the recovery of
accounts;
(iv) Following receipt by Practice, to take
possession of payments from patients, insurance companies, Medicare, Medicaid
and all other payors with respect to services rendered by Practice, Physician
Shareholders and Practice Employees, and Practice hereby covenants to forward
such payments to Manager for deposit;
(iv) To endorse in the name of Practice, or any
Physician Shareholder or Practice Employee, any notes, checks, money orders,
insurance payments and any other instruments received by Practice as payment of
such accounts receivable;
(v) To collect in Practice's name and on its
behalf, and in the name and on behalf of all Physician Shareholders and Practice
Employees, all Net Practice Revenues;
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(vi) To pledge the accounts receivable as
collateral or otherwise encumber the accounts receivable without the approval of
the Advisory Board or Practice (all actions with respect to any discounting,
selling or encumbering accounts receivable involving Medicare or Medicaid shall
not be inconsistent with applicable laws and regulations relating thereto); and
(vii) To sign checks on behalf of Practice and
make withdrawals from Practice bank accounts for payments specified in this
Agreement and as requested from time to time by Practice.
3.6 DEPOSIT OF NET PRACTICE REVENUES. During the term of this
Agreement, all Net Practice Revenues collected shall be received directly by
Practice at the Practice location, and each business day Practice will transfer
all collected Net Practice Revenues into a bank account as specifically directed
by Manager, of which Manager shall be the owner and from which Manager shall
have the sole right to make withdrawals to pay Practice Expenses on a monthly
basis and, at the direction of Practice, to transfer pursuant to Section 5.1
remaining Net Practice Revenues by the fifteenth day of each month in arrears to
an account designated by Practice from which Practice will pay Physician
Expenses. Manager shall maintain its accounting records in such a way as to
clearly segregate Net Practice Revenues from other funds of Manager. Practice
and Manager hereby agree to execute from time to time such documents and
instructions as shall be required by the Credit Facility Lender (as defined in
Section 5.2(b)) and mutually agreed upon to effectuate the foregoing provisions
and to extend or amend such documents and instructions.
3.7 REVENUE REPORTS. Manager shall maintain revenue reports, as
determined by the books and records of Manager, with respect to the operations
of Practice. Revenue reports shall reflect the total gross revenues and Net
Practice Revenues generated by or on behalf of the medial practice of Practice.
Manager shall provide Practice with monthly revenue reports and shall provide a
year-end revenue report for Practice within ninety (90) days after the end of
each calendar year.
3.8 SUPPORT SERVICES. Manager shall provide all reasonable and
necessary computer, management information, bookkeeping, billing and collection
services, accounts receivable and accounts payable management services, laundry,
linen, janitorial and cleaning services and management services to improve
efficiency and workflow systems and procedures, as determined by Manager after
consultation with Practice.
3.9 ADMINISTRATOR. Manager shall provide an Administrator to
manage and administer all of the day-to-day business functions and services of
the medical practice of Practice. The Administrator will be selected by Manager
after prior consultation with Practice, and Manager shall determine the salary
and fringe benefits of the Administrator, but shall consult with Practice with
respect thereto.
3.10 PERSONNEL. Manager shall provide such non-physician personnel
as determined by Manager, after consultation with Practice, to be reasonably
necessary for
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the effective operation of the medical practice of Practice at the Medical
Offices, subject, however, to the following:
(a) Manager shall provide to Practice all nurses, medical
records personnel and other medical support personnel as requested by Practice
and as shall be reasonably necessary for the operation of Practice's medical
practice at the Medical Offices. As to the nursing and non-physician medical
support personnel provided under this Section 3.10(a), Manager shall determine
the salaries and benefits of all such personnel, but shall consult with Practice
with respect thereto. Manager shall also recommend the assignment of all such
personnel to perform services at the Medical Offices; provided, however, that
Practice shall have the right to approve, based primarily on professional
competence, the assignment of all non-physician medical support personnel to
provide services at the Medical Offices and Manager shall, at Practice's
request, reassign and replace such personnel from time to time who are not, in
Practice's reasonable and good faith judgment, adequately performing the
required professional services.
(b) Manager shall provide to Practice all business office
personnel (i.e., clerical, secretarial, bookkeeping and collection personnel)
reasonably necessary for the maintenance of patient records, collection of
accounts receivable and upkeep of the financial books of account to the extent
that same are required for, and directly related to, the operation of the
medical practice by Practice. As to the personnel provided under this Section,
Manager shall determine the salaries and fringe benefits of all such personnel,
but shall consult with Practice with respect thereto.
(c) In exercising its judgment with regard to personnel
as provided in Section 3.9 and this Section 3.10, Practice agrees not to
discriminate against such personnel on the basis of race, religion, age, sex,
disability or national origin.
(d) In recognition of the fact that personnel provided to
Practice under this Agreement may perform services from time to time for others,
this Agreement shall not prevent Manager from performing such services for
others or restrict Manager from so using such personnel. Manager will make every
effort consistent with sound business practices to honor the specific requests
of Practice with regard to the assignment of such personnel; provided, however,
that except for non-physician medical support personnel as provided in
subsection (a) above, Manager hereby retains the sole and exclusive
decision-making authority regarding all such personnel assignments.
(e) If Practice or Physician Shareholders request
personal secretarial, clerical, bookkeeping, or other non-physician medical
support personnel in addition to personnel determined to be necessary and/or
appropriate by Manager, and such additional personnel and/or services are
provided by mutual agreement between Manager and Practice, all costs and
expenses incurred by Manager in providing such additional personnel shall be
paid to Manager by Practice.
3.11 PROFESSIONAL SERVICES. Manager shall use reasonable efforts to
arrange for
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or render to Practice such business, legal and financial management consultation
and advice as may be reasonably required or requested by Practice and directly
related to the operations of Practice. Manager shall not be responsible for any
services requested by or rendered to any individual, employee or agent of
Practice not directly related to the operations of Practice nor shall Manager be
responsible for rendering any legal or tax advice or services or personal
financial services to Practice or any employee or agent of Practice.
3.12 PATIENT AND FINANCIAL RECORDS. Manager shall maintain all
files and records relating to the operation of Practice including, but not
limited to, customary financial records and patient files. The management of all
files and records shall comply with all applicable federal, state and local
laws, statutes, rulings, orders, ordinances and regulations ("Laws"), and all
files and records shall be located so that they are readily accessible for
patient care, consistent with ordinary records management practices. Practice
shall supervise the preparation of, and direct the contents of, patient medical
records, all of which shall be and remain confidential and the property of
Practice. Manager shall have reasonable access to such records and, subject to
applicable Laws and accreditation policies, Manager shall be permitted to retain
true and complete copies of such records. Manager hereby agrees to preserve the
confidentiality of such patient medical records and to use the information in
such records only for the limited purposes necessary to perform the Management
Services and, within the limits of its responsibilities hereunder, to ensure
that provision is made for appropriate care for patients of Practice.
3.13 N/A.
3.14 PHYSICIAN RECRUITMENT. At the request of Practice, Manager
shall perform administrative services relating to the recruitment of physicians
for Practice. Practice shall determine the need for additional physicians in
consultation with Manager. All such physicians recruited by Manager and accepted
by Practice shall be shareholders or employees of Practice (if such physicians
are hired as employees) and not of Manager. Any expenses incurred in the
recruitment of physicians shall be treated as Practice Expenses. Practice agrees
that all physicians hired by the Practice shall execute a Physician Employment
Agreement in a form approved by Manager (the "Physician Employment Agreements").
Practice agrees not to change the form of the Physician Employment Agreement
without Manager's prior written consent.
3.15 EXPANSION OF PRACTICE. Manager will assist Practice in
attempting to add additional office-based procedures, in establishing new
satellite office(s) that are commercially reasonable and beneficial to Practice,
as determined by Practice and Manager to be beneficial to Practice, and in
developing relationships and affiliations with physicians and other specialists,
hospitals, networks, health maintenance organizations, preferred provider
organizations, etc., to assist in the continued growth and development of the
medical practice of Practice. Practice will cooperate with Manager in such
efforts and use its best efforts to assist Manager with respect thereto. Without
limiting the generality of the foregoing, Practice will not enter into any
agreements with respect to any such matters without prior notice to Manager.
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3.16 PERFORMANCE OF BUSINESS OFFICE SERVICES. Manager is hereby
expressly authorized to perform its business office services hereunder in
whatever reasonable manner it deems appropriate to meet the day-to-day
requirements of the non-medical business functions of Practice's medical
practice at the Medical Offices. Manager may perform some or all of the business
office functions of Practice at locations other than at the Medical Offices.
3.17 FORCE MAJEURE. Manager shall not be liable to Practice for
failure to perform any of the services required under this Agreement in the
event of strikes, lockouts, calamities, acts of God, unavailability of supplies
or other events over which Manager has no control for so long as such event
continues and for a reasonable period of time thereafter.
3.18 PAYMENT OF PRACTICE EXPENSES AND MANAGEMENT FEE. Manager shall
pay all Practice Expenses as they become due out of Net Practice Revenues;
provided, however, that Manager may, in the name of and on behalf of Practice,
contest in good faith any claimed Practice Expenses as to which there is any
dispute regarding the nature, existence or validity thereof. Manager shall be
entitled, on a monthly basis, to pay itself from Net Practice Revenues the
amount specified in Section 1.6(g) as its management fee for providing its
services under this Agreement. Practice acknowledges and agrees that the amount
to be retained by Manager as its management fee in accordance with this
Agreement is reasonable and fair, given the undertakings of Manager as set forth
in this Agreement and the other benefits and value that accrue to Practice as a
result of Manager's services under this Agreement.
3.19 BUDGETS.
(a) As part of the Manager's responsibilities under this
Agreement, the Manager shall prepare annual capital and operating budgets for
the Practice for each budget period in accordance with the provisions of this
Section 3.19. As used herein, a budget period means a fiscal year of Practice
unless otherwise provided.
With respect to each budget period following the initial
budget period, the Manager shall prepare and deliver a preliminary draft of each
such budget to the Advisory Board at least 30 days prior to the commencement of
the budget period to which such budget relates. The Advisory Board shall provide
any comments or suggested changes to such preliminary drafts to the Manager
within 15 days after receipt thereof. The Manager shall then submit a revised
budget to the Advisory Board for approval by the Advisory Board no later than 15
days after the end of the 15-day period referred to in the immediately preceding
sentence. The Advisory Board shall then approve or disapprove of, but not modify
or amend the budget within 15 days of receiving it. The foregoing time periods
during which drafts of the budget are to be delivered and approved shall be
subject to adjustment from time to time as determined appropriate by the
Advisory Board and Manager.
If prior to the commencement of any budget period, the
Advisory Board
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has not yet approved the budget, then the Manager and the Advisory Board will
work diligently in good faith to obtain such approvals, and until such approvals
are obtained, with respect to the budget, (i) as to any disputed line items, the
immediately preceding budget period's budget shall be controlling until such
time, if any as agreement is reached on the amounts to be allocated to such
disputed line items, specifically as follows: (A) non-recurring or extraordinary
items shall not be continued from the budget for the immediately preceding
budget period, (B) if the previous budget was for a budget period of less than
12 months, it shall be annualized, (C) all items subject to an automatic
increase, such as rent and taxes, shall be budgeted at the increased rate (D)
for items such as employee salaries and benefits, the total salary and benefits
number shall be adjusted to take into account changes in the number and
classifications of employees employed or contracted, (ii) as to any line items
which are not in dispute, the revised budgets submitted by the Manager shall
control, and (E) those items reasonably deemed medically necessary by Practice
shall be acquired
(b) The parties agree that the Manager shall have the
authority and discretion to reallocate cost and expense line items within the
budget, so long as the pre-tax income targets within such budgets are not
adversely impacted.
(c) Manager agrees that expenses of the Practice which
are shared by other practices being managed by Manager shall be allocated as
"Practice Expenses" to Practice and such other practices based on actual
expenses incurred where such expenses are directly identifiable by Manager or on
a pro rata basis in accordance with the respective "Net Practice Revenues" of
Practice and such other practices, or such other fair and reasonable basis as
Manager may determine.
3.20 STRATEGIC FOCUS OF MANAGER. Manager covenants and agrees with
Practice that the strategic focus of the business of Manager for a period of at
least three (3) years commencing as of the date of this Agreement shall not
materially change from the management of or affiliation with physician practices
and health case providers that specialize in the treatment and management of
diseases and disorders of the ear, nose and throat, head and neck, including
specialists practicing in the fields of allergy, audiology, oral surgery,
plastic surgery and sleep medicine, and including ancillary or additional
revenue sources such as ambulatory surgery centers, sleep laboratories and CT
scanners.
SECTION 4. OBLIGATIONS OF PRACTICE.
4.1 PHYSICIAN EXPENSES. Practice shall be solely responsible for
the payment, when due, of all costs and expenses incurred in connection with
Practice's operations that are not Practice Expenses ("Physician Expenses"),
including, but not limited to, insurance premiums for policies of malpractice
insurance, deductibles under such policies of malpractice insurance, any and all
costs and expenses incurred with respect to claims under such policies of
malpractice insurance, salaries and benefits, workers' compensation, retirement
plan contributions, health, disability and life insurance premiums, payroll
taxes, cellular phone and automobile expenses incurred by or in connection with
the employment of all Physician Shareholders and Practice Employees. Practice
shall be responsible for
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paying as a Physician Expense salaries, benefits and other similar direct costs
for all Practice Employees and Physician Shareholders. Practice shall pay all
Physician Expenses as they become due. However, Practice shall pay the salaries
and benefits for those individuals described in Section 1.5(b), but Manager
shall reimburse Practice for all such salaries and benefits and such
reimbursement amounts shall be a Practice Expense under Section 1.6.
4.2 PROFESSIONAL STANDARDS.
(a) It is expressly acknowledged by the parties to the
Agreement that all medical services provided at the Medical Offices shall be
performed solely by physicians and allied health care professionals duly
licensed to practice medicine in the State. The professional services provided
by Practice and its Physician Shareholders and Practice Employees shall at all
times be provided in accordance with applicable ethical standards and Laws
applying to the medical profession. Practice shall at all times during the term
of this Agreement be and remain legally organized and authorized to provide
medical care and services in a manner consistent with all state and federal
laws. The parties will cooperate with each other in taking steps to resolve any
utilization review or quality assurance issues which may arise in connection
with the medical practice of Practice. If any disciplinary actions or
professional liability actions are initiated against any Physician Shareholder
or Practice Employee, Practice shall immediately inform Manager of such action
and the underlying facts and circumstances. Practice agrees to implement and
maintain a program to monitor the quality of medical care provided by Practice,
and Manager shall render administrative assistance to Practice on an
as-requested basis to assist Practice in implementing and maintaining such
program.
(b) Practice shall at all times during the term of this
Agreement assure that each physician of the Practice shall:
(i) maintain an unrestricted license to practice
medicine and surgery in all its branches in the State and maintain good standing
with the Medical Board of the State;
(ii) maintain a federal Drug Enforcement
Administration certificate without restrictions, to prescribe controlled
substances as are customarily prescribed by physicians practicing in Physician's
practice specialties;
(iii) maintain hospital medical staff memberships
and clinical privileges at those facilities set forth on Part Three of Exhibit A
of the Physician Employment Agreement as amended from time to time;
(iv) perform all professional services through
Practice and in accordance with all Laws and with prevailing standards of care
and medical ethics in accordance with any Employment Agreement between Practice
and Physician and with practice protocols and policies as adopted from time to
time by Practice;
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(v) maintain Physician's skills through
continuing education and training, including participation in those programs
designated by Practice from time to time;
(vi) maintain eligibility for insurance under the
professional liability policy or policies at a commercially reasonable cost as
determined by Practice carried by or on behalf of Practice for Physician's
practice specialties, to the extent Physician is to be covered by such policy or
policies pursuant to Section 5.2 of the Physician Employment Agreement;
(vii) maintain Physician's board-certified or
board eligible status in Physician's practice specialties;
(viii) qualify and maintain Physician's
qualification as a participating provider in the Medicare and State of Illinois
Medicaid programs;
(ix) abide by the Principles of Medical Ethics of
the American Medical Association, any principles or statements or ethics adopted
by the state medical society in any state in which Physician maintains a
professional license, and the ethical principles or statements as adopted and
amended from time to time by the American Board of Otolaryngology;
(x) comply with all Laws applicable to the
conduct of Physician's activities, as well as with the articles of
incorporation, bylaws and other corporate governance documents of Practice and
other rules or regulations adopted from time to time by Practice;
(xi) promptly disclose to Practice (i) the
commencement or pen-dency of any legal action, administrative proceeding or
investigation, medical staff or professional disciplinary actions against
Physician or (ii) the existence of any circumstances that could reasonably be
expected to form the basis of or lead to any such action, proceeding or
investigation;
(xii) abide by any guidelines adopted by Practice
or any person or entity providing management services to Practice designed to
encourage the appropriate, efficient and cost-effective delivery of medical
services, subject always to the clinical judgment of Physician, and cooperate
with and participate in all Practice programs regarding quality assurance,
utilization review, risk management and peer review;
(xiii) maintain appropriate and accurate medical
records in accordance with accepted medical standards and Practice policies with
respect to all patients evaluated and treated; and
(xiv) satisfy such other reasonable requirements
as are established from time to time by Practice.
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4.3 PROVIDER AND PAYOR RELATIONSHIPS. Practice shall advise
Manager on matters relating to the establishment or maintenance of relationships
with institutional healthcare providers and third-party payors, including, but
not limited to, managed care programs, health maintenance organizations and
preferred provider organizations. Without limiting the generality of the
foregoing, Practice shall cooperate with Manager in the development and
operation of integrated healthcare delivery systems developed from time to time
by Manager for the benefit of Manager's affiliates. Practice shall not be
required by Manager to sign up or contract with any particular provider.
4.4 PHYSICIAN CONTRACTS AND POWERS OF ATTORNEY. (a) During the
term of this Agreement Practice shall maintain Employment Agreements
substantially in the form of Exhibit A hereto with all Physician Shareholders
and other physician practitioners employed or otherwise retained by Practice as
Practice Employees. Practice shall not amend any of the Employment Agreements or
waive any rights thereunder without the prior consent of Manager.
(b) Practice shall require all Physician Shareholders and
physician Practice Employees to execute and deliver to Manager powers of
attorney, satisfactory in form and substance to Manager, appointing Manager as
attorney-in-fact for each such Physician Shareholder and physician Practice
Employee for the purposes set forth in Section 3.5(e) to the extent authorized
by law.
4.5 RESTRICTIVE COVENANTS.
(a) Practice acknowledges and agrees that the services to
be provided by Manager hereunder are feasible only if Practice operates a
vigorous medical practice to which its Physician Shareholders and Practice
Employees devote their full time and attention. Accordingly, Practice agrees
that, during the term of this Agreement, it shall not, without the prior written
consent of Manager, establish, operate or provide physician services at any
medical office, clinic or other healthcare facility in the State which provides
services substantially similar to those offered by Practice at the Medical
Offices other than services at healthcare facilities in a manner consistent with
past practices of Practice or, prior to the date hereof, Otolaryngology Medical
and Surgical Associates, Ltd.
(b) During the term of this Agreement and for a period of
eighteen (18) months following the termination or expiration of this Agreement,
Practice shall not, in the State, alone or in conjunction with any other person
or entity, without the prior written consent of Manager, solicit or attempt to
solicit any employee, consultant, contractor or other personnel affiliated with
Manager (or who was affiliated with Manager at any point during the six months
prior to termination of this Agreement) to terminate, alter or lessen that
party's affiliation with Manager or to violate the terms of any agreement or
understanding between such employee, consultant, contractor or other person and
Manager.
(c) If this Agreement is terminated for any reason other
than by Practice pursuant to Section 6.2 (b) below, Practice shall not for a
period of eighteen (18) months
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following the effective date of such termination, engage or contract with any
person, firm or entity (or group of affiliated entities) for the provision of
comprehensive management services to Practice at the Medical Offices (or at any
new or replacement medical offices of Practice in the State) substantially of
the kind contemplated by this Agreement.
(d) Subject to Illinois law, the intellectual and other
property rights in any work product, discoveries or inventions developed or
acquired by Practice, the Physician Shareholders or Practice Employees or any
other personnel or agents of such parties (other than intellectual and other
property rights developed or acquired by a Physician Shareholder and
specifically excluded in such individual's employment agreement with Practice)
during the term of this Agreement (the "Practice IP") shall be deemed to be
owned exclusively by the Manager. The Practice hereby unconditionally and
irrevocably transfers and assigns to Manager all rights, title and interest the
Practice may currently have (or in the future may have) by operation of law or
otherwise in or to any Practice IP, including, without limitation, all patents,
copyrights, trademarks, service marks and other intellectual property rights.
Practice agrees to execute and deliver to Manager any transfers, assignments,
documents or other instruments which Manager may deem necessary or appropriate
to vest complete title and ownership of any Practice IP, and all associated
rights, exclusively in Manager. The Physician Employment Agreements shall have a
provision comparable to this paragraph (d) assigning these Practice IP rights
from the Practice physicians to Practice, in contemplation of their reassignment
from Practice to Manager as herein provided, subject only to such exclusions as
are provided in the form of Physician Employment Agreement approved by Manager.
(e) Practice acknowledges and agrees that Manager's Trade
Secrets and Confidential Information (both as defined below) represent a
substantial investment by Manager. Practice also acknowledges and agrees that
any unauthorized disclosure or use of any of Manager's Trade Secrets or
Confidential Information would be wrongful and would likely result in immediate
and irreparable injury to Manager. Except as required in order to perform
Practice's obligations under this Agreement, Practice shall not, without the
express prior written consent of Manager, redistribute, market, publish,
disclose or divulge to any other person or entity, or use or modify for use,
directly or indirectly in any way for any person or entity: (i) any Confidential
Information during the term of this Agreement and for a period of three (3)
years after the final date of the term of this Agreement; and (ii) any Trade
Secrets at any time (during or after the term of this Agreement) during which
such information or data shall continue to constitute a "trade secret" under
applicable law. Practice further agrees to cooperate with (and require its
physicians and other personnel to comply with) any reasonable confidentiality
requirements of Manager. Practice shall immediately notify Manager of any
unauthorized disclosure or use of any of the Trade Secrets or Confidential
Information of Manager of which Practice becomes aware. For purposes of this
Agreement "Confidential Information" shall mean valuable, non-public
competitively sensitive data and information relating to Manager's or Parent's
business other than Trade Secrets (which shall have the meaning given that term
under applicable law) that is not generally known by or readily available to
competitors of Manager, including, without limitation, computer software and
management information systems provided by Manager, practice acquisition
targets,
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strategic expansion plans, contracting and payor negotiations, managed care
contracting strategies and fees, rates, exclusions and other payor contract
features.
(f) Unless otherwise agreed by Manager in writing,
Practice shall enforce vigorously the covenants (and any liquidated damages
provisions) of the Physician Shareholders and other physician employees of
Practice set forth in the Physician Employment Agreements (which the Parties
agree will be in substantially the form of Exhibit A) with counsel approved by
Manager. Practice and such counsel shall cooperate with Manager in any such
litigation and all major litigation decisions and strategy shall be subject to
approval of Manager, and Practice shall not compromise or settle any such
litigation without Manager's approval. In the event that the Practice recovers
liquidated damages (or other damages) from any physician for breach of such a
covenant, then the Practice shall promptly remit to Manager an amount equal to
any and all such amounts so received. Manager agrees to pay the fees and
disbursements of counsel of Practice approved by it. Practice shall not take any
action that, under this Agreement, is to be taken only by Manager. The Parties
agree and the Physician Employment Agreement shall provide that the actual
losses to be suffered by Manager and Practice will be difficult to ascertain,
but the liquidated damages set forth have been arrived at after good faith
effort to estimate such losses. Practice specifically acknowledges and agrees
that Manager would not have entered into this Agreement but for Practice's
covenant to enforce the Physician Employment Agreements as provided above and
that the failure of any physician to comply with such agreements will result in
Manager suffering extensive economic damages.
(g) Manager and Practice acknowledge and agree that
Manager's remedy at law for any breach or attempted breach of the foregoing
provisions may be inadequate and that Manager shall be entitled to specific
performance, injunction or other equitable relief in the event of any such
breach or attempted breach, in addition to any other remedies which might be
available at law or in equity. If the duration, scope or geographic area
contemplated by the foregoing provisions is determined to be unenforceable by a
court of competent jurisdiction, the parties agree that such duration, scope or
geographic area shall be deemed to be reduced to the greatest scope, duration or
geographic area which would be enforceable.
4.6 PROFESSIONAL DUES AND EDUCATION EXPENSES. Practice and its
Physician Shareholders and Practice Employees, subject to Manager approval,
shall be solely responsible for all costs and expenses associated with
membership in professional associations and continuing professional education.
Practice shall ensure that each of its Physician Shareholders and Practice
Employees participates in such continuing medical education activities as are
necessary for such physicians to remain current in their respective specialties,
including, but not limited to, the minimum continuing medical education
requirements imposed by applicable laws and policies of applicable specialty
boards.
4.7 PROVISION OF SERVICES BY PRACTICE. Practice shall maintain at
least the
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same quality and scope of medical practice and other health care services
provided by Otolaryngology Medical and Surgical Associates, Ltd. prior to the
date hereof and shall use its reasonable good faith efforts to enhance the
medical practice of the Practice and to comply with all Practice budgets.
Practice shall engage a sufficient member of Physician Shareholders or physician
Practice Employees to provide services to patients of the Practice at normal
office hours at the Medical Offices and to provide coverage during all
appropriate hours of all hospitalized patients of Practice whether on any
inpatient or outpatient basis.
4.8 PHYSICIAN SHAREHOLDER AGREEMENT. Practice represents that it
has delivered to Manager a true and correct copy of the shareholder agreement
between Practice and its Physician Shareholders and will cause all new
shareholders of Practice to execute such agreement prior to becoming a
shareholder in Practice. Practice shall not amend the shareholder agreement so
as to cause the shareholder agreement to contravene or conflict with this
Agreement or the Employment Agreements between Practice and its physician
employees.
SECTION 5. FINANCING MATTERS
5.1 MECHANICS OF DRAWS. Following the end of each month, Manager
shall make an estimate of the collection percentage ("Estimated Collection
Percentage") for such month's gross Practice revenues. The Estimated Collection
Percentage may vary depending on historical collection percentages, changes in
fee schedules, changes in third party reimbursement, bad debt write-offs and
similar adjustments. The Estimated Collection Percentage will then be applied to
such month's gross Practice revenues, resulting in estimated Net Practice
Revenues for such month. An amount equal to the excess of Net Practice Revenues
over Practice Expenses will be transferred by Manager to Practice and used by
Practice to pay Physician Expenses on such 15th day. A final accounting will be
due from Manager on or before April 30 of each year of this Agreement with
respect to the immediately preceding calendar year.
5.2 ASSIGNMENT OF SECURITY INTEREST.
(a) Practice hereby exclusively and irrevocably assigns and sets
over to Manager all of Practice's rights to all revenue and accounts receivable
generated by the Physician Shareholders and Practice Employees with respect to
any services rendered prior to the effective date of expiration or termination
of this Agreement, except as otherwise provided in this Agreement, and grants to
Manager the right to retain such proceeds for its own account for application in
accordance with this Agreement, and shall obtain a like assignment from all
Physician Shareholders and Practice Employees; provided, that in the case of
revenue and accounts receivable generated as a result of billing for services
under Medicare or Medicaid such assignment shall only be an assignment of
proceeds of accounts receivable consistent with the provisions of applicable
law. Practice shall endorse (and shall cause each Physician Shareholder or
Practice Employee to endorse) any payments received on account of such services
to the order of Manager and shall take such other actions as may be necessary to
confirm to Manager the rights set forth in this Section 5.2(a).
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Without limiting the generality of the foregoing, it is the
intent of the parties that the assignment to Manager of the rights described in
Section 5.2(a) above shall be inclusive of the rights of Practice and the
Physician Shareholders and Practice Employees to proceeds of payment with
respect to any services rendered prior to the effective date of any expiration
or termination of this Agreement. Practice agrees and shall cause each Physician
Shareholder and Practice Employee to agree, that Manager shall retain the right
to collect any and all accounts receivable and claims for reimbursement relating
to any such services rendered prior to the effective date of any such expiration
or termination ("Pre-Termination Accounts Receivable"), and that the proceeds
thereof will be transferred to Manager's account to be applied in accordance
with Section 3.6 and the other provisions of this Agreement.
In addition and as a supplement to Practice's obligations as otherwise
set forth herein, Practice shall, with all deliberate speed, apply for and
maintain in effect any and all provider and/or supplier numbers, including but
not limited to Medicare and Medicaid numbers, in Practice's name. If Practice is
unable to obtain such provider and/or supplier numbers, Practice shall cause
Physician Shareholders to maintain each of their provider numbers, including but
not limited to Medicare and Medicaid numbers, necessary or appropriate to obtain
payment or reimbursement for all medical services provided by such Physician
Shareholders and shall further cause each Physician-Shareholder who provides
services to the Practice to execute any and all documentation necessary to
effectuate the assignments of revenues to Manager as contemplated by this
Agreement.
(b) Practice acknowledges that Manager and Parent may, to
the extent permitted by law, grant a security interest in the Pre-Termination
Accounts Receivable and proceeds thereof to their factor(s) or lender(s) under
Manager's or Parent's working capital credit facility (whether one or more,
"Credit Facility Lender"), as in effect from time to time. Practice agrees that
such security interest of the Credit Facility Lender is intended to be a first
priority security interest and is superior to any right, title or interest which
may be asserted by Practice or any Physician Shareholder or Practice Employee
with respect to Pre- Termination Accounts Receivable or the proceeds thereof
under this Agreement. Practice further agrees, and shall cause each Physician
Shareholder and Practice Employee to agree, that, upon the occurrence of an
event which, under the terms of such working capital credit facility, would
allow the Credit Facility Lender to exercise its right to collect Pre-
Termination Accounts Receivable and apply the proceeds thereof toward amounts
due under such working capital credit facility, the Credit Facility Lender will
succeed to all rights and powers of Manager under the powers of attorney
provided for in Sections 3.5 and 4.4 above as if such Credit Facility Lender had
been named as the attorney-in-fact therein.
(c) If, contrary to the mutual intent of Manager and
Practice, the assignment described in this Section 5.2 shall be deemed for any
reason to be ineffective, then Practice and each Physician Shareholder and
Practice Employee shall to the extent permitted by applicable Laws, effective as
of the date of this Agreement, be deemed to
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have granted (and Practice does hereby grant, and shall cause each Physician
Shareholder and Practice Employee to grant) to Manager a first priority lien on
and security interest in and to any and all interests of Practice and such
Physician Shareholders and Practice Employees in any accounts receivable
generated by the medical practice of Practice and its Physician Shareholders and
Practice Employees or otherwise generated through the operations of the medical
practice of Practice, and all proceeds with respect thereto, to secure the
payment to Manager hereunder of all Practice Expenses, and this Agreement shall
be deemed to be a security agreement to the extent necessary to give effect to
the foregoing. Practice shall execute and deliver, and cause each Physician
Shareholder and Practice Employee to execute and deliver, all such financing
statements as Manager may request in order to perfect such security interest.
Practice shall not grant (and shall not suffer any Physician Shareholder or
Practice Employee to grant) any other lien on or security interest in or to such
accounts receivable or any proceeds thereof or in or to this Agreement to any
other person or entity.
SECTION 6. TERM AND TERMINATION.
6.1 TERM. The initial term of this Agreement shall be for a period
of forty (40) years commencing on September 22, 1997 and ending on September 22,
2037. This Agreement may be extended for separate and successive five-year
periods (each such five-year period referred to hereinafter as an "extended
term"), under such terms and conditions as stated herein with respect to any
such extended term; provided, however, that: (a) Practice and Manager mutually
agree to extend the term of this Agreement and mutually agree upon the documents
to be in effect during any such extended term hereto, not less than sixty (60)
days prior to expiration of the initial term or extended term then in effect;
and (b) Practice is not in material default hereunder on the date of
commencement of the extended term.
6.2 TERMINATION.
(a) Manager may terminate this Agreement, and have no
further liability or obligation hereunder, upon the occurrence of one or more of
the following events:
(i) Practice repeatedly fails to perform in a
material respect its material obligations hereunder and such repeated failure
continues for a period of forty-five (45) days after Practice's receipt of
written notice specifying such failure; provided, however, that if such failure
cannot be cured within forty-five (45) days, but is capable of being cured
within a reasonable period of time in excess of forty-five (45) days, then
Manager shall not be entitled to terminate this Agreement if Practice commences
the cure of such failure within the first forty-five (45) day period and
thereafter diligently and in good faith continues to prosecute such cure until
completion; provided, further, that if Practice or any Physician Shareholder or
Practice Employee breaches Section 4.5(a) of this Agreement, Manager may
terminate this Agreement immediately upon written notice to Practice.
(ii) Practice voluntarily files a petition in
bankruptcy or makes
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an assignment for the benefit of creditors or otherwise seeks relief from
creditors under any federal or state bankruptcy, insolvency, reorganization or
moratorium statute, or Practice is the subject of an involuntary petition in
bankruptcy which is not set aside within sixty (60) days of its filing.
(iii) Practice is in material breach or default
under any other written agreement with Manager, subject to any applicable notice
and cure periods provided in any such agreement.
(iv) Any representations and warranties made by
Practice in this Agreement prove to have been untrue or incorrect in any
material respect.
(v) If in any calendar year the licenses of more
than 25% in number of the Physician Shareholders or physician Practice Employees
to practice medicine in the State of Illinois are suspended or revoked, or are
subjected to final disciplinary action by the State Board of Medicine or any
similar body on any grounds, other than minor, immaterial or insubstantial
grounds, or die or become mentally or physically disabled and, by reason of such
disability, are in the reasonable judgment of Manager unable to conduct medical
practice on substantially the same basis as conducted prior to such disability,
or if in any calendar year more than 25% of the Physician Shareholders retire or
sell their interests in Practice and cease to practice medicine on substantially
a full-time basis as Practice Employees; provided, however, that in any such
event Practice shall have one hundred eighty (180) days from the date on which
Manager gives Practice written notice of its intent to terminate this Agreement
pursuant to this Section 6.2(a)(v) to replace the affected physicians with other
physicians satisfactory to Manager, in its reasonable discretion; provided
further, however, that Manager and Practice may agree to bring in a locum tenens
physicians to provide physician services during such one hundred eighty (180)
day period.
(vi) Manager and Practice are unable,
notwithstanding diligent efforts to do so, to agree on any modifications or
amendments to the then-current capital and operating budgets for the medical
practice of Practice which Manager reasonably deems to be necessary in light of
the circumstances then prevailing.
(b) Practice may terminate this Agreement, and have no further
liability hereunder, upon the occurrence of one or more of the following events:
(i) Manager repeatedly fails to perform in a
material respect its material obligations hereunder and such repeated failure
continues uncured for a period of forty-five (45) days after Manager's receipt
of written notice specifying such failure, provided, however, that if such
failure cannot be cured within forty-five (45) days, but is capable of being
cured within a reasonable period of time in excess of forty-five (45) days, then
Practice shall not be entitled to terminate this Agreement if Manager commences
the cure of such failure within the first forty-five (45) day period and
thereafter diligently and in good faith continues to prosecute such cure until
completion.
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(ii) Manager voluntarily files a petition in
bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under federal or state bankruptcy, insolvency,
reorganization or moratorium statute, or Manager is the subject of an
involuntary petition in bankruptcy which is not set aside within sixty (60) days
of its filing.
6.3 REMEDIES UPON TERMINATION.
If this Agreement is terminated pursuant to Section 6.2,
Manager's management fees under this Agreement shall be deemed earned through
the date of termination. Any management fees due Manager shall be paid within
thirty (30) days after the effective date of termination. If this Agreement is
terminated pursuant to Sections 6.2(a)(i), 6.2(a)(iii), 6.2(a)(iv), or 6.2(b)(i)
of this Agreement, the non-breaching party may pursue such other legal or
equitable relief and remedies as may be available in addition to such proration.
6.4 REPURCHASE OF EQUIPMENT AND SUPPLIES. Upon the termination of
this Agreement prior to the end of the forty (40) year initial term (other than
a termination by Practice pursuant to Section 6.2(b), Manager shall have the
additional right to require Practice to repurchase all or any portion of the FFE
and all then unused supplies located at the Medical Offices and other items of
personal property purchased by Manager for specific use at the Medical Offices,
from Manager at a repurchase price equal to $2,150,000 minus the product of (x)
$53,750 times (y) the number of years of the initial term which have been
completed at the time of any such termination. Exercise of this right by Manager
shall be accomplished by written notice to Practice within thirty (30) days
after the termination of this Agreement. Such notice of exercise shall also
specify a time and date for a closing to be held to consummate such purchase and
sale, such closing to be within ninety (90) days after the termination of this
Agreement at the offices of Manager in Illinois, or such other location as
Manager shall designate in such written notice. At the closing Practice shall
purchase such FFE and unused supplies from Manager hereunder by delivery of cash
or immediately available funds, or rights to shares of PSC Common Stock under
the Asset Acquisition Agreement which have not yet been delivered or shares
delivered under the Asset Acquisition Agreement for which Rule 144 is not yet
available (valued at the closing price of the trading day immediately preceding
the day of tender), against delivery of a xxxx of sale from Manager transferring
all its right, title or interest in or to same. The repurchase requirements
contained in this paragraph are in addition to, and not in lieu of, any other
rights and remedies that Manager may have under any other agreements.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
7.1 REPRESENTATIONS AND WARRANTIES OF PRACTICE. Practice hereby
represents and warrants to Manager as follows:
(A) ORGANIZATION AND GOOD STANDING. Practice is a medical practice
corporation duly organized, validly existing and in good standing under the laws
of the
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State of Illinois. Practice has all necessary power to own all of its properties
and assets and to carry on its business as now being conducted.
(B) NO VIOLATIONS. Practice has the corporate authority to
execute, deliver and perform this Agreement and all agreements executed and
delivered by it pursuant to this Agreement, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement and such
related documents. The execution and delivery of this Agreement does not and,
subject to the consummation of the transactions contemplated hereby, will not,
violate any provisions of the Articles or Certificate of Incorporation or Bylaws
of Practice or any provisions of or result in the acceleration of, any material
obligation under any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree, to which Practice is a party, or by which
it is bound. This Agreement has been duly executed and delivered by Practice and
constitutes the legal, valid and binding obligation of Practice, enforceable in
accordance with its terms.
(C) PROFESSIONAL LIABILITY. No Physician Shareholder or physician
Practice Employee has ever (a) had his license to practice medicine in any state
or his Drug Enforcement Agency number suspended, relinquished, terminated,
restricted or revoked; (b) been reprimanded, sanctioned or disciplined by any
licensing board, or any federal, state or local society or agency, governmental
body or specialty board; (c) had entered against him final judgment in, or
settle without judgment, a malpractice or similar action for an aggregate award
or amount to the plaintiff in excess of Fifty Thousand and No/100 Dollars
($50,000.00); or (d) had his medical staff privileges at any hospital or medical
facility suspended, terminated, restricted or revoked other than temporary
suspension for failure to timely complete medical records.
7.2 REPRESENTATIONS AND WARRANTIES OF MANAGER. Manager hereby
represents and warrants as follows:
(A) ORGANIZATION AND GOOD STANDING. Manager is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Manager has all necessary power to own all of its properties and
assets and to carry on its business as now being conducted.
(B) NO VIOLATIONS. Manager has the corporate authority to execute,
deliver and perform this Agreement and has taken all action required by law, its
Articles or Certificate of Incorporation, its Bylaws or otherwise to authorize
the execution, delivery and performance of this Agreement. The execution and
delivery of this Agreement does not and, subject to the consummation of the
transactions contemplated hereby, will not, violate any provisions of the
Articles or Certificate of Incorporation or Bylaws of Manager or any provisions
of or result in the acceleration of, any material obligation under any mortgage,
lien, lease, agreement, instrument, order, arbitration award, judgment or
decree, to which Manager is a party, or by which it is bound. This Agreement has
been duly executed and delivered by Manager and constitutes the legal, valid and
binding obligation of Manager, enforceable in accordance with its terms.
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SECTION 8. INSURANCE AND INDEMNITY.
8.1 INSURANCE TO BE MAINTAINED BY PRACTICE. Practice shall
provide, or shall arrange for the provision of, and maintain throughout the
entire term of this Agreement, professional liability insurance coverage on
Practice and each of Practice's employees and agents, including, but not limited
to, all Physician Shareholders and Practice Employees, in the minimum amount of
Three Million and No/100 Dollars ($3,000,000.00) per occurrence and Five Million
and No/100 Dollars ($5,000,000.00) annual aggregate including "tail coverage" to
the extent necessary to ensure continuity of coverage. Practice shall provide to
Manager written documentation evidencing such insurance coverage. Practice
shall, at its sole cost and expense, pay the premium costs of all such
professional liability insurance coverage during the term of this Agreement.
Practice shall provide, or shall arrange for the provision of, and shall
maintain throughout the entire term of this Agreement, workers' compensation
insurance coverage on Practice and each of its employees and agents, including,
but not limited to, all Physician Shareholders and Practice Employees, in the
amounts required by law. Practice shall provide to Manager written documentation
evidencing such insurance coverage. Practice shall, at its sole cost and
expense, pay the premium costs of all such workers' compensation insurance
coverage. Manager agrees to administer and manage the above insurance.
8.2 INDEMNIFICATION BY MANAGER. Manager shall indemnify and hold
harmless Practice, its shareholders, directors, officers, agents, employees and
other personnel and Otolaryngology Medical and Surgical Associates, Ltd. from
and against any and all claims, demands, liabilities, losses, damages, costs and
expenses (including reasonable attorney's fees, court costs and other expenses
incurred in defending against claims or otherwise connected therewith)
(hereinafter a "Loss" or "Losses") resulting in any manner, directly or
indirectly, from the gross negligence or intentional acts or omissions of
Manager, its directors, officers, employees, independent contractors or agents.
8.3 INDEMNIFICATION BY PRACTICE. Practice shall indemnify and hold
harmless Manager, its shareholders, directors, officers, agents, employees and
other personnel from and against any all Losses resulting in any manner,
directly or indirectly, from the gross negligence, professional malpractice or
intentional acts or omissions of Practice, its Physician Shareholders, Practice
Employees or independent contractors.
8.4 INDEMNIFICATION PROCEDURE. Within 60 days after an indemnified
person under Section 8.2 or 8.3 (an "Indemnified Person") receives written
notice of the commencement of any action or other proceeding, or otherwise
becomes aware of any claim or other circumstance, in respect of which
indemnification or reimbursement is being sought under Section 8.2 or Section
8.3, such Indemnified Person shall notify the Party required to indemnify
hereunder (the "Indemnitor"). If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
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proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to employ
separate counsel at Indemnitor's expense and to control its own defense of such
action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Person, (a) there are or may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to Indemnitor and which could not be adequately
advanced by counsel chosen by Indemnitor, or (b) a conflict or potential
conflict exists between Indemnitor and such Indemnified Person that would make
such separate representation advisable; provided, however, that in no event
shall Indemnitor be required to pay fees and expenses hereunder for more than
one firm of attorneys in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
8.5 KEY MAN INSURANCE. Practice agrees, and shall cause its
Physician Shareholders and Practice Employees to agree, that Manager may obtain,
at its sole expense (and not as a Practice Expense) and for its sole benefit,
"key man" life insurance policies on any or all Physician Shareholders and
Practice Employees. Neither Practice nor any Physician Shareholder or Practice
Employee shall have any right, title or interest in or to the proceeds of any
such insurance policies. Practice shall cause its Physician Shareholders and
Practice Employees to cooperate with Manager, as reasonably requested by Manager
from time to time, in obtaining any such insurance policies, including, but not
limited to, causing such Physician Shareholders and Practice Employees to submit
to such physical examinations and providing such information relating to
insurability as Manager may reasonably request from time to time.
SECTION 9. ASSIGNMENT.
The parties hereby agree that this Agreement shall not be assigned or
transferred by Manager or Practice without the prior written consent of the
other; provided, however, that this Agreement may be assigned, in whole or in
part, by Manager, in its sole discretion, without the consent of Practice, to
any parent, subsidiary or affiliate of Manager or to any person or entity that
acquires all or substantially all of the assets of Manager or Parent.
Notwithstanding the foregoing, the Practice agrees and consents to the Manager
granting to the Credit Facility Lender a security interest in all of the
Manager's right, title and interest in and under this Agreement as security for
the Manager's obligations under a guaranty of all of the Parent's indebtedness
and other obligations owing to the Credit Facility Lender. Any such assignment
shall not affect the guaranty by Parent of the obligations of Manager hereunder.
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SECTION 10. COMPLIANCE WITH REGULATIONS.
10.1 PRACTICE OF MEDICINE. The parties hereto acknowledge that
Manager is not authorized or qualified to engage in any activity which may be
construed or deemed to constitute the practice of medicine. Neither of the
Parties shall suggest or hold Manager out to the public as being engaged in the
practice of medicine. To the extent any act or service herein required of
Manager should be construed or deemed to constitute the practice of medicine,
the performance of said act or service by Manager shall be deemed waived and
forever unenforceable. Practice and its Physician Employees and Practice
Employees shall be unfettered in the exercise of their professional medical
judgment with respect to matters under consideration which require the exercise
of such judgment.
10.2 SUBCONTRACTS. Pursuant to Title 42 of the United States Code
and applicable rules and regulations thereunder, until the expiration of four
(4) years after termination of this Agreement, Manager shall make available,
upon appropriate written request by the Secretary of the United States
Department of Health and Human Services or the Comptroller General of the United
States General Accounting Office, or any of their duly authorized
representatives, a copy of this Agreement and such books, documents and records
as are necessary to certify the nature and extent of the costs of the services
provided by Manager under this Agreement. Manager further agrees that if it
carries out any of its duties under this Agreement through a subcontract with a
value or cost of Ten Thousand and No/100 Dollars ($10,000.00) or more over a
twelve (12) month period with a related organization, such subcontract shall
contain a clause to the effect that until the expiration of four (4) years after
the furnishing of such services pursuant to such subcontract, the related
organization shall make available, upon appropriate written request by the
Secretary of the United States Department of Health and Human Services or the
Comptroller General of the United States General Accounting Office, or any of
their duly authorized representatives, a copy of such subcontract and such
books, documents and records of such organization as are necessary to verify the
nature and extent of such costs. Disclosure pursuant to this Section shall not
be construed as a waiver of any other legal right to which Manager may be
entitled under law or regulation.
SECTION 11. INDEPENDENT RELATIONSHIP.
11.1 INDEPENDENT CONTRACTOR STATUS.
(a) It is acknowledged and agreed that Practice and
Manager are at all times acting and performing hereunder as independent
contractors. Manager shall neither have nor exercise any control or direction
over the methods by which Practice, Physician Shareholders and Practice
Employees practice medicine. The sole function of Manager hereunder is to
provide all Management Services in a competent, efficient and satisfactory
manner. Manager shall not, by entering into and performing its obligations under
this Agreement, become liable for any of the existing obligations, liabilities
or debts of Practice unless otherwise specifically provided for under the terms
of this Agreement. In its management role, Manager will have only an obligation
to exercise reasonable care in the performance of the Management Services.
Manager shall have no liability whatsoever
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for damages suffered on account of the willful misconduct or negligence of any
employee, agent or independent contractor of Practice. Each party shall be
solely responsible for compliance with all state and federal laws pertaining to
employment taxes, income withholding, unemployment compensation contributions
and other employment related statutes regarding their respective employees,
agents and servants.
(b) If any court or regulatory authority shall determine
that the independent contractor relationship established hereby violates any
statutes, rules or regulations (or in the event that Manager, in good faith,
determines that there is a material risk that such a determination would be made
by any court or regulatory authority), then the parties will negotiate in good
faith to enter into an employment arrangement between Manager and the
then-current Physician Shareholders and Practice Employees which substantially
preserves for the parties the relative economic benefits of this Agreement. If
the parties cannot reach agreement on such an employment arrangement, Manager
may terminate this Agreement upon ninety (90) days prior written notice to
Practice.
11.2 REFERRAL ARRANGEMENTS. The parties hereby acknowledge and
agree that no benefits to Practice hereunder require or are in any way
contingent upon the admission, recommendation, referral or any other arrangement
for the provision of any item or service offered by Manager or any of its
affiliates, to any patients of Practice, Practice's employees or agents.
SECTION 12. GUARANTEES.
(a) Irrevocable Guaranty by Parent. To induce Practice to execute
and deliver this Agreement, Parent hereby unconditionally and irrevocably
guarantees the Practice the full, prompt and faithful performance by Manager of
all covenants and obligations to be performed by Manager under this Agreement.
This guaranty shall be a guaranty of payment, not merely collection, and shall
be unaffected by any subsequent modification or amendment of this Agreement
whether or not Parent has knowledge of or consented to such modification or
amendment. In the event that Manager fails to fully perform all such covenants
and obligations in accordance with their terms or pay all or any part of such
sums or deliver all or any part of such property when due, Parent will perform
all such covenants and obligations in accordance with their terms or immediately
pay or deliver to Practice (or such other payee or transferee as may be provided
in any such agreement) the amount due and unpaid or the property not delivered,
as the case may be, by Manager. In the event of bankruptcy, termination,
liquidation or dissolution of Manager, this unconditional guaranty shall
continue in full force and effect. In the event of any extension of time for
payment or performance or other modification of any guaranteed obligation or
covenant, or any waiver thereof or other compromise or indulgence with respect
thereto or any release or impairment of any security for any such obligation or
covenant, or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor, no notice to, or consent of,
Parent shall be required.
(b) Irrevocable Guaranty by Physician Shareholders. To induce
Manager to
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execute and deliver this Agreement, the undersigned Physician Shareholders,
during the term of such Physician Shareholder's employment with Practice and for
a period of five (5) years thereafter, (i) jointly and severally unconditionally
and irrevocably guarantee to Manager the full, prompt and faithful performance
by Practice of all covenants and obligations to be performed by Practice under
Sections 3.6, 4.4, 4.5(a) through 4.5(e), 5.2, 6.4, and 7.1(a) and 7.1(b) of
this Agreement, and (ii) severally unconditionally and irrevocably guarantee to
Manager the full, prompt and faithful performance by Practice of all covenants
and obligations to be performed by Practice of all covenants and obligations to
be performed by Practice under Sections 4.5(f), 8.1 and 8.3. The several
liabilities of the Physician Shareholders under Section (ii) shall be
twenty-five percent (25%) each during the term of such Physician Shareholder's
employment with Practice and for a period of five (5) years thereafter. This
guaranty shall be a guaranty of payment and performance, not merely collection,
and shall be unaffected by any subsequent modification or amendment of this
Agreement whether or not such guarantor has knowledge of or consented to such
modification or amendment. In the event that Practice fails to fully perform all
such covenants and obligations in accordance with their terms or pay all or any
part of such sums or deliver all or any part of such property when due, the
Physician Shareholders will perform all such covenants and obligations in
accordance with their terms or immediately pay or deliver to Manager (or such
other payee or transferee as may be provided in any such agreement) the amount
due and unpaid or the property not delivered, as the case may be, by Practice.
In the event of bankruptcy, termination, liquidation or dissolution of Practice,
this unconditional guaranty shall continue in full force and effect. In the
event of any extension of time for payment or performance or other modification
of any guaranteed obligation or covenant, or any waiver thereof or other
compromise or indulgence with respect thereto or any release or impairment of
any security for any such obligation or covenant, or any other circumstance
which might otherwise constitute a legal or equitable discharge of a surety or
guarantor, no notice to, or consent of, Practice or any other Physician
Shareholder shall be required.
SECTION 13. NAME; LICENSE. Practice agrees that it shall conduct its
medical practice under the name of, and only under the name of "Otolaryngology
Medical and Surgical Associates, Ltd.", subject to the terms of the Trademark
License between the parties of even date herewith. In the event of any
termination of the Trademark License, Practice agrees to change the name under
which it conducts its medical practice to a distinctly different name.
SECTION 14. MISCELLANEOUS.
14.1 NOTICES. Any notice required or permitted by this Agreement or
any agreement or document executed and delivered in connection with this
Agreement shall be deemed to have been served properly if hand delivered or sent
by overnight express, charges prepaid and properly addressed, to the respective
party to whom such notice relates at the following addresses:
If to Practice:
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Otolaryngology Medical and Surgical Associates, Ltd.
000 X. Xxxxx Xxxxx Xxx., Xxxxx 0
Xxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxxxxxx, M.D.
Facsimile: (000) 000-0000
with a copy of each notice directed to:
If to Manager:
PSC MANAGEMENT CORP.
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Secretary
Facsimile: (000) 000-0000
If to Parent:
PHYSICIANS' SPECIALTY CORP.
0000 Xxxxxxxxx Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile:(000)000-0000
with a copy of each notice directed to Manager or Parent to:
Xxxxxxx X. Xxxxx
Xxxxxxxx Xxxxxxx LLP
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
or such other address as shall be furnished in writing by any party to the other
party. All such notices shall be considered received when hand delivered or one
business day after delivery to the overnight courier.
14.2 ADDITIONAL ACTS. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.3 GOVERNING LAW. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State applied without giving
effect to any conflicts-of-law principles.
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14.4 CAPTIONS, ETC. The captions or headings in this Agreement are
made for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement. All Addenda and Exhibits to this Agreement are hereby incorporated
into this Agreement by this reference.
14.5 SEVERABILITY. In the event any term, covenant, condition,
agreement, section or provision hereof shall be deemed invalid or unenforceable
by a court of competent and final jurisdiction in the premises, the same shall
be severable and this Agreement shall not terminate or be deemed void or
voidable, but shall continue in full force and effect without such stricken
provision.
14.6 CHANGES IN REIMBURSEMENT. If Medicare, Medicaid, Blue
Cross/Blue Shield or any other third party payor, or any other Federal, state or
local laws, rules, regulations or interpretations, at any time during the term
of this Agreement, prohibit, restrict or in any way materially and adversely
change the method or amount of reimbursement or payment for services rendered by
Practice pursuant to this Agreement or of the method of compensation for either
party provided for in this Agreement, then the parties shall in good faith
consider any amendment of this Agreement proposed by the other to provide for
payment of compensation in a manner consistent with any such prohibition,
restriction or limitation and which takes into account any materially adverse
change, provided such amendments are consistent with the overall economic and
other objectives of the parties set forth in this Agreement.
14.7 MODIFICATIONS. This instrument contains the entire agreement
of the parties and supersedes any and all prior or contemporaneous negotiations,
understandings or agreements between the parties, written or oral, with respect
to the transactions contemplated hereby. This Agreement may not be changed or
terminated orally, but may only be changed by an agreement in writing signed by
a duly authorized officer of Manager if Manager is the party against whom
enforcement of any such waiver, change, modification, extension, discharge or
termination is sought, or by Practice if Practice is the party against whom
enforcement of any such waiver, change, modification, extension, discharge or
termination is sought. The parties expressly acknowledge that this Section 14.7
may not be waived, modified or changed by any other persons except the Chief
Executive Officer or Chief Financial Officer of Manager and Practice.
14.8 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by Manager solely as a convenience and that all
parties and their counsel have read and fully negotiated all the language used
in this Agreement. The parties acknowledge and agree that because all parties
and their counsel participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes any language,
whether ambiguous, unclear or otherwise, in favor of, or against any party by
reason of that party's role in drafting this Agreement.
14.9 COUNTERPARTS. This Agreement may be executed in several
counterparts,
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each of which, when so executed, shall be deemed to be an original, and such
counterparts shall, together, constitute and be one and the same instrument.
14.10 BINDING EFFECT. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto, and their successors and permitted
assigns. Subject to the foregoing sentence, no person not a party hereto shall
have any right under or by virtue of this Agreement.
14.11 ENFORCEMENT RIGHTS. Practice acknowledges that both Practice
and Manager will be directly or indirectly affected by the enforcement of
Practice's contractual and other legal rights against third parties and by
Practice's enforcement of the rights of third parties the enforcement rights of
which were delegated to Practice by such third parties, and that Manager may
need from time to time to take legal action against third parties to enforce
such rights. Therefore, Practice hereby appoints Manager its nonexclusive true
and lawful attorney-in-fact to enforce any and all rights of Practice, other
than any rights Practice may have against Manager, and to enforce the rights of
third parties the enforcement rights of which were delegated to Practice by such
third parties, to the extent not contrary to applicable law. Practice agrees to
execute any instrument reasonably requested by Manager to evidence such
appointment or to reappoint Manager as such attorney-in-fact upon any
termination of the appointment made hereby. Such appointment is coupled with an
interest and irrevocable.
14.12 COSTS OF ENFORCEMENT. If either party files suit in any court
against the other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable costs, including reasonable attorneys' fees,
from the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if any)
is rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those attorneys' fees actually incurred in obtaining a
judgment in favor of the prevailing party.
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IN WITNESS WHEREOF, Practice, Manager and Parent have duly executed
this Agreement on the day and year first above written.
PSC MANAGEMENT CORP. NEW OTOLARYNGOLOGY MEDICAL
AND SURGICAL ASSOCIATES, LTD.
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxx X. Xxxxxxxx
----------------------------- -----------------------------
Title: Vice President Title: President
-------------------------- --------------------------
PHYSICIANS' SPECIALTY CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice Chairmen
--------------------------
The undersigned, constituting all of the Physician Shareholders, hereby
ratify and confirm the above Agreement and agree to be bound by its terms,
including, but not limited to, Section 12(b) hereof.
/s/ Xxx X. Xxxxxxxx
----------------------------
Xxx X. Xxxxxxxx, M.D.
/s/ Xxxx X. Xxxxxxxxxx
----------------------------
Xxxx X. Xxxxxxxxxx, M.D.
/s/ Xxxxx X. Xxxxxxx
----------------------------
Xxxxx X. Xxxxxxx, M.D.
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxx, M.D.
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APPENDIX A
DEFINITIONS
Defined Term Section
Confidential Information 4.6(e)
Credit Facility Lender 5.2(b)
Effective Date Preamble
Extended term 6.1
FFE 3.3
GAAP 1.2
Indemnified Person 8.4
key man 8.5
Laws 3.12
Manager Preamble
Medical Offices 3.1
Net Practice Revenues 1.3
Parent Preamble
Parties Background
Physician Employment Agreements 3.14
Physician Expenses 4.1
Physician Shareholders 1.4
Practice Preamble
Practice IP 4.6(d)
Practice Employees 1.5
Practice Expenses 1.6
PSC Background
Reasonable attorneys' fees 14.11
State 1.7
