EXECUTION COPY
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") is
entered into as of December 23, 1996 (the "Signature Date"),
effective as of November 1, 1996, by and between SOUTH TEXAS
SPINAL CLINIC, .A., a Texas professional association (the
"Medical Group"), and BONE, MUSCLE AND JOINT, INC., a
Delaware corporation (the "Management Company"), with
reference to the following facts:
A. The Medical Group is engaged in the business (the "Medical
Business") of providing orthopedic medical and surgical services and related
medical and ancillary services to the general public.
B. The Management Company is a corporation engaged in the business (the
"Management Business") of providing management, administrative, financial,
marketing, information technology, and related services to professional medical
organizations.
C. Concurrently herewith, the Management Company and the Medical Group
have entered into an Asset Purchase Agreement (the "Asset Purchase Agreement"),
pursuant to which the Management Company has acquired substantially all of the
assets of the Medical Group.
D. The Management Company and the Medical Group now desire to enter
into this Management Services Agreement, pursuant to which, among other things,
the Management Company will render certain management and administrative
services to the Medical Group.
NOW, THEREFORE, the Medical Group and the Management Company hereby
agree as follows:
SECTION I. Retention of the Management Company.
1.1. RETENTION.
The Medical Group hereby retains the Management Company to provide all
of the management and related services identified or referenced in Section 3
hereof and as otherwise required by this Agreement (collectively, the
"Management Services"), and the Management Company hereby accepts such retention
and agrees to provide such services, upon the terms and subject to the
conditions set forth herein.
1.2. EXCLUSIVITY.
During the term of this Agreement, the Management Company shall be the
exclusive provider of all management and administrative services utilized by the
Medical Group; provided, however, that the Medical Group may contract directly
with or otherwise engage individuals or companies for the provision of
accounting, legal, consulting, or other professional or advisory services
(provided that such services shall be in addition to, and not in replacement of,
the services to be provided by the Management Company hereunder), all in the
sole discretion of the Medical Group and at the sole cost of the Medical Group.
1.3. RELATIONSHIP OF PARTIES.
Notwithstanding anything contained herein to the contrary, (a) the
Management Company and the Medical Group intend to act and perform as
independent contractors, and the provisions hereof are not intended to create
any partnership, joint venture, or employment relationship between the parties,
and (b) the Management Company is hereby engaged solely to provide management
and administrative services to the Medical Group and shall not interfere with,
control, direct, or supervise the Medical Group or any medical professional
employed by the Medical Group in connection with the provision of professional
medical services.
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1.4. NO REFERRAL OBLIGATION.
The parties agree that the benefits to the Medical Group hereunder do
not require, are not payment for, and are not in any way contingent upon the
admission, referral, purchase, or any other arrangement for the provision of any
item or service to or for any of the Medical Group's patients in or from any
medical facility or laboratory or from any other entity owned, operated,
controlled, or managed by the Management Company. The Management Company shall
provide prior written notice to the Medical Group before acquiring any
ownership, investment interest, or control in, or entering into any agreement or
arrangement pursuant to which the Management Company would become responsible
for all or any part of the operations or management of, any medical facility,
laboratory, or any provider or supplier of ancillary services, diagnostic or
therapeutic equipment, prosthetic or orthotic devices, medical supplies, or
other items or services furnished to or for use by patients, but only if any of
the foregoing is located in California or serves the geographic area served by
the Medical Group.
SECTION 2. TERM.
Provided that the Closing under the Asset Purchase Agreement shall have
occurred as provided therein, and subject to such start-up procedures as the
parties may agree upon for purposes of facilitating the transition of
responsibilities required by this Agreement, the performance of services under
this Agreement shall commence as of November 1, 1996 (the "Commencement Date")
and shall expire on the fortieth anniversary of the Commencement Date unless
terminated earlier pursuant to the terms hereof (the "Base Term"). The Base Term
of this Agreement shall be automatically extended for additional terms
("Additional Terms" and together with the Base Term, the "Term") of five years
each, unless either party delivers to the other party, not less than six (6)
months nor more than nine (9) months prior to the expiration of the then-current
Term, written notice
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of such party's intention not to extend the Term of this Agreement.
SECTION 3. MANAGEMENT SERVICES.
3.1. MANAGEMENT SERVICES GENERALLY.
(a) The Management Company shall be the sole and exclusive manager and
administrator of all day-to-day business functions for the Medical Group,
subject to the provisions of Section 1.2 hereof. The Management Company shall
provide all of the management and administrative services reasonably required by
the Medical Group in connection with the provision of any and all of the Medical
Group Services and as otherwise provided in this Agreement, including without
limitation the services described in Sections 3.2 through 3.17 hereof.
(b) Without limiting the generality of the provisions of Section
3.1(a), the Management Services shall include such management and administrative
services as may be reasonably required in connection with (i) all of the offices
(including New Medical Offices) of the Medical Group, and (ii) all professional
services and all ancillary services furnished by the Medical Group.
(c) Additionally, the full range of Management Services as described
in this Agreement shall be applicable with respect to the items identified as
Medical Group Costs in Section 5.7 hereof, except that such Medical Group Costs
shall be paid by the Medical Group rather than by the Management Company.
Accordingly, the Management Company shall provide accounting, bookkeeping, and
related services with respect to all such costs.
(d) The Management Company may enter into such contracts and
agreements with outside services and suppliers as the Management Company shall
reasonably deem necessary in connection with the provision of the Management
Services, and, to the extent permitted by applicable law, such contracts and
agreements shall, except as otherwise expressly provided in this Agreement, be
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in the name of the Management Company. The Management Company shall have no
authority, directly or indirectly, to perform, and shall not perform or enter
into any agreement to perform, Medical Services or any other medical function
required by law to be performed by a licensed physician or by any other licensed
health care professional.
(e) The Management Company shall comply in all material respects with
all applicable material Federal, state and local laws, regulation, and
ordinances in connection with the provision of the Management Services
hereunder.
3.2. PREMISES.
(a) The Medical Group, as of the Commencement Date of this Agreement,
provides Medical Services at the following locations:
(i) Suite Lease between ▇▇▇▇▇▇▇ Enterprises, L.C., as Lessor,
and Medical Group, as Lessee, dated March 1, 1994 for premises commonly
known as Suites 220 and 300, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇;
(ii) Suite Lease between International Bank of Commerce, Inc.,
as Lessor, and Medical Group, as Lessee, dated September 7, 1994 for
premises commonly known as ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇;
(iii) Suite Lease between Memorial Professional Services Inc.,
as Lessor, and Medical Group, as Lessee, dated January 23, 1995 for
premises commonly known as ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇;
(iv) Suite Lease between S.W.R.O.E., Inc. as Lessor, and Medical
Group, as Lessee dated April 30, 1996 for premises commonly known as ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇, ▇▇▇▇▇▇, ▇▇;
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(v) Suite Sub-Lease arrangement between J. ▇▇▇▇▇ ▇▇▇▇▇▇, III,
M.D., P.A., and Medical Group dated February 28, 1996 at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇;
(vi) Suite Sub-Lease arrangement between Crossroads Orthopedics,
P.A., and Medical Group dated March 19, 1996 at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇; and
(vii) Suite Lease arrangement between Medplex Rentals and
Medical Group dated December 1, ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇.
Immediately prior to the Commencement Date of this Agreement, all of the
above-identified premises were leased to the Medical Group, in the Medical
Group's name. Effective from and after the Commencement Date of this Agreement,
each of the leases of such premises are to be assigned from the Medical Group to
the Management Company pursuant to an assignment substantially in the form of
the Assignment of Lease attached hereto as Exhibit D. Additionally, the
Management Company shall sublease each of such premises to the Medical Group
pursuant to a sublease (each, an "Office Sublease") substantially in the form of
the Office Sublease attached hereto as Exhibit E, in consideration of the
payments to be made by the Medical Group under such Office Sublease. The parties
intend that the payments to be made by the Medical Group to the Management
Company pursuant to an Office Sublease shall equal the amounts payable by the
Medical Group to the landlord under the assigned lease corresponding to such
Office Sublease. Upon the expiration of each of the premises leases assigned in
accordance with this Section 3.2(a), the Management Company shall use its best
efforts to enter into a new lease, in the name of the Management Company, with
the landlord of such premises, and the parties shall amend the applicable
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Office Sublease or enter into a new sublease relating to such new premises
lease; provided, however, that the approval of the Medical Group, which shall
not be unreasonably withheld, shall be required in the event of any substantial
changes in the terms of the premises lease, and if the Medical Group does not
give such approval, the failure to enter into such new premises lease shall not
constitute a default of the Management Company. Each assigned lease and each new
lease entered into between the Management Company and the landlord is referred
to herein as an "Office Lease."
(b) A New Medical Office (as hereinafter defined) may be opened only
upon the agreement of the Medical Group and the Management Company. The capital
costs and start-up costs reasonably required in connection with the opening of
any New Medical Office shall be borne as set forth in Section 5 hereof. The
premises of any New Medical Office shall be leased to the Management Company, in
the Management Company's name, and the Medical Group shall not be required to
lease any such premises. Additionally, the Management Company shall sublease
such premises to the Medical Group pursuant to a sublease substantially in the
form of the Sublease attached hereto as Exhibit E, in consideration of the
payments to be made by the Medical Group under such sublease.
(c) The closing or relocation of any offices of the Medical Group
shall be subject to agreement by the Medical Group and the Management Company.
(d) The premises services to be provided by the Management Company
shall include, without limitation, the negotiation and renegotiation of leases,
provision of ongoing liaison with the landlords of the respective office
premises of the Medical Group, identification of potential new locations for
Medical Group offices, financial analysis relating to the opening, closing, and
relocation of offices, arranging for necessary repairs, maintenance and
improvements, procurement of
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property insurance, arranging for telephone and other utility services,
arranging for hazardous waste disposal, and all other reasonably necessary or
appropriate services related to all of the office premises of the Medical Group.
(e) The Management Company also shall provide all necessary or
appropriate leasehold improvements to each of the premises, subject to prior
approval as provided in Section 8.2 hereof.
(f) The Medical Group acknowledges that the Management Company makes
no warranties or representations, expressed or implied, regarding the condition
of any of the leased premises.
3.3. Equipment.
(a) The Management Company shall provide to the Medical Group all of
the diagnostic and therapeutic medical equipment reasonably required by the
Medical Group in connection with the provision of Medical Group Services (the
"Medical Equipment"). All Medical Equipment shall be provided by the Management
Company to the Medical Group in consideration of the rental payments to be made
by the Medical Group to the Management Company pursuant to an equipment lease
substantially in the form of the Medical Equipment Master Lease Agreement
attached hereto as Exhibit F. As used herein, the term Medical Equipment shall
not include medical equipment used in connection with a New Ancillary Service
(as hereinafter defined).
(b) The Management Company also shall provide to the Medical Group all
furniture, furnishings, trade fixtures, and office equipment reasonably required
in connection with the provision of Medical Group Services pursuant to this
Agreement (collectively, "FF&E"). The Management Company shall acquire, at its
cost, all FF&E, and the Management Company shall retain ownership of all FF&E.
The Management Fee payable to the Management Company under this Agreement is
intended to compensate
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the Management Company for the provision of FF&E for use by the Medical Group.
As used herein, the term FF&E does not include furniture, furnishings, trade
fixtures, and office equipment used in connection with a New Ancillary Service.
(c) The Medical Equipment and the FF&E are sometimes referred to
collectively as the "Equipment." The acquisition, replacement, relocation, or
other disposition of any Equipment shall require prior approval as provided in
Section 8.2 hereof.
(d) The Management Company's obligations with respect to the Equipment
are subject and subordinate to the provisions and obligations contained in any
financing, security interest, mortgage, lien or other encumbrance the Management
Company may, in its reasonable discretion, place upon the Equipment through an
unaffiliated third party. The Medical Group shall use the Equipment only in
connection with its provision of the Medical Group Services, and the Medical
Group shall not alter, repair, augment, or remove the Equipment from the
premises of the Medical Group without the prior written consent of the
Management Company and any lessor thereof, which approval may be granted or
withheld in the Management Company's or such lessor's sole discretion. To the
extent the Equipment is utilized by the Medical Group in the provision of
Medical Group Services, the Medical Group shall have the right to exercise
reasonable control over the use of such Equipment.
(e) From time to time, and as reasonably requested by the Medical
Group, the Management Company shall use reasonable efforts to cause the
Equipment manufacturer or its authorized agent to provide service and
maintenance for the Equipment as needed to maintain the Equipment in an operable
condition, so that all such Equipment shall function continuously (subject to
interruptions not reasonably avoidable) in accordance with the manufacturer's
specifications and so that all conditions imposed by the manufacturer to
maintaining the continued effectiveness of
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any warranty on such Equipment shall be satisfied. The Management Company shall
take all reasonable steps to provide that all necessary service and maintenance
is obtained in a prompt and timely manner, so as to minimize the amount of time
that any of the Equipment is not available for usage by or for patients of the
Medical Group.
(f) THE MEDICAL GROUP ACKNOWLEDGES THAT THE MANAGEMENT COMPANY MAKES
NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER RELATING TO THE EQUIPMENT PROVIDED TO THE MEDICAL GROUP PURSUANT TO
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE DESIGN CONDITION OF THE
EQUIPMENT, THE CONFORMANCE THEREOF TO THE PROVISIONS AND SPECIFICATIONS OF ANY
PURCHASE ORDER RELATING THERETO, OR THE FITNESS OF THE EQUIPMENT FOR ANY
PARTICULAR PURPOSE. NOTWITHSTANDING THE FOREGOING DISCLAIMER, THE MANAGEMENT
COMPANY DOES WARRANT TO THE MEDICAL GROUP THAT THE X-RAY EQUIPMENT AND THE
COMPUTER HARDWARE AND COMPUTER SOFTWARE THAT THE MANAGEMENT COMPANY SELECTS FOR
USE BY THE MEDICAL GROUP SHALL BE SUITABLE FOR USE BY THE MEDICAL GROUP FOR SUCH
INTENDED USES. Nothing in this Agreement shall be construed to affect or limit
in any way the professional discretion of the Medical Group to select and use
any Equipment acquired by the Management Company in accordance with the terms of
this Agreement insofar as such selection or use constitutes or might constitute
the practice of medicine.
3.4. NEW ANCILLARY SERVICES.
(a) For purposes of this Agreement, "New Ancillary Services" means the
technical component (but not the professional component) of the following,
except as set forth in Schedule I:
(i) Physical therapy;
(ii) Magnetic resonance imaging and/or other imaging services
(except diagnostic radiology);
(iii) Outpatient surgery;
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(iv) Densitometry; and
(v) Other revenue-producing services generally recognized as
ancillary services, but excluding the following:
(A) Plain film radiography;
(B) Any other services provided on a regular basis by the
Medical Group immediately prior to the Commencement Date of this
Agreement, including without limitation (1) other diagnostic radiology
(if any) and (2) ultrasound for pediatric patients; and
(C) Any service performed in connection with new Medical
Equipment acquired to replace existing Medical Equipment so long as
the new Medical Equipment performs substantially the same functions as
the replaced Medical Equipment.
New Ancillary Services do not include the sale or provision of (or services
rendered in connection with) prosthetics, prosthetic devices, orthotics, braces,
splints, appliances, crutches, casts, or any other supplies or similar items
which are billable to patients or payors.
(b) New Ancillary Services may be established only upon agreement of
the Medical Group and the Management Company. Such agreement shall be
memorialized in a written agreement executed by the parties (or in a written
amendment to this Agreement) under which the Management Company agrees to
provide all of the Management Services described in this Section 3 in connection
with such New Ancillary Service, and for which the Management Company shall be
compensated as described in Section 5.8 of this Agreement, except as otherwise
agreed by the parties.
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3.5. ADMINISTRATION, FINANCE AND ACCOUNTING.
The Management Company shall provide or arrange for the provision of
all administrative, financial, and accounting functions necessary for the
operation of the Medical Group, including without limitation --
(a) Creation and maintenance of bank accounts.
(b) Deposits of receipts.
(c) Preparing accounts receivable summary reports, including various
analyses of delinquent accounts.
(d) Receiving appropriate approvals as required by the Medical Group's
General Partnership Agreement prior to distribution of payments to outside
parties; provided, however, that the Management Company shall not be responsible
for or liable with respect to interpretations of the General Partnership
Agreement.
(e) Disbursement of payables, including payables of the Medical Group;
provided, however, that payables of the Medical Group shall be paid from an
account of the Medical Group and not from the Management Company's Operating
Account, and all checks drawn on any Medical Group account shall be signed by a
partner in the Medical Group or other authorized representative of the Medical
Group.
(f) Negotiation of vendor contracts.
(g) Performing monthly accounting functions, including bank
reconciliations, maintenance of books and records, and preparation of financial
statements.
(h) Analyzing financial data as reasonably requested by physicians.
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(i) Analyzing potential new office locations, and coordinating all
functions associated with opening new office locations.
(j) Preparing monthly financial and medical practice statistics
reports:
(i) By satellite office; and
(ii) By physician
(k) Providing from the Medical Group's bank account(s) monthly draws
to physicians and professional corporations pursuant to service agreements,
monthly profit and loss distributions, and quarterly bonus calculations;
provided, however, that the Management Company shall not be responsible for or
liable with respect to interpretations of the General Partnership Agreement;
provided, further, that all checks drawn on any Medical Group account shall be
signed by a partner in the Medical Group or other authorized representative of
the Medical Group.
(1) Calculating physicians' and professional corporations' annual
earnings based on the Medical Group's profit and loss distribution formulas.
(m) Ongoing day-to-day communication with the managing partner and
assisting the managing partner in fulfilling his responsibilities.
(n) Preparing agendas and information packages for Medical Group
meetings.
(o) Developing budgets and long-term strategies for the Medical Group.
(p) Coordinating payroll processing and payroll tax payments.
(q) Providing ongoing personnel FTE analysis.
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(r) Providing administrative services (excluding the services of a
plan administrator) of the Medical Group's 401(k) and flexible spending plans;
provided, however, that the Management Company shall not be responsible for
investment decisions.
(s) Coordinating recruitment, interviewing, and hiring of new
physicians.
(t) Implementing Medical Group fee schedule increases and/or
decreases.
(u) Coordinating depositions and court appearances.
(v) Assisting in the coordination of call schedules.
(w) Assisting in the coordination of coverage of athletic team events.
(x) Assisting in the day-to-day administration of the Medical Group's
fellowship program, including the sports clinic.
(y) Acting as liaison to hospital administration, physical therapy,
surgery center, MRI, and other ancillary services entities.
(z) Cooperating with outside accountants in preparing various
schedules and providing other information.
(aa) Interacting with legal counsel as necessary.
3.6. BILLING AND COLLECTION.
(a) The Medical Group hereby irrevocably designates and appoints the
Management Company to be the agent of the Medical Group during the Term, to
perform the following duties and for those purposes incidental thereto: (i) to
▇▇▇▇
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patients and third party payors in the Medical Group's name and on its behalf;
(ii) to collect accounts receivable resulting from such billing; (iii) to
receive payments and prepayments from the Medical Group's patients, Blue Cross
and Blue Shield organizations, insurance companies, health care plans, Medicare,
Medicaid, HMO's and any and all other third party payors; (iv) to take
possession of and deposit into such bank (the "Medical Group Bank") as the
Medical Group designates, in an account established by the Medical Group in the
name of the Medical Group (the "Medical Group Collections Account"), any and all
checks, insurance payments, cash, cash equivalents and other instruments
received for Medical Group Services; and (v) to initiate with the consent of the
Medical Group, which consent may be withheld by the Medical Group in its sole
and absolute discretion, legal proceedings in the name of the Medical Group to
collect any accounts and monies owed to the Medical Group, to enforce the rights
of the Medical Group as a creditor under any contract or in connection with the
rendering of any service, and to contest adjustments and denials by governmental
agencies (or its fiscal intermediaries) as third-party payors. The Management
Company, in its capacity as agent pursuant to this paragraph, shall not have any
duties or responsibilities except those expressly set forth in clauses (i)
through (v) above. Following termination of this Agreement, the Management
Company shall continue to use reasonable efforts to collect the accounts
receivable of the Medical Group as of such termination date for a period of
ninety (90) days thereafter.
(b) From time to time at the Management Company's request, the Medical
Group shall make available to the Management Company one or more authorized
partners (the "Authorized Partners") of the Medical Group to sign any letters,
checks, instruments or other documents (the "Documents") on behalf of the
Medical Group that are necessary for the Management Group to perform its duties
as agent under this Section 3.6 and its other duties under this Agreement. If
the Management Company notifies the Medical Group that an Authorized Partner is
not signing the
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Documents in a timely manner, the Management Company shall not be liable for any
failure to perform its duties as agent hereunder or for any failure to perform
the Management Services to the extent caused by the failure of an Authorized
Partner to sign the Documents in a timely manner.
(c) The Management Company represents and warrants to the Medical
Group that it has sufficient knowledge and expertise in the area of billing for
orthopedic and other medical services and ancillary services to be able to
adequately perform the billing services required by the Medical Group hereunder.
The Management Company shall submit all bills and manage the billing process on
a timely basis in accordance with the terms of this Agreement and applicable
law.
(d) Without limiting the generality of the foregoing, the Management
Company shall ▇▇▇▇ patients, ▇▇▇▇ and submit claims to third party payors,
perform appropriate coding for each ▇▇▇▇, and collect all fees for professional
and other services rendered and for items supplied to patients by the Medical
Group, all in a timely manner and in accordance with parameters and criteria
established by the Operations Committee (as hereinafter defined). Additionally,
the Management Company shall provide the following services which are currently
being provided by or on behalf of the Medical Group:
(i) Receive and collect from patients at the time of visit all
appropriate payments and pre-payments, including co-pays, deductibles,
payments for non-covered medical services, and deposits for surgeries (if
applicable), and additionally shall obtain all appropriate insurance and
other information required.
(ii) Submit claims utilizing electronic billing submission,
whenever appropriate.
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(iii) Perform delinquent account collection calls and other
appropriate follow-up mechanisms for delinquent accounts of all insurance
classifications, all in a timely fashion as determined by the Operations
Committee.
(iv) Turn over to outside collection agencies all delinquent
accounts satisfying the criteria established by the Operations Committee.
The Management Company shall also follow-up on the performance of the
outside collection agencies and make changes if necessary, and additionally
shall reconcile each account turned over to the summary data provided by
the collection agency.
(v) Write-off account balances according to criteria approved by
the Operations Committee.
(vi) Prepare claim reviews in accordance with criteria approved
by the Operations Committee.
(vii) ▇▇▇▇ workers' compensation medical services at rates equal
to the most recently approved California workers' compensation fee
schedule.
(viii) Apply "insurance only" and other courtesy write-offs in
compliance with Operations Committee policy.
(ix) With respect to discounted fee-for-service contracts with
Preferred Provider Organizations (PPOs) and Health Maintenance
Organizations (HMOs), the Management Company shall determine that payments
from the PPOs and HMOs are in compliance with the contract with the Medical
Group.
(x) With respect to capitation fee contracts with HMOs, the
Management Company shall --
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(A) Follow-up to ensure that payments to the Medical Group
are made on a timely basis;
(B) Review and audit enrollment data provided by the HMO to
ensure that Medical Group is being compensated for the proper number
of lives enrolled.
(xi) With respect to lien accounts, the Management Company shall
--
(A) Ensure that appropriate documents are signed and agreed
to initially as between Medical Group, attorney and patient;
(B) Follow-up on a regular basis as to the status of the
account; and
(C) Apply the policies of the Operations Committee in
resolving open account balances.
(xii) With respect to student athlete accounts, the Management
Company shall coordinate insurances and other information in compliance
with the policy of the Operations Committee.
(xiii) With respect to amounts withheld by payors in compliance
with contracts between the payor and the Medical Group, the Management
Company shall follow-up on a timely basis to ensure that withheld amounts
are returned to the Medical Group, if warranted, and to ensure that amounts
not returned are verified and audited for appropriateness.
(xiv) Coordinate the timely payment of refunds to patients and
third party payors when appropriate.
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(xv) Ensure that revenue related to depositions, record review,
court appearances, athletic teams services, are accounted for, monitored,
followed-up, and ultimately collected.
3.7. PERSONNEL.
(a) The Management Company shall retain and provide or arrange for the
retention and provision of all of the following non-medical personnel necessary
for the conduct of the Medical Group's business operations (collectively,
"Administrative Personnel"):
(i) Administration
(ii) Accounting
(iii) Billing and Collection
(iv) Secretarial
(v) Transcription
(vi) Appointments
(vii) Switchboard
(viii) Medical Records
(ix) Chart Preparation
(x) Historians
(xi) Clinic Support
(xii) Marketing
(b) The Management Company shall determine and pay the salaries and
fringe benefits of the Administrative Personnel, and shall provide other
personnel services related to the Administrative Personnel, including but not
limited to
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scheduling, personnel policies, administering continuing education benefits, and
payroll administration.
(c) With respect to each applicable new employee in Administrative
Personnel, the Management Company shall, as reasonably necessary, verify
educational and employment experience, licensure, and insurability.
(d) All of the personnel services shall be performed in compliance
with all applicable Texas and Federal labor laws.
(e) Notwithstanding anything to the contrary contained in this
Agreement, the Management Company shall retain all of the Administrative
Personnel employed by the Medical Group as of the Commencement Date for the
six-month period beginning on the Commencement Date and ending on the six month
anniversary of the Commencement Date.
3.8. INVENTORY AND SUPPLIES.
The Management Company shall order and purchase inventory and supplies
on behalf of the Medical Group, and such other ordinary or appropriate materials
as the Medical Group reasonably deems to be necessary for it to carry out its
professional medical activities. Inventory and supplies shall include, but not
be limited to:
(a) Medical supplies
(b) Office supplies
(c) Postage
(d) Computer forms and supplies
(e) Printing and stationary supplies
(f) Printer supplies
(g) Linen and laundry supplies
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3.9. TAXES.
The Management Company shall provide the Medical Group with access to
all information necessary for the Medical Group to prepare its tax returns. The
Management Company shall have no responsibility for --
(a) The payment of the Medical Group's taxes; or
(b) The preparation of any partnership income tax returns or related
Schedule K-1 forms for the Medical Group.
3.10. Information Systems Management.
(a) The Management Company shall provide or arrange for the provision
of all management information systems services to be utilized by the Medical
Group. These services shall include, but not be limited to --
(i) Ongoing maintenance and improvement of the Medical Group's
existing information systems:
(A) Accounts receivable - Billing/Insurance/Collections
(B) On-line appointment scheduling
(C) Internal e-mail
(D) On-line transcription
(E) Faxing subsystem
(F) Electronic claims submission
(G) Patient flow monitoring system
(H) Authorization module
(I) Prescription module
(J) X-ray tracking system
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(K) Voice mail
(ii) Development of the following new information systems --
(A) Paperless medical records
(B) Bar code chart tracking system
(b) The services provided by the Management Company shall
protect the confidentiality of patient medical records to the extent
required by applicable law or the Medical Group's payor agreements;
provided, however, that in no event shall a breach of such confidentiality
be deemed a default under this Agreement if the Management Company acted
reasonably and in good faith to protect such confidentiality.
3.11. USE OF NEW TECHNOLOGIES IN THE PRACTICE OF MEDICINE.
The Management Company shall promote the integration of new
technologies into the professional practice of the Medical Group, including
without limitation the use of satellite and other telecommunications services
that permit the provision of remote consultations, virtual operations, and other
professional services; provided, however, that the foregoing shall be subject to
the terms of Section 8.2(e) hereof.
3.12. PUBLIC RELATIONS; MARKETING AND ADVERTISING.
The Management Company shall develop and implement community outreach
programs and public relations programs designed to educate the patient
population regarding the Medical Group, the availability of its medical
services, and the availability in terms of any managed care programs in which
the Medical Group participates. The Management Company also shall develop and
implement marketing and advertising programs as reasonably required to promote
and expand the Medical Business, subject to any approved budgets. The programs
shall be conducted in
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compliance with applicable laws and regulations governing
advertising by the medical profession.
3.13. MEDICAL PERSONNEL RECRUITING.
(a) The Management Company shall, upon request by the Medical Group,
assist the Medical Group in recruiting Medical Personnel. "Medical Personnel"
means:
(i) Physicians (including 5 fellows and residents, if any)
providing professional medical services who are employees, independent
contractors, partners, or physician-employees of corporate partners in the
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Medical Group;
(ii) Physician assistants, nurse practitioners, and other health
care professionals who provide services that are billable to patients or
third party payors (separate and apart from the billable services provided
by physicians); and
(iii) Technicians who perform diagnostic tests or procedures.
(b) With respect to each of the Medical Personnel, the
Management Company shall verify educational and employment experience,
licensure and insurability, and shall review and provide the Medical Group
with copies of any complaints contained in public files with applicable
state and federal sanctioned commissions.
3.14. INSURANCE.
The Management Company shall provide the insurance coverage described
in Sections 12.1 and 12.2 of this Agreement.
3.15. FILES AND RECORDS.
(a) To the extent permitted by applicable law, the Management Company
shall supervise and maintain custody of all
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files and records relating to the operation of the business of the Medical
Group, including, without limitation, accounting, billing, collection, or
patient medical records. The management of all files and records shall be in
compliance with applicable state and federal statutes. Business records of the
Medical Group created and/or maintained by the Management Company shall be the
joint property of the Management Company and the Medical Group and shall at all
times be located at a location that is readily accessible to the parties.
Patient medical records shall at all times be and remain the property of the
Medical Group and shall be located at a location that is readily accessible for
patient care. The Management Company shall preserve the confidentiality of
patient medical records and use information contained in such records only for
the limited purposes necessary to perform the management services set forth
herein; provided, however, that in no event shall a breach of such
confidentiality be deemed a default under this Agreement if the Management
Company acted reasonably and in good faith to protect such confidentiality.
(b) The Management Company shall provide all off site storage of files
and records as required and in conjunction with policies established by the
Operations Committee. The Management Company shall provide the Medical Group
with all requested off-site files and records on a timely basis, consistent with
the policies of the Medical Group in effect immediately prior to the
Commencement Date. Any change in such policies shall be subject to the approval
of the Operations Committee.
3.16. MANAGED CARE CONTRACTS.
The Management Company shall solicit, negotiate and administer all
managed care contracts on behalf of the Medical Group based on parameters and
criteria established by the Operations Committee. Such services shall be
performed by the Management Company as agent of the Medical Group, and all
managed care contracts shall be subject to the Medical Group's prior
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approval of any such contract. The Management Company shall prepare cost
forecasts and other analyses as reasonably requested by the Medical Group in
order to allow the Medical Group to make an informed decision with respect to
each proposed contract.
3.17. BUDGETS.
The Management Company shall prepare, for the review and approval of
the Operations Committee, annual operating budgets (the "Budgets") reflecting in
reasonable detail projected ▇▇▇▇▇▇▇▇, Collections, Medical Group Costs, and
Management Company Operating Costs; provided, however, that the Medical Group
shall provide the Management Company with a proposed Budget covering the initial
three-month period under this Agreement. The initial Budget, which shall be
applicable to the period commencing on the Commencement Date and ending three
(3) months thereafter, is attached hereto as Schedule II. All other budgets
shall be on a calendar year basis. The Management Company shall prepare and
submit to the Operations Committee all subsequent Budgets on or before December
15 of the year immediately preceding the calendar year to which such Budgets are
applicable.
3.18. FORCE MAJEURE.
The Management Company shall not be liable to the Medical Group for
failure to perform any of the services required herein in the event of strikes,
lock-outs, calamities, acts of God, unavailability of supplies, changes in
applicable law or regulations or other events over which the Management Company
has no control for so long as such events continue and for a reasonable time
thereafter.
SECTION 4. EQUITY PARTICIPATION AND CONSIDERATION.
In consideration of the Medical Group's entering into this Agreement,
the Management Company shall provide to the persons identified in Schedule III
attached hereto (the "Eligible Parties") the equity and the cash consideration
set forth on Schedule III.
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SECTION 5. Costs, Compensation, and Other Payments.
5.1. BANK ACCOUNTS.
The Medical Group shall instruct the Medical Group Bank to transfer,
on a weekly basis, all funds in the Medical Group Collections Account (less the
amount necessary to avoid the payment of bank charges or fees relating to the
failure to maintain a minimum balance in the Medical Group Collections Account)
to a bank (the "Management Company Bank") designated by the Management Company,
for credit to an account in the Management Company's name (the "Operating
Account"). All interest earned on the funds on deposit in the Operating Account
shall be for the account of the Management Company.
5.2. PAYMENTS.
The Management Company shall pay all of the Medical Group Compensation
and all of the Management Company Costs, as hereinafter defined, and the
Management Company shall be entitled to retain for itself the Management Fee, as
hereinafter defined. The Management Company may disburse funds from the
Operating Account only for the purposes specified in this Section 5, including
without limitation for the payment of Medical Group Compensation, Authorized
Management Company Operating Costs, and the Management Fee. If at any time there
are insufficient funds in the Operating Account to satisfy any of the payment
obligations of the Management Company under this Agreement, the Management
Company shall satisfy such obligations from other funds of the Management
Company, and the Management Company may thereafter reimburse itself such amounts
from the Operating Account.
5.3. MEDICAL GROUP COMPENSATION.
(a) Monthly Draw.
(i) On each Draw Date during the Term hereof, the Management
Company shall distribute to the
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Medical Group an amount equal to a percentage (the "Draw Percentage") of
the Medical Group's total ▇▇▇▇▇▇▇▇ for Medical Group Services provided
during the previous month (the "Monthly Draw"). The Draw Date and the
initial Draw Percentage are as set forth in Schedule IV, and the Draw
Percentage shall be adjusted as provided in Section 5.3(a)(ii).
(ii) Commencing May 15, 1998, and effective May 15 of each year
thereafter, the Draw Percentage shall be adjusted to equal a fraction, the
numerator of which is the Annual Medical Group Compensation Amount for the
previous year, and the denominator of which is the total amount of ▇▇▇▇▇▇▇▇
for the previous year.
(b) Annual Settlement.
(i) On or before April 1, 1998, and on or before April 1 of each
year thereafter, the Management Company shall calculate the following (the
"Annual Medical Group Compensation Amount"):
(A) The total Collections for all Medical Group Services
rendered during the previous calendar year, less --
(B) the sum of the following:
(1) the Management Fee earned by the Management Company for
the previous calendar year; and
(2) the Authorized Management Company Operating Costs
incurred by the Management Company during the previous calendar year.
(ii) If the Annual Medical Group Compensation Amount thus
determined exceeds the total of the twelve (12) Monthly Draws paid by the
Management Company to the Medical Group during the previous calendar year
(the "Annual Draw Amount"), the Management Company shall pay to the Medical
Group on or before May 15, an amount equal to such excess. If the Annual
Draw Amount for the previous calendar year exceeds the Annual Medical Group
Compensation Amount for the previous calendar year, the Management Company
shall withhold from the Medical Group Compensation otherwise payable to the
Medical Group, during each of the following six (6) months, an amount equal
to one-sixth (1/6) of such excess.
(iii) For purposes of determining the total Collections for all
Medical Group Services provided during any calendar year, all Collections
during January, February, and March of each year shall be deemed to be for
Medical Group Services rendered during the previous calendar year, and all
Collections during April through December shall be deemed to be for Medical
Group Services rendered during the calendar year in which such Collections
were received; provided, however, that for purposes of determining the
total Collections during the period commencing on the Commencement Date and
ending December 31, 1997, all Collections from and after the Commencement
Date through March 31, 1998, shall be deemed to be for Medical Group
Services rendered during the period commencing on the Commencement Date and
ending December 31, 1997. Notwithstanding the foregoing, the Management Fee
applicable to any calendar year shall be
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based on the Collections actually received during such calendar year.
(iv) Notwithstanding anything to the contrary set forth herein,
the first period for which the annual settlement described in this Section
5.3(b) shall be applicable is the period commencing on the Commencement
Date and ending on December 31, 1997.
(c) Notwithstanding the provisions of Section 5.1, in the event that
the Medical Group has not received from the Management Company all or any
portion of the Monthly Draw on or before the third business day following the
Draw Date, or in the event that the Medical Group has not received from the
Management Company all or any portion of any amount payable to the Medical Group
pursuant to Section 5.3(b)(ii) on or before the third business day following the
date on which such payment is required to be made under the terms of Section
5.3(b)(ii), without limiting any other right or remedy that the Medical Group
may have under this Agreement or under applicable law, the Medical Group shall
have the right to immediately withdraw such amount directly from the Medical
Group Collections Account.
(d) For purposes of this Agreement --
(i) "▇▇▇▇▇▇▇▇" means, for any applicable period, the gross
charges of the Medical Group for all Medical Group Services furnished
during such period.
(ii) "Collections" means, for any applicable period, all cash or
cash equivalents received during such period, net of refunds paid during
such period, for Medical Group Services.
(iii) "Medical Group Services" means the following services
rendered by, through, or on behalf of the Medical Group or its Medical
Personnel: all professional services rendered by or under the supervision
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of any of the Medical Personnel (including professional services rendered
in connection with New Ancillary Services); all diagnostic radiology
services rendered by or under the supervision of any of the Medical
Personnel; all other ancillary services (other than New Ancillary
Services); all prosthetics, prosthetic devices, orthotics, braces, splints,
appliances, and other items and supplies that are billable to patients or
to third party payors; and depositions, record review services, court
appearances, independent medical exams, athletic team services.
(iv) It is the intent of the parties that ▇▇▇▇▇▇▇▇, Collections,
and Medical Group Services not include any of the following: New Ancillary
Services (excluding professional services rendered by Medical Personnel in
connection therewith, which professional services are included under
Section 5.3(d)(iii) above), interest income; royalties payable to any
Medical Group physician for medical inventions; fees payable under
consulting agreements entered into by Medical Group physicians; income from
presentations, writings, and endorsements; proceeds from the sale of any
capital assets of the Medical Group; and any income from investments.
5.4. MANAGEMENT FEE.
(a) The compensation payable to the Management Company for the
provision of Management Services under this Agreement (the "Management Fee"),
which the Management Company may disburse from the Operating Account from time
to time at its discretion, shall be equal to the aggregate of the following:
(i) An amount equal to the Applicable Percentage of Collections,
provided that the amount thus determined shall be reduced by the Medical
Equipment Master Lease Payments; and
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(ii) An amount equal to sixty-six and two-thirds percent
(66-2/3%) of the Professional Practice Cost Savings.
(b) For purposes of this Section 5.4, "Applicable Percentage" has the
meaning set forth in Schedule V.
(c) For purposes of this Agreement, "Office Sublease Payments" means
the aggregate of the monthly lease amounts payable under all of the Office
Subleases described in Section 3.2 hereof.
(d) For purposes of this Agreement, "Medical Equipment Master Lease
Payments" means the monthly lease amounts payable for all Medical Equipment
determined in accordance with the Medical Equipment Master Lease Agreement
referenced in Section 3.3(a) hereof.
(e) For purposes of this Section 5.4, "Professional Practice Cost
Savings" means the cost savings determined in the manner described in Schedule
VI.
(f) An example of the computation of Medical Group Compensation and
the Management Fee is attached hereto as Schedule VII.
5.5. MANAGEMENT COMPANY COSTS.
(a) The Management Company shall pay all Management Company Operating
Costs and all Excluded Costs (collectively, the "Management Company Costs").
(Authorized Management Company Operating Costs may be paid from the Operating
Account, but Excluded Costs shall be paid from a separate account of the
Management Company.) All Management Company Costs shall be incurred in the name
of the Management Company, and not in the name of the Medical Group, except as
specifically approved by the Medical Group. Management Company Costs shall not
include any costs or expenses incurred prior to the Commencement Date of this
Agreement.
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(b) The Management Company shall provide to the Medical Group, upon
reasonable request by the Medical Group from time to time, supporting
documentation and other backup detail relating to any or all of the Management
Company Costs.
(c) For purposes of this Agreement, "Management Company Operating
Costs" means all costs and expenses incurred in connection with the provision of
the Management Services, except for any costs and expenses defined as Medical
Group Costs in Section 5.7 hereof, and except for Excluded Costs. "Excluded
Costs" means all of the following costs and expenses incurred in connection with
the provision of the Management Services hereunder:
(i) New Medical Office Start-Up Costs;
(ii) The rent and any other payments due under any of the Office
Leases;
(iii) The cost of any Medical Equipment leased by the Management
Company to the Medical Group;
(iv) The cost of any FF&E provided by the Management Company to
the Medical Group;
(v) Depreciation, amortization, and interest; and
(vi) Corporate overhead of the Management Company ("Corporate
Overhead") except to the extent that all of the following conditions are
satisfied:
(A) The Corporate Overhead is incurred in lieu of a
pre-existing Management Company Operating Cost;
(B) The amount of such Corporate Overhead does not exceed
the amount of
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the Management Company Operating Costs being eliminated; and
(C) The Corporate Overhead is allocated to the Medical Group
and to all other medical groups utilizing such Corporate Overhead on a
pro rata basis.
Any Corporate Overhead with respect to which all of the above conditions are
satisfied shall be considered Management Company Operating Costs.
(d) For purposes of this Agreement, "Authorized Management Company
Operating Costs" means all Management Company Operating Costs incurred in any
year reduced by any or all of the following, as applicable:
(i) any costs that exceed the applicable Management Company
Operating Costs Budget which are not approved by the Operations Committee;
(ii) any costs with respect to which the Medical Group has
reasonably requested supporting documentation or other backup detail which
has not been furnished by the Management Company or which does not
reasonably establish the appropriateness of such costs; and
(iii) any costs that have been determined pursuant to an audit
under Section 5.9 not to have been reasonably incurred in connection with
the Management Services required to be provided under of this Agreement.
5.6. NEW MEDICAL OFFICE START-UP COSTS.
(a) The Management Company shall pay all New Medical Office
Start-Up Costs incurred in connection with the establishment of any New
Medical Office.
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(b) All Medical Equipment utilized at any New Medical Office shall be
acquired by the Management Company and leased to the Medical Group in accordance
with Section 3.3 hereof.
(c) For purposes of this Agreement, "New Medical Office" means any
office of the Medical Group other than those offices located in the premises
identified in Sections 3.2(a) and 3.2(b) hereof.
(d) For purposes of this Agreement, "New Medical Office Start-Up
Costs" means the following costs incurred in connection with the establishment
of a New Medical Office during the New Medical Office Start-Up Period: all
Management Company Costs and all costs other than physician Medical Personnel
costs that, but for this provision, would have been considered Medical Group
Costs.
(e) For purposes of this Agreement, "New Medical Office Start-Up
Period" means the period commencing on the date that any costs are incurred in
connection with the establishment of a New Medical Office and ending on the
earlier of (i) the last day of the calendar month in which a period of eighteen
(18) months has elapsed from and after the date on which the New Medical Office
first opened for the treatment of patients, or (ii) the last day of the first
period of two (2) consecutive calendar months for which the costs borne by the
Management Company in connection with the New Medical Office are less than sixty
percent (60%) of the Collections for Medical Group Services provided at the New
Medical Office during such two-month period. In no event shall the Management
Company have any obligation under this Section 5.6 to pay any New Medical Office
Start-Up Costs incurred later than eighteen (18) months after the New Medical
Office first opened for the treatment of patients.
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5.7. MEDICAL GROUP COSTS.
Except as otherwise provided in this Agreement, the Medical Group
shall pay all of the costs specified in this Section 5.7 (the "Medical Group
Costs"). All Medical Group Costs shall be incurred in the name of the Medical
Group, and not in the name of the Management Company, and shall be paid from an
account of the Medical Group and not from the Operating Account of the
Management Company. The Medical Group Costs are as follows:
(a) Compensation of all Medical Personnel;
(b) Any applicable fringe benefits for all Medical Personnel,
including, but not limited to, payroll taxes, workers' compensation, health
insurance (including drug coverage), dental insurance, individual disability
insurance, life insurance, business buy-out disability insurance, continuing
education, and medical dues and licenses;
(c) The cost of prosthetics, prosthetic devices, orthotics, braces,
splints, appliances, allografts, x-ray films, and other items and supplies that
are billable to patients or to third party payors (the "Billable Items");
(d) The Medical Equipment Master Lease Payments;
(e) Any lease payments for New Ancillary Service Medical Equipment;
(f) The Office Sublease Payments; and
(g) The cost of any items which are not required to be provided by the
Management Company under this Agreement and/or which were ordered, purchased, or
incurred by the Medical Group directly, including but not limited to the cost of
accounting, legal, consulting, or other professional or advisory services,
business meetings, and business taxes.
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5.8. NEW ANCILLARY SERVICES COSTS.
(a) Any agreement by the parties to establish a New Ancillary Service
as described in Section 3.4 of this Agreement shall (unless otherwise agreed by
the parties) incorporate the following:
(i) The Management Company shall create a separate division
("Ancillary Division") for purposes of accounting for the income, costs,
profits, and losses of any New Ancillary Service. The Management Company
shall utilize generally accepted accounting principles in determining and
accounting for the profits and losses related to the operations of each New
Ancillary Service.
(ii) Profits and/or losses of any Ancillary Division shall be
divided equally between the Medical Group and the Management Company, and
all distributions to the Medical Group and to the Management Company shall
be made in equal amounts to each from available cash (after payment of all
currently due obligations incurred in connection with such New Ancillary
Division, including without limitation any principal and interest amounts
then due and payable under Section 5.8(a)(iv) below, and after retention of
reasonable reserves) derived from the operation of such Ancillary Division.
(iii) All diagnostic and therapeutic equipment utilized in
connection with any New Ancillary Service ("New Ancillary Service Medical
Equipment") shall be acquired by the Management Company and leased to the
Medical Group pursuant to an equipment lease substantially in the form of
the Medical Equipment Master Lease Agreement attached hereto as Exhibit F.
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(iv) The Management Company shall pay all of the Ancillary
Service Start-Up Costs. Beginning with the month following the expiration
of the Ancillary Service Start-Up Period, the Management Company shall be
entitled to recoup all of the Ancillary Service Start-Up Costs previously
paid by the Management Company in sixty (60) equal monthly installments of
principal, plus interest on the unrecouped portion of such costs at the
prevailing prime rate as set forth in the Wall Street Journal and/or at the
actual rate paid by the Management Company with respect to any part of such
costs that have been financed by the Management Company.
(v) The Management Company shall provide, in connection with any
New Ancillary Service, the full range of management services described in
this agreement.
(vi) The ▇▇▇▇▇▇▇▇, collections, costs and expenses relating to
any New Ancillary Service shall not be included in the computations of
Medical Group Compensation, the Management Fee, Management Company Costs,
New Medical Office Start-Up Costs, or Medical Group Costs as described in
Sections 5.3, 5.4, 5.5, 5.6, or 5.7, respectively.
(b) For purposes of this Section 5.8, "Ancillary Service Start-Up
Period" means the period commencing on the date that any costs are incurred in
connection with the establishment of the New Ancillary Service and ending on the
last day of the first period of two (2) consecutive calendar months for which
the New Ancillary Service shows a profit.
(c) For purposes of this Section 5.8, "Ancillary Service Start-Up
Costs" means the total of all of the following costs incurred in connection with
the establishment of a New Ancillary Service during the Ancillary Service
Start-Up Period
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(whether such costs would otherwise be considered Management Company Costs or
Medical Group Costs) --
(i) Any lease payments for New Ancillary Service Medical
Equipment;
(ii) All costs of acquiring furniture, fixtures, and office equipment;
All initial occupancy costs, if any, including but not limited to rent deposits,
prepaid rent, and tenant improvements;
(iii) All other start-up costs, including but not limited to legal,
accounting and consulting fees, and the cost of initial inventories of supplies
and other items; and
(v) All ongoing costs of the New Ancillary Service, including but not
limited to personnel (other than physician Medical Personnel) and related
benefits, the cost of operating any equipment utilized in providing the service,
supplies, insurance, rent, repairs and maintenance, outside services, telephone,
taxes, utilities, storage and other ordinary ongoing expenses of providing the
New Ancillary Service.
5.9. REVIEW AND AUDIT OF BOOKS AND RECORDS.
Each of the parties shall have the right, during ordinary business
hours and upon reasonable notice, to review and make copies of, or to audit
through a qualified certified public accountant approved by the other party
(which approval shall not be unreasonably withheld), the books and records of
the other party relating to the billing, collection, and disbursement of fees,
and the determination of costs, under this Agreement. Any such review or audit
shall be performed at the cost of the requesting party; provided, however, that
in the event that such
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review or audit requested by the Medical Group discloses a discrepancy
indicating that the Medical Group has actually been underpaid by an amount in
excess of two percent (2%) of the total amount of Medical Group Compensation
payable to the Medical Group for the period covered by the audit, the cost of
the audit shall be borne by the Management Company. All documents and other
information obtained in the course of such review or audit shall be held in
strict confidence.
5.10. START-UP PERIOD.
Consistent with the provisions of Section 2 of this Agreement, the
parties acknowledge and agree that, in order to facilitate the transition of
responsibilities hereunder, certain requirements and procedures agreed to under
this Agreement may be implemented over the course of a period of time commencing
on the Commencement Date and ending December 31, 1996 (subject to extension by
agreement of the Medical Group and the Management Company), rather than being
fully implemented immediately on the Commencement Date. Accordingly, the parties
further agree that the Management Fee and Medical Group Compensation payable in
respect of the Management Services and the Medical Group Services applicable to
such period of time shall be computed, and any appropriate adjustments shall be
made, such that no material financial advantage or disadvantage shall accrue to
either party as a result of implementing such requirements and procedures over
the course of such start-up period rather than immediately on the Commencement
Date.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE MEDICAL GROUP.
The Medical Group hereby represents and warrants to the Management
Company, as of the Signature Date hereof, as follows:
6.1. ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
The Medical Group is a professional association duly organized,
validly existing, and in good standing under the laws
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of the State of Texas and has all requisite power and authority to own, lease,
and operate its properties, to carry on its business as now being conducted and
as proposed to be conducted, to enter into this Agreement, the Asset Purchase
Agreement, the Medical Equipment Master Lease, each Assignment of Lease, each
Office Sublease, and each Stockholder Non-Competition Agreement (collectively,
the "Medical Group Transaction Documents"), to perform its obligations
thereunder, and to consummate the transactions contemplated hereby and thereby.
The Medical Group has delivered to the Management Company a true and correct
copy of its certificate of association and bylaws, in effect on the date hereof.
6.2. EQUITY INVESTMENTS.
The Medical Group currently has no subsidiaries, nor does the Medical
Group currently own any capital stock or other proprietary interest, directly or
indirectly, in any corporation, association, trust, partnership, joint venture,
or other entity.
6.3. AUTHORITY.
The execution, delivery and performance of the Medical Group
Transaction Documents and the consummation of the transactions contemplated
thereby have been duly and validly authorized by all necessary action on the
part of the Medical Group. The Medical Group Transaction Documents have been
duly and validly executed and delivered by the Medical Group and constitute the
legal, valid and binding obligations of the Medical Group enforceable in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally or by applicable laws pertaining to
the enforceability of non-competition agreements. Neither the execution,
delivery or performance of the Medical Group Transaction Documents by the
Medical Group nor the consummation by the Medical Group of the transactions
contemplated hereby or thereby, nor compliance by the Medical
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Group with any provision hereof or thereof will conflict with or result in a
breach of any provision of the formation documents of the Medical Group, cause a
default (with due notice, lapse of time or both), or give rise to any right of
termination, cancellation or acceleration, under any of the terms, conditions or
provisions of any note, bond, lease, mortgage, indenture, license or other
instrument, obligation or agreement to which the Medical Group or the Medical
Business is a party or by which they or any of its respective properties or
assets may be bound (with respect to which defaults or other rights all
requisite waivers or consents shall have been obtained at or prior to the date
hereof) or to the best knowledge of the Medical Group, but without expressing
any opinion regarding the enforceability of non-competition agreements, violate
any law, statute, rule or regulation or order, writ, judgment, injunction or
decree of any court, administrative agency or governmental body applicable to
the Medical Group, the Medical Business or any of their respective properties or
assets. To the best knowledge of the Medical Group, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any person
(governmental or private) is required in connection with the execution, delivery
or performance by the Medical Group of the Medical Group Transaction Documents
or the consummation of the transactions contemplated thereby.
6.4. FINANCIAL INFORMATION.
Schedule 6.4 contains the Medical Group's internal statements of
assets, liabilities and partners' equity of the Medical Business at September
30, 1996 (the "Balance Sheet"; and the date thereof being referred to as the
"Balance Sheet Date"), and the related internal statements of revenue and
expenses for the period then ended (including the notes thereto and other
financial information included therein) (collectively, the "Internal Financial
Statements"), and (b) the review financial statements of the Medical Business
for the periods ended December 31, 1995 and December 31, 1994 (the "Review
Financial
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Statements"). The Internal Financial Statements and the Review
Financial Statements (i) were prepared in accordance with the books and records
of the Medical Business, (ii) fairly present the financial position of the
Medical Business as of the dates thereof, and (iii) are true, correct and
complete in all material respects as of the dates thereof.
6.5. ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth on Schedule 6.5, as of the Balance Sheet Date, the
Medical Business did not have any material liability of any nature (matured or
unmatured, fixed or contingent, known or unknown) which was not provided for or
disclosed on the Balance Sheet, all liability reserves established by the
Medical Business on the Balance Sheet were adequate and there were no loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) which were not adequately provided for or disclosed on the Balance Sheet.
6.6. ABSENCE OF CHANGES.
Except as set forth on Schedule 6.6, since the Balance Sheet Date, the
Medical Business has been operated in the ordinary course and consistent with
past practice and there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets (including, without limitation, levels of working capital and
the components thereof), liabilities, operations, results of operations,
earnings, business or prospects of the Medical Business;
(b) any damage, destruction or loss (whether or not covered by
insurance) in an aggregate amount exceeding $25,000 affecting any asset or
property of the Medical Business;
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(c) any obligation or liability (whether absolute, accrued, contingent
or otherwise and whether due or to become due) created or incurred, or any
transaction, contract or commitment entered into, by the Medical Business other
than such items created or incurred in the ordinary course of the Medical
Business and consistent with past practice;
(d) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Medical Business outside the
ordinary course of the Medical Business (whether absolute, accrued, contingent
or otherwise and whether due or to become due);
(e) any license, sale, transfer, pledge, mortgage or other disposition
of any tangible or intangible asset of the Medical Business except in the
ordinary course of the Medical Business and consistent with past practice;
(f) any write-off as uncollectible of any accounts receivable in
connection with the Medical Business or any portion thereof in excess of $5,000
in the aggregate exclusive of all normal contractual adjustments from third
party payors;
(g) except for all normal contractual adjustments from third party
payors, any account receivable in connection with the Medical Business in an
amount greater than $10,000 which (i) has become delinquent in its payment by
more than 90 days, (ii) has had asserted against it any claim, refusal to pay or
right of set-off, (iii) an account debtor has refused to pay for any reason or
with respect to which such account debtor has become insolvent or bankrupt or
(iv) has been pledged to any third party;
(h) any cancellation of any debts or claims of, or any amendment,
termination or waiver of any rights of material value to, the Medical Business;
-43-
(i) any general uniform increase in the compensation of employees of
the Medical Group or the Medical Business (including, without limitation, any
increase pursuant to any bonus, pension, profit-sharing, deferred compensation
arrangement or other plan or commitment) or any increase in compensation payable
to any officer, employee, consultant or agent thereof, or the entering into of
any employment contract with any officer or employee, or the making of any loan
to, or the engagement in any transaction with, any officer of the Medical Group
or the Medical Business;
(j) any change in the accounting methods or practices followed in
connection with the Medical Business or any change in depreciation or
amortization policies or rates theretofore adopted;
(k) the termination of any partner and/or key employee of the Medical
Group or the Medical Business listed on Annex A ("Medical Group Key Personnel"),
or any expression of intention by any of the Medical Group Key Personnel to
terminate such partnership status or employment with the Medical Group or the
Medical Business;
(l) any agreement or commitment relating to the sale of any material
fixed assets of the Medical Business;
(m) any other transaction relating to the Medical Business other than
in the ordinary course of the Medical Business and consistent with past
practice; or
(n) any agreement or understanding, whether in writing or otherwise,
for the Medical Business to take any of the actions specified in items (a)
through (m) above.
6.7. TAX MATTERS.
(a) Except as set forth on Schedule 6.7, (i) all Taxes relating to the
Medical Business required to be paid by the Medical Group through the date
hereof have been paid and all
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returns, declarations of estimated Tax, Tax reports, information returns and
statements required to be filed by the Medical Group in connection with the
Medical Business prior to the date hereof (other than those for which extensions
shall have been granted prior to the date hereof) relating to any Taxes with
respect to any income, properties or operations of the Medical Group prior to
the date hereof (collectively, "Returns") have been duly filed; (ii) as of the
time of filing, the Returns correctly reflected in all material respects (and,
as to any Returns not filed as of the date hereof, will correctly reflect in all
material respects) the facts regarding the income, business, assets, operations,
activities and status of the Medical Business and any other information required
to be shown therein; (iii) all Taxes relating to the operations of the Medical
Business that have been shown as due and payable by the Medical Group on the
Returns have been timely paid and filed or adequate provisions made to the books
and records of the Medical Business; (iv) in connection with the Medical
Business (x) the Medical Group has made provision on the Balance Sheet for all
Taxes payable by the Medical Group for any periods that end on or before the
Balance Sheet Date for which no Returns have yet been filed and for any periods
that begin on or before the Balance Sheet Date and end after the Balance Sheet
Date to the extent such Taxes are attributable to the portion of any such period
ending on the Balance Sheet Date and (y) provision has been made for all Taxes
payable by the Medical Group for any periods that end on or before the date
hereof for which no Returns have then been filed and for any periods that begin
on or before the date hereof and end after such date to the extent such Taxes
are attributable to the portion of any such period ending on such date; (v) no
tax liens have been filed with respect to any of the assets of the Medical
Business, and there are no pending tax audits of any Returns relating to the
Medical Business; and (vi) no deficiency or addition to Taxes, interest or
penalties applicable to the Medical Group for any Taxes relating to the
operation of the Medical Business has been proposed, asserted or assessed in
writing (or any member of any affiliated or combined group of
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which the Medical Group or any previous operator of the Medical Business was a
member for which the Medical Group could be liable).
(b) The Medical Group is not a foreign person within the meaning of
ss.1.1445-2(b) of the Regulations under Section 1445 of the Code.
(c) The Medical Group has provided the Management Company with true
and complete copies of all Federal, state and foreign Returns of the Medical
Group for the calendar years ending December 31, 1994 and 1995.
(d) For purposes of this Agreement, "Tax" means any of the Taxes and
"Taxes" means, with respect to any person or entity, (i) all federal, state,
local and foreign income taxes (including any tax on or based upon net income,
or gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all Federal, state, local and
foreign gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, alternative or add-on minimum taxes, customs
duties or other Federal, state, local and foreign taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign) on such person or entity and (ii) any liability for the payment of
any amount of the type described in the immediately preceding clause (i) as a
result of being a `transferee' (within the meaning of Section 6901 of the Code
or any other applicable law) of another person or entity or a member of an
affiliated or combined group.
6.8. LITIGATION, ETC.
Except as set forth on Schedule 6.8, there are no (a) actions, suits,
claims, investigations or legal or administrative
-46-
or arbitration proceedings pending or, to the best knowledge of the Medical
Group, threatened against the Medical Group or in connection with the Medical
Business, whether at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality or (b) judgments, decrees, injunctions or orders of any court,
governmental department, commission, agency, instrumentality or arbitrator
against the Medical Group, its assets or affecting the Medical Business. The
Medical Group has delivered to the Management Company all documents and
correspondence relating to matters referred to in said Schedule 6.8.
6.9. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS.
The Medical Group and the Medical Business shall have complied in all
material respects with all applicable material Federal, state, local or foreign
laws, ordinances, regulations and orders. The Medical Group has all Federal,
state, local and foreign governmental licenses and permits necessary in the
conduct of the Medical Business, the lack of which would have a material adverse
effect on the Medical Group's ability to operate the Medical Business after the
date hereof on substantially the same basis as presently operated, such licenses
and permits are in full force and effect, the Medical Group has not received any
notice indicating that any violations are or have been recorded in respect of
any thereof, and no proceeding is pending or, to the best knowledge of the
Medical Group, threatened to revoke or limit any thereof. To the best knowledge
of the Medical Group, none of such licenses and permits shall be affected in any
material respect by the transactions contemplated hereby.
6.10. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
(a) Except as set forth on Schedule 6.10, all of the accounts
receivable owing to the Medical Group in connection with the Medical Business as
of the date hereof constitute valid and enforceable claims arising from bona
fide transactions in the
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ordinary course of the Medical Business, the amounts of which are actually due
and owing, and as of the date hereof, to the best knowledge of the Medical
Group, there are no claims, refusals to pay or other rights of set-off against
any thereof. Except as set forth on Schedule 6.10, as of the date hereof, there
is (i) no account debtor or note debtor of the Medical Business delinquent in
its payment by more than 60 days, (ii) no account debtor or note debtor of the
Medical Business who or which has refused to pay its obligations for any reason
or is the subject of a bankruptcy proceeding and (iii) no account receivable or
note receivable of the Medical Business pledged to any third party.
(b) All accounts payable and notes payable by the Medical Business to
third parties arose in the ordinary course of business and, except as set forth
in Schedule 6.10, there is no account payable or note payable past due or
delinquent in its payment.
6.11. LABOR RELATIONS; EMPLOYEES.
Schedule 6.11 contains a true and complete list of the persons
employed by the Medical Group as of the date hereof (the "Employees"). Except as
set forth on Schedule 6.11, (a) the Medical Group and the Medical Business are
not delinquent in payments to any of the Employees for any wages, salaries,
commissions, bonuses or other compensation for any services performed by them to
the date hereof or amounts required to be reimbursed to the Employees; (b) upon
termination of the employment of any of the Employees, neither the Medical
Group, the Medical Business nor the Management Company will by reason of
anything done prior to the date hereof, or by reason of the consummation of the
transactions contemplated hereby, be liable for any excise taxes pursuant to
Section 4980B of the Code or to any of the Employees for severance pay or any
other payments; (c) there is no unfair labor practice complaint against the
Medical Group or in connection with the Medical Business pending before the
National Labor Relations Board or any comparable state, local
-48-
or foreign agency; (d) there is no labor strike, dispute, slowdown or stoppage
actually pending or, to the best knowledge of the Medical Group, threatened
against or involving the Medical Group or Medical Business; (e) there is no
collective bargaining agreement covering any of the Employees; and (f) to the
best knowledge of the Medical Group, no Employee or consultant is in violation
of any (i) employment agreement, arrangement or policy between such person and
any previous employer (private or governmental) or (ii) agreement restricting or
prohibiting the use of any information or materials used or being used by such
person in connection with such person's employment by or association with the
Medical Group or the Medical Business.
6.12. EMPLOYEE BENEFIT PLANS.
(a) Schedule 6.12 identifies each `employee benefit plan', as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and all other written or oral plans, programs, policies or
agreements involving direct or indirect compensation (including any employment
agreements entered into between the Medical Group or the Medical Business and
any Employee or former employee of the Medical Group or in connection with the
Medical Business, but excluding workers' compensation, unemployment compensation
and other government-mandated programs) currently or previously maintained or
entered into by the Medical Group or in connection with the Medical Business for
the benefit of any Employee or former employee of the Medical Group or in
connection with the Medical Business under which the Medical Group, any
affiliate thereof or the Medical Business has any present or future obligation
or liability (the "Employee Plans"). The Medical Group has provided the
Management Company with true and complete age, salary, service and related data
for Employees of the Medical Group and in connection with the Medical Business.
(b) Schedule 6.12 lists each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage
-49-
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits currently maintained by the Medical Group or
in connection with the Medical Business.
6.13. INSURANCE.
Schedule 6.13 contains a list of all policies of professional
liability (medical malpractice), general liability, theft, fidelity, fire,
product liability, errors and omissions, health and other property and casualty
forms of insurance held by the Medical Group covering the assets, properties or
operations of the Medical Group and the Medical Business (specifying the
insurer, amount of coverage, type of insurance, policy number and any pending
claims thereunder). All such policies of insurance are valid and enforceable
policies and are outstanding and duly in force and all premiums with respect
thereto are currently paid. Neither the Medical Group nor its predecessor in
interest has, during the last five fiscal years, been denied or had revoked or
rescinded any policy of insurance relating to the assets, properties or
operations of the Medical Group or the Medical Business.
6.14. REAL PROPERTY.
Schedule 6.14 sets forth an accurate and complete legal description of
the entire right, title and interest of the Medical Group in and to all real
property, together with all buildings, facilities, fixtures and improvements
located on such real property, owned or leased by the Medical Group (the "Real
Property"), together with an accurate description of the title insurance policy
or other evidence of title issued with respect thereto, the most current survey
of such real property and a description of the use thereof. Other than the Real
Property, the Medical Group has no other interest (leasehold or otherwise)
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in real property used, held for use or intended to be used in the Medical
Business. The Medical Group has a valid leasehold interest in all Real Property
leased by the Medical Group.
6.15. BURDENSOME RESTRICTIONS.
Except as set forth on Schedule 6.15, neither the Medical Group nor
the Medical Business is bound by any oral or written agreement or contract which
by its terms prohibits it from conducting the Medical Group or the Medical
Business (or any material part thereof).
6.16. DISCLOSURE.
Neither the Medical Group Transaction Documents (including the
Exhibits and Schedules attached thereto) nor any other document, certificate or
written statement furnished to the Management Company by or on behalf of the
Medical Group in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. Except as set forth on Schedule 6.16, there have been no events or
transactions, or information which has come to the attention of the Medical
Group, which, as they relate directly to the Medical Group or the Medical
Business, could reasonably be expected to have a material adverse effect on the
business, operations, affairs, prospects or condition of the Medical Group and
the Medical Business.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT COMPANY.
The Management Company represents and warrants to the Medical Group,
as of the Signature Date hereof, as follows:
7.1. ORGANIZATION, GOOD STANDING AND POWER.
The Management Company (a) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and (b)
has all requisite corporate
-51-
power and authority to own, lease and operate its properties, to carry on its
business as now being conducted and as proposed to be conducted, to execute and
deliver this Agreement, the Asset Purchase Agreement, each Restricted Stock
Agreement, the Medical Equipment Master Lease, each Assignment of Lease, each
Office Sublease, and each Stockholder Non-Competition Agreement (collectively,
the "Management Company Transaction Documents"), to perform its obligations
thereunder, and to consummate the transactions contemplated hereby and thereby.
The Management Company has delivered to the Medical Group a true and correct
copy of its formation documents, consisting of the following: Amended and
Restated Certificate of Incorporation filed November 12, 1996 and the
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation filed November 25, 1996 (the "BMJ Formation Documents"). The BMJ
Formation Documents have not been amended, and the BMJ Formation Documents are
in effect as of the date hereof.
7.2 EQUITY INVESTMENTS.
Except as identified in Schedule 7.2, the Management Company currently
has no subsidiaries, nor does the Management Company currently own any capital
stock or other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture, or other entity.
7.3. CAPITALIZATION.
(a) The total authorized capital of the Management Company consists of
15,000,000 shares of common stock and 5,000,000 shares of preferred stock. Set
forth in Schedule 7.3(a) is an accurate and complete listing of all of the
stockholders of the Management Company and the number and class of shares held
by each. Except as set forth in Schedule 7.3(a), the Management Company has no
other outstanding stock or securities of any kind or nature, and no shares of
capital stock are held by the Management Company in its treasury. Each of the
outstanding shares of capital stock has been duly and validly
-52-
authorized and issued, is fully paid and non-assessable, and was issued in
compliance with all applicable federal and state securities laws. Except as set
forth in the Stockholders Agreement (as hereinafter defined), no person is
entitled to any preemptive or similar right with respect to the issuance of any
shares of capital stock of the Management Company.
(b) No sale of common stock has been effected or any other action
taken the effect of which sale or other action would require or permit an
adjustment of the Conversion Price of any issued and outstanding convertible
preferred stock. The exercise of the right of any holder of convertible
preferred stock to convert such stock to common stock on or as of the
Commencement Date hereunder would entitle such holder of preferred stock to
receive one share of common stock for each share of preferred stock.
(c) There are no outstanding warrants, options, calls, conversion
rights or commitments or other rights to subscribe for or purchase from the
Management Company any shares of capital stock of the Management Company or
securities convertible into or exchangeable for capital stock, except as set
forth in Schedule 7.3(c).
(d) The Management Company has taken all action necessary or
appropriate to duly authorize the creation, issuance and sale of the common
stock to be issued hereunder. Such shares of common stock, when issued, sold and
delivered, as provided for herein and in the Restricted Stock Agreements, will
be validly issued, fully paid and nonassessable, with no personal liability
attaching to the ownership of the shares. The issuance of such shares of common
stock will not violate any preemptive or similar right of any person.
7.4. STOCKHOLDERS AGREEMENT.
The Management Company has delivered to the Medical Group a true and
correct copy of that certain Amended and
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Restated Stockholders Agreement dated as of November 12, 1996, entered into by
and among the Management Company and the stockholders identified therein. The
Stockholders Agreement has not been terminated or amended and remains in full
force and effect.
7.5. AUTHORITY.
The execution, delivery and performance of the Management Company
Transaction Documents, and the consummation of the transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Management Company. The Management Company Transaction
Documents to which it is a party have been duly and validly executed and
delivered by the Management Company, and such Management Company Transaction
Documents are valid and binding obligations of the Management Company,
enforceable in accordance with their respective terms except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally. Neither the execution,
delivery or performance of the Management Company Transaction Documents, nor the
consummation by the Management Company of the transactions contemplated thereby,
nor compliance by the Management Company with any provision thereof, will (a)
conflict with or result in a breach of any provisions of the BMJ Formation
Documents or By-laws of the Management Company, (b) cause a default (with due
notice, lapse of time or both), or give rise to any right of termination,
cancellation or acceleration, under any of the terms, conditions or provisions
of any material note, bond, lease, mortgage, indenture, license or other
instrument, obligation or agreement to which the Management Company is a party
or by which it or any of its properties or assets is or may be bound or (c)
violate any law, statute, rule or regulation or order, writ, judgment,
injunction or decree of any court, administrative agency or governmental body
applicable to the Management Company or any of its properties or assets. Except
as provided in Schedule 7.5, to the best of the Management
-54-
Company's knowledge, no permit, authorization, consent or approval of or by, or
any notification of or filing with, any person (governmental or private) is
required in connection with the execution, delivery or performance by the
Management Company of this Agreement or the consummation by the Management
Company of the transactions contemplated hereby.
7.6. FINANCIAL INFORMATION.
Schedule 7.6 contains (a) the unaudited statements of assets,
liabilities and stockholders' equity of the Management Business at October 31,
1996 (the "Management Company Balance Sheet"; and the date thereof being
referred to as the "Management Company Balance Sheet Date"), and the related
unaudited statements of revenue and expenses for the periods then ended
(including the notes thereto and other financial information included therein)
(collectively, the "Unaudited Financial Statements"). The Unaudited Financial
Statements (i) were prepared in accordance with the books and records of the
Management Business, (ii) fairly present the financial position of the
Management Business as of the dates thereof, and (iii) are true, correct and
complete in all material respects as of the date thereof.
7.7. ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth on Schedule 7.7, as of the Management Company
Balance Sheet Date, (a) the Management Business did not have any material
liability of any nature (matured or unmatured, fixed or contingent, known or
unknown) which was not provided for or disclosed on the Management Company
Balance Sheet, (b) all liability reserves established by the Management Business
on the Management Company Balance Sheet were adequate and (c) there were no loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) which were not adequately provided for or disclosed on the Management
Company Balance Sheet.
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7.8. ABSENCE OF CHANGES.
Except as set forth on Schedule 7.8, since the Management Company
Balance Sheet Date, the Management Business has been operated in the ordinary
course and consistent with past practice and there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets (including, without limitation, levels of working capital and
the components thereof), liabilities, operations, results of operations,
earnings, business or prospects of the Management Business;
(b) any damage, destruction or loss (whether or not covered by
insurance) in an aggregate amount exceeding $25,000 affecting any asset or
property of the Management Business;
(c) any obligation or liability (whether absolute, accrued, contingent
or otherwise and whether due or to become due) created or incurred, or any
transaction, contract or commitment entered into, by the Management Business
other than such items created or incurred in the ordinary course of the
Management Business and consistent with past practice;
(d) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Management Business outside the
ordinary course of the Management Business (whether absolute, accrued,
contingent or otherwise and whether due or to become due);
(e) any license, sale, transfer, pledge, mortgage or other disposition
of any tangible or intangible asset of the Management Business except in the
ordinary course of the Management Business and consistent with past practice;
(f) any write-off as uncollectible of any accounts receivable in
connection with the Management Business or any
-56-
portion thereof in excess of $5,000 in the aggregate exclusive of all normal
contractual adjustments from third party payors;
(g) except for all normal contractual adjustments from third party
payors, any account receivable in connection with the Management Business in an
amount greater than $10,000 which (i) has become delinquent in its payment by
more than 90 days, (ii) has had asserted against it any claim, refusal to pay or
right of set-off, (iii) an account debtor has refused to pay for any reason or
with respect to which the Management Business, such account debtor has become
insolvent or bankrupt or (iv) has been pledged to any third party;
(h) any cancellation of any debts or claims of, or any amendment,
termination or waiver of any rights of material value to, the Management
Business;
(i) any general uniform increase in the compensation of employees of
the Management Company or the Management Business (including, without
limitation, any increase pursuant to any bonus, pension, profit-sharing,
deferred compensation arrangement or other plan or commitment) or any increase
in compensation payable to any officer, employee, consultant or agent thereof,
or the entering into of any employment contract with any officer or employee, or
the making of any loan to, or the engagement in any transaction with, any
officer of the Management Company or the Management Business;
(j) any change in the accounting methods or practices followed in
connection with the Management Business or any change in depreciation or
amortization policies or rates theretofore adopted;
(k) any termination of employment of any key employee of the
Management Company or the Management Business listed on Annex B (each, a
"Management Company Key Employee"), or any expression of intention by any Key
Employee of the Management
-57-
Company or the Management Business to terminate such employment with the
Management Company or the Management Business;
(l) any agreement or commitment relating to the sale of any material
fixed assets of the Management Business;
(m) any other transaction relating to the Management Business other
than in the ordinary course of the Management Business and consistent with past
practice; or
(n) any agreement or understanding, whether in writing or otherwise,
for the Management Business to take any of the actions specified in items (a)
through (m) above.
7.9. TAX MATTERS.
(a) Except as set forth on Schedule 7.9, (i) all Taxes relating to the
Management Business required to be paid through the date hereof have been paid
and all returns, declarations of estimated Tax, Tax reports, information returns
and statements required to be filed in connection with the Management Business
prior to the date hereof (other than those for which extensions shall have been
granted prior to the date hereof) relating to any Taxes with respect to any
income, properties or operations of the Management Company prior to the date
hereof (collectively, "Management Company Returns") have been duly filed; (ii)
as of the time of filing, the Management Company Returns correctly reflected in
all material respects (and, as to any Management Company Returns not filed as of
the date hereof, will correctly reflect in all material respects) the facts
regarding the income, business, assets, operations, activities and status of the
Management Business and any other information required to be shown therein;
(iii) all Taxes relating to the operations of the Management Business that have
been shown as due and payable on the Management Company Returns have been timely
paid and filed or adequate provisions made to the books and records of the
Management Business; (iv) in connection with the Management Business (x) the
Management
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Company has made provision on the Management Company Balance Sheet for all Taxes
payable for any periods that end on or before the Management Company Balance
Sheet Date for which no Management Company Returns have yet been filed and for
any periods that begin on or before the Management Company Balance Sheet Date
and end after the Management Company Balance Sheet Date to the extent such Taxes
are attributable to the portion of any such period ending on the Management
Company Balance Sheet Date and (y) provision has been made for all Taxes payable
for any
periods that end on or before the date hereof for which no Management Company
Returns have then been filed and for any periods that begin on or before the
date hereof and end after such date to the extent such Taxes are attributable to
the portion of any such period ending on such date; (v) no tax liens have been
filed with respect to any of the assets of the Management Business, and there
are no pending tax audits of any Management Company Returns relating to the
Management Business; and (vi) no deficiency or addition to Taxes, interest or
penalties for any Taxes relating to the operation of the Management Business has
been proposed, asserted or assessed in writing (or any member of any affiliated
or combined group of which the Management Company or any previous operator of
the Management Business was a member for which the Management Company could be
liable).
(b) The Management Company is not a foreign person within the meaning
of ss.1.1445-2(b) of the Regulations under Section 1445 of the Code.
7.10. LITIGATION, ETC.
Except as set forth on Schedule 7.10, there are no (a) actions, suits,
claims, investigations or legal or administrative or arbitration proceedings
pending or, to the best knowledge of the Management Company, threatened against
the Management Company or in connection with the Management Business, whether at
law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality or
(b) judgments, decrees, injunctions or orders
-59-
of any court, governmental department, commission, agency, instrumentality or
arbitrator against the Management Company its assets or affecting the Management
Business. The Management Company has delivered to the Medical Group all
documents and correspondence relating to matters referred to in said Schedule
7.10.
7.11. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS.
The Management Company and the Management Business shall have complied
in all material respects with all applicable material Federal, state, local or
foreign laws, ordinances, regulations and orders. The Management Company has all
Federal, state, local and foreign governmental licenses and permits necessary in
the conduct of the Management Business, the lack of which would have a material
adverse effect on the Management Company's ability to operate the Management
Business after the date hereof on substantially the same basis as presently
operated, such licenses and permits are in full force and effect, the Management
Company has not received any notice indicating that any violations are or have
been recorded in respect of any thereof, and no proceeding is pending or, to the
best knowledge of the Management Company, threatened to revoke or limit any
thereof. To the best knowledge of the Management Company, none of such licenses
and permits shall be affected in any material respect by the transactions
contemplated hereby.
7.12. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
(a) Except as set forth on Schedule 7.12, all of the accounts
receivable owing to the Management Company in connection with the Management
Business as of the date hereof constitute valid and enforceable claims arising
from bona fide transactions in the ordinary course of the Management Business,
the amounts of which are actually due and owing, and as of the date hereof, to
the best knowledge of the Management Company, there are no claims, refusals to
pay or other rights of set-off against any thereof. Except as set forth on
Schedule 7.12, as of
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the date hereof, there is (i) no account debtor or note debtor of the Management
Business delinquent in its payment by more than 60 days, (ii) no account debtor
or note debtor of the Management Business who or which has refused to pay its
obligations for any reason or is the subject of a bankruptcy proceeding and
(iii) no account receivable or note receivable of the Management Business
pledged to any third party.
(b) All accounts payable and notes payable by the Management Business
to third parties arose in the ordinary course of business and, except as set
forth in Schedule 7.12, there is no account payable or note payable past due or
delinquent in its payment.
7.13. LABOR RELATIONS; EMPLOYEES.
Schedule 7.13 contains a true and complete list of the persons
employed by the Management Company as of the date hereof (the "Management
Company Employees"). Except as set forth on Schedule 7.13, (a) the Management
Company and the Management Business are not delinquent in payments to any of the
Management Company Employees for any wages, salaries, commissions, bonuses or
other compensation for any services performed by them to the date hereof or
amounts required to be reimbursed to the Management Company Employees; (b) upon
termination of the employment of any of the Management Company Employees,
neither the Management Company, the Management Business nor the Medical Group
will by reason of anything done prior to the date hereof, or by reason of the
consummation of the transactions contemplated hereby, be liable for any excise
taxes pursuant to Section 4980B of the Code or to any of the Management Company
Employees for severance pay or any other payments; (c) there is no unfair labor
practice complaint against the Management Company or in connection with the
Management Business pending before the National Labor Relations Board or any
comparable state, local or foreign agency; (d) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the best knowledge of the
Management Company, threatened against or involving the
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Management Company or Management Business; (e) there is no collective bargaining
agreement covering any of the Management Company Employees; and (f) to the best
knowledge of the Management Company, no Management Company Employee or
consultant is in violation of any (i) employment agreement, arrangement or
policy between such person and any previous employer (private or governmental)
or (ii) agreement restricting or prohibiting the use of any information or
materials used or being used by such person in connection with such person's
employment by or association with the Management Company or the Management
Business.
7.14. EMPLOYEE BENEFIT PLANS.
(a) Schedule 7.14 identifies each `employee benefit plan', as defined
in Section 3(3) of ERISA, and all other written or oral plans, programs,
policies or agreements involving direct or indirect compensation (including any
employment agreements entered into between the Management Company or the
Management Business and any Management Company Employee or former employee of
the Management Company or in connection with the Management Business, but
excluding workers' compensation, unemployment compensation and other
government-mandated programs) currently or previously maintained or entered into
by the Management Company or in connection with the Management Business for the
benefit of any Management Company Employee or former employee of the Management
Company or in connection with the Management Business under which the Management
Company, any affiliate thereof or the Management Business has any present or
future obligation or liability. The Management Company has provided the Medical
Group with true and complete age, salary, service and related data for
Management Company Employees and in connection with the Management Business.
(b) Schedule 7.14 lists each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' compensation,
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disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits currently maintained by the
Management Company or in connection with the Management Business.
7.15. INSURANCE.
Schedule 7.15 contains a list of all policies of liability, theft,
fidelity, fire, product liability, errors and omissions, health and other
property and casualty forms of insurance held by the Management Company covering
the assets, properties or operations of the Management Company and the
Management Business (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims thereunder). All such policies
of insurance are valid and enforceable policies and are outstanding and duly in
force and all premiums with respect thereto are currently paid. Neither the
Management Company nor its predecessor in interest has, during the last five
fiscal years, been denied or had revoked or rescinded any policy of insurance
relating to the assets, properties or operations of the Management Company or
the Management Business.
7.16. REAL PROPERTY.
Schedule 7.16 sets forth an accurate and complete legal description of
the entire right, title and interest of the Management Company in and to all
real property, together with all buildings, facilities, fixtures and
improvements located on such real property, owned or leased by the Management
Company (the "Management Company Real Property"), together with an accurate
description of the title insurance policy or other evidence of title issued with
respect thereto, the most current survey of such real property and a description
of the use thereof. Other than the Management Company Real Property, the
Management Company has no other interest (leasehold or otherwise) in real
property
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used, held for use or intended to be used in the Management Business. The
Management Company has a valid leasehold interest in all Management Company Real
Property leased by the Management Company.
7.17. BURDENSOME RESTRICTIONS.
Except as set forth on Schedule 7.17, neither the Management Company
nor the Management Business is bound by any oral or written agreement or
contract which by its terms prohibits it from conducting the Management Company
or the Management Business (or any material part thereof).
7.18. DISCLOSURE.
Neither the Management Company Transaction Documents (including the
Exhibits and Schedules attached thereto) nor any other document, certificate or
written statement furnished to the Medical Group by or on behalf of the
Management Company in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading. Except as set forth on Schedule 7.18, there have been no events or
transactions, or information which has come to the attention of the Management
Company, which, as they relate directly to the Management Company or the
Management Business, could reasonably be expected to have a material adverse
effect on the business, operations, affairs, prospects or condition of the
Management Company and the Management Business.
SECTION 8. OPERATIONS COMMITTEE.
8.1. FORMATION AND OPERATION OF THE OPERATIONS COMMITTEE.
The Management Company and the Medical Group shall establish an
Operations Committee responsible for directing the Management Company in
connection with the development of certain specific management and
administrative policies for the overall
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operation of the Medical Group. The Operations Committee shall consist of six
(6) members. The Medical Group shall designate three (3) members of the
Operations Committee, each of whom shall be a physician in the Medical Group,
and the Management Company shall designate three (3) members of the Operations
Committee. The business of the Operations Committee shall be conducted in
accordance with the policies and procedures described in Section 8.4 hereof.
8.2. AUTHORITATIVE FUNCTIONS OF THE OPERATIONS COMMITTEE.
The Operations Committee shall perform the following functions, and
the decisions of the Operations Committee with respect to such functions shall
be binding on the Management Company and the Medical Group:
(a) Approve the annual budgets for:
(i) ▇▇▇▇▇▇▇▇ and Collections
(ii) Medical Group Costs
(iii) Management Company Operating Costs
(b) Approve costs and expenses that exceed the Management Company
Operating Costs Budget.
(c) Establish parameters and criteria with respect to the
establishment and maintenance of relationships with institutional providers and
payors and managed care contracts (except with respect to the establishment of
professional fees).
(d) Establish parameters and criteria with respect to:
(i) ▇▇▇▇▇▇▇▇
(ii) Claims submission
(iii) Collections of fees
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(iv) Delinquent account collection policies
(v) Turnover of delinquent accounts to outside collection
agencies
(vi) Write-offs of account balances
(vii) Claim review requests
(viii) "Insurance only" and other courtesy write-off
policies
(ix) Lien account collection policies
(x) Student Athlete account policies
(e) Approve the acquisition, replacement, relocation, or other
disposition of Medical Equipment and FF&E, approve the integration of new
technologies into the professional practice of the Medical Group as contemplated
by Section 3.11 hereof, and approve the renovation and expansion of any offices
of the Medical Group ("Tenant Improvements"); provided, however, that the
approval of the Management Company also shall be required prior to (i) the
acquisition of any Medical Equipment or FF&E (including any Medical Equipment or
FF&E relating to the integration of new technologies into the professional
practice of the Medical Group) if and to the extent that the aggregate cost of
such items in any calendar year exceeds five percent (5%) of the Management Fee
for such year, (ii) the undertaking of any Tenant Improvements relating to
patient care facilities that cost more than $25,000 in the aggregate at any one
of the Medical Group's office locations in any calendar year, or (iii) the
undertaking of any other Tenant Improvements.
(f) Establish parameters and criteria for off-site storage of files
and records of the Medical Group.
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8.3. ADVISORY FUNCTIONS OF THE OPERATIONS COMMITTEE.
The Operations Committee shall review, evaluate and make
recommendations to the Medical Group and the Management Company with respect to
the following matters:
(a) Identification of physician subspecialties required for the
efficient operation of the Medical Group; advice regarding all Medical Personnel
employment and recruitment contracts to be utilized by the Medical Group.
(b) Development of long-term strategic planning objectives for the
Medical Group.
(c) Public relations, advertising, and other marketing of Medical
Group services, including design of exterior signs.
(d) The establishment of fees for professional services and ancillary
services rendered by the Medical Group.
(e) Access and quality issues pertaining to ancillary services.
(f) Insurance limits and insurance coverage of the Medical Group and
the Management Company, as such coverage may relate to Medical Group operations
and activities.
(g) Any matters arising in connection with the operations of the
Medical Group that are not specifically addressed in this Agreement and as to
which the Management Company or the Medical Group requests consideration by the
Operations Committee.
The recommendations of the Operations Committee with respect to the matters
described in this Section 8.3 are intended for the advice and guidance of the
Management Company and the Medical Group, and except as provided herein, the
Operations Committee does not have the power to bind the Management Company or
the Medical Group. Where discretion with respect to any matters is
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vested in the Management Company or the Medical Group under the terms of this
Agreement, the Management Company or the Medical Group, as the case may be,
shall have ultimate responsibility for the exercise of such discretion,
notwithstanding any recommendation of the Operations Committee. The Management
Company and the Medical Group shall, however, take such recommendations of the
Operations Committee into account in good faith in the exercise of such
discretion.
8.4. COMMITTEE POLICIES AND PROCEDURES.
(a) The Medical Group shall designate one of its members to act as
Chairman of the Committee, and the Management Company shall designate one of its
members to act as Vice Chairman. Each party may substitute or change its
designated Operations Committee members at any time upon notice to the other
party, and any Operations Committee member may designate his or her own
substitute at any meeting without notice. Each member shall have one vote and
shall have the right to grant his or her proxy to another member of the
Operations Committee. The Chairman, if present, shall preside at all meetings of
the Operations Committee. In the absence of the designated Chairman, the Vice
Chairman shall preside. The only powers of the Chairman and the Vice Chairman
that differ from those of the other members of the Operations Committee shall be
to call and preside over meetings in accordance with this Section 8.4.
(b) The Operations Committee may hold meetings without call or formal
notice at such times and places as a quorum of its members may from time to time
determine. A meeting of the Operations Committee also may be called by at least
two (2) members of the Operations Committee or by the Chairman or Vice Chairman
thereof upon at least three (3) days' written notice to the other members of the
Operations Committee. Such notice requirement shall be deemed waived with
respect to any member of the Operations Committee who attends such meeting.
Meetings may be held in person or by telephone. The Operations Committee also
may act by written consent as provided in Section
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8.4(c). Minutes shall be kept of all formal actions taken by the Operations
Committee.
(c) No action of the Operations Committee shall be effective unless
authorized by the vote of four (4) or more members of the Operations Committee
present or represented by proxy at the applicable meeting. A quorum of the
Operations Committee shall be four (4) members, in person, by telephone, or by
proxy, and a quorum must remain for the duration of the meeting. The Operations
Committee may establish such procedures to act by written consent, without a
meeting, as the Operations Committee determines are advisable, provided that all
six (6) members (in person or by proxy) must sign any written consent.
SECTION 9. OBLIGATIONS OF THE MEDICAL GROUP.
The Medical Group shall perform the following obligations during the
Term:
9.1. COMPLIANCE WITH LAWS.
The Medical Group shall provide professional services to patients in
compliance at all times with ethical standards, laws and regulations to which
they are subject. The Medical Group shall verify, with the assistance of the
Management Company, that each physician and other Medical Personnel associated
with the Medical Group for the purpose of providing medical care to patients of
the Medical Group is licensed by the State of California. The Medical Group
shall monitor the quality of medical care practiced by physicians and other
health care personnel associated with the Medical Group. In the event that any
disciplinary actions or medical malpractice actions are initiated against any
such physician by any payor, patient, state or federal regulatory agency or any
other person or entity, the Medical Group shall immediately inform the
Management Company of such action and its underlying facts and circumstances.
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9.2. USE OF FACILITY.
The Medical Group shall use and occupy any Facility (as defined below)
exclusively for the practice of medicine, and shall comply with all applicable
federal, state and local rules, ordinances and standards of medical care. The
medical practice or practices conducted at any Facility described in clause (i)
of the definition of the term "Facility" shall be conducted solely by Medical
Personnel associated with the Medical Group, and no other physician or medical
practitioner shall be permitted to use or occupy any Facility described in
clause (i) below without the prior written consent of the Management Company,
which consent shall not be unreasonably withheld or delayed. The term "Facility"
shall mean (i) any medical facility or laboratory controlled, managed or
operated by the Management Company or (ii) any hospital at which any Medical
Personnel practices medicine or maintains admitting privileges.
9.3. CHOICE OF BRACES, SPLINTS, APPLIANCES, MEDICAL SUPPLIES, AND
ALLOGRAFTS.
The Medical Group shall have the exclusive control over the choice of
vendors and products utilized with respect to all prosthetics, prosthetic
devices, orthotics, braces, splints, appliances, medical supplies and
allografts.
9.4. CHOICE OF RADIOLOGISTS, ANESTHESIOLOGISTS, HOSPITALS, PHYSICAL
THERAPY, MRI, AND OTHER MEDICAL PROFESSIONALS AND FACILITIES.
The Medical Group shall have exclusive control over the choice of
specific physicians and facilities to be utilized by the Medical Group with
respect to radiology, anesthesiology, hospitals, physical therapy, MRI, and
other medical professionals and facilities; provided, however, that the
foregoing shall not limit the provisions of Section 3.4(b) hereof.
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9.5. INSURABILITY.
The Medical Group shall cooperate with the Management Company in (i)
ensuring that its Medical Personnel are insurable or (ii) instituting
proceedings to terminate within two business days any Medical Personnel who is
not insurable or who loses his or her insurance eligibility. The Medical Group
shall notify the Management Company in writing of any change in the insurance
status of any Medical Personnel within two days after the Medical Group receives
notice of any such change. The Medical Group shall require all Medical Personnel
to participate in an on-going risk management program.
9.6. MEDICARE.
The Medical Group shall cause all physicians to be participating
providers and accept assignment under Medicare.
9.7. ACCOUNTS RECEIVABLE; BILLING.
From the Commencement Date, the Medical Group acknowledges and agrees
that all accounts receivable of the Medical Group or its Medical Personnel shall
be the property of the Management Company hereunder and the Medical Group and
the Medical Personnel hereby transfer and assign all of their right, title and
interest to such accounts receivable to the Management Company. The Medical
Group's Medical Personnel shall be responsible for providing the appropriate
current CPT4 coding with respect to the fee tickets prepared by such Medical
Personnel.
9.8. MEDICAL PERSONNEL HIRING.
The Medical Group shall have the ultimate control over and
responsibility for the hiring, compensation, supervision, evaluation and
termination of its Medical Personnel; provided, however, that at the request of
the Medical Group, the Management Company shall consult with the Medical Group
regarding such matters.
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9.9. CONTINUING EDUCATION.
The Medical Group and its Medical Personnel shall be solely
responsible for ongoing membership in professional associations and continuing
professional education. The Medical Group shall ensure that its Medical
Personnel participate in such continuing professional education as is necessary
for such physician or professional to remain current in his or her field of
medical practice.
9.10. PHYSICIAN FELLOWSHIP PROGRAM.
The Medical Group shall have the ultimate control over and
responsibility for the Physician Fellowship Program of the Medical Group,
including but not be limited to fellow interviewing, hiring, termination,
compensation, day-to-day supervision, and assignment of responsibilities and
projects.
9.11. CLINICAL RESEARCH.
The Medical Group shall have the ultimate control over and
responsibility for the clinical research program pertaining to patients of the
Medical Group. This shall include but not be limited to research personnel
interviewing, hiring, termination, compensation, day-to-day supervision, and
assignment of responsibilities and projects. However, the Medical Group will
cooperate with and take direction from the Management Company in its nationwide
efforts to provide an effective disease management information system and
outcome studies programs.
9.12. SALES OF STOCK.
The Eligible Parties shall give to ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D. and any venture
capital firm providing funds to the Management Company the right to participate
on a pro rata basis (based on the number of shares, whether preferred or common,
calculated on an as-converted basis, held by ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D. and any such
venture capital firm and by any other shareholders who hold the same rights that
are conferred by this Section 9.12, including
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members of other physician groups) in any proposed sale of more than fifty
percent (50%) of the stock in the Management Company held by the Eligible
Parties to any unaffiliated third party or parties, and the Medical Group shall
require the Eligible Parties to comply with the obligations set forth in this
Section 9.12; provided, however, that the obligations under this Section 9.12
shall become null and void upon the consummation of an initial public offering
of the Management Company's common stock.
SECTION 10. CERTAIN COVENANTS.
10.1. CHANGE OF CONTROL.
During the Term of this Agreement, the Medical Group shall not enter
into any single transaction (or group of related transactions undertaken
pursuant to a common plan) involving [the admission of new partners, transfer of
partnership interests], or reorganization or restructuring of the Medical Group
if in any such case the effect would be to transfer a majority of the ownership
interest in the Medical Group, without the prior written consent of the
Management Company, which consent shall not be unreasonably withheld or delayed.
10.2. LEGEND ON SECURITIES.
During the Term of this Agreement, any certificate or similar evidence
representing an equity interest in the Medical Group issued by the Medical Group
shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE RESTRICTIONS ON TRANSFER CONTAINED IN THE MANAGEMENT
SERVICES AGREEMENT EFFECTIVE AS OF NOVEMBER 1, ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ SPINAL CLINIC, P.A., A TEXAS PROFESSIONAL
ASSOCIATION, AND BONE, MUSCLE AND JOINT, INC., A DELAWARE
CORPORATION."
The Management Company acknowledges that there is no certificate or
other similar evidence representing equity interests in the Medical Group as of
the Signature Date hereof. Nothing herein
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shall be construed as requiring the Medical Group to issue any certificate or
other evidence representing an equity interest in the Medical Group (other than
the Medical Group's [Name any agreements], or any replacement thereof, as
amended from time to time).
SECTION 11. RECORDS.
11.1. MEDICAL RECORDS.
Upon termination of this Agreement, the Medical Group shall retain all
patient medical records maintained by the Medical Group or the Management
Company in the name of the Medical Group.
11.2. MANAGEMENT BUSINESS RECORDS.
All books and records relating in any way to the operation of the
Management Business which are not patient medical records shall at all times be
the joint property of the Management Company and the Medical Group. The
Management Company shall maintain custody of such records, and the Medical Group
shall, upon its written request, be entitled to copies of any such records
relating to the Management Services performed by the Management Company.
11.3. ACCESS TO RECORDS FOLLOWING TERMINATION.
Following the termination of this Agreement, the Medical Group shall
grant (to the extent permitted by law) to the Management Company, for the
purpose of preparing for any actual or anticipated legal proceeding or for any
other reasonable purpose, reasonable access (which shall include making
photocopies) to the patient medical records described in Section 11.1 hereof and
any other pertinent information regarding the Medical Group during the Term.
Prior to accessing such patient medical records, the Management Company shall
obtain any required patient authorization.
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Following the termination of this Agreement, the Management Company
shall provide to the Medical Group, promptly upon the Medical Group's written
request, photocopies of the Management Business records described in Section
11.2 hereof, and shall grant to the Medical Group, for the purpose of preparing
for any actual or anticipated legal proceeding or for any other reasonable
purpose, any other pertinent information regarding the Management Company during
the Term.
SECTION 12. INSURANCE AND INDEMNITY.
12.1. PROFESSIONAL LIABILITY INSURANCE.
During the Term, the Management Company shall, to the extent permitted
by applicable law, procure and maintain for the benefit of itself and the
Medical Group comprehensive professional liability insurance providing for (a)
general liability coverage and (b) medical malpractice coverage with limits of
not less than $200,000 per claim and with aggregate policy limits of not less
than $600,000 covering the Medical Group and each of the Medical Personnel of
the Medical Group (or such higher amounts as may be necessary to comply with any
regulatory requirement and/or contractual requirement to which such Medical
Personnel or the Medical Group may be subject), including coverage for claims
made after the Commencement Date relating to events or occurrences at any time
prior thereto. The parties hereto acknowledge that the Management Company is
procuring the malpractice insurance referenced herein to ensure that the
Management Company has protection in the event it is sued as a result of an act
or omission of an employee of the Medical Group. The Management Company shall
pay the premiums for such general and medical malpractice liability coverage,
and the Management Company shall be designated as a co-beneficiary under such
insurance policies.
12.2. LIFE INSURANCE.
The Management Company shall obtain a $500,000 life insurance policy
for each duly licensed physician partner in the
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Medical Group. The Management Company shall be designated as the beneficiary
under such policies. The premiums for such policies shall be paid by the
Management Company and shall not be included as Management Company Operating
Costs or otherwise charged to the Medical Group.
12.3. INDEMNIFICATION BY MEDICAL GROUP.
The Medical Group shall indemnify, hold harmless and defend the
Management Company, its officers, directors, shareholders, employees, agents and
independent contractors from and against any and all liabilities, losses,
damages, claims, causes of action and expenses (including reasonable attorneys'
fees and expenses), whether or not covered by insurance, caused or asserted to
have been caused, directly or indirectly, by or as a result of (i) the
performance of Medical Group Services, including without limitation the
performance of such services prior to
the Commencement Date, (ii) any other acts or omissions of the Medical Group and
its Medical Personnel, including without limitation any such acts or omissions
that occurred prior to the Commencement Date, or (iii) any breach of or failure
to perform any obligation under this Agreement or the Transaction Documents by
the Medical Group and/or the Medical Personnel and/or their respective agents
and/or subcontractors (other than the Management Company) during the Term.
12.4. INDEMNIFICATION BY MANAGEMENT COMPANY.
The Management Company shall indemnify, hold harmless and defend the
Medical Group, its officers, directors, partners, members, employees, agents and
independent contractors from and against any and all liabilities, losses,
damages, claims, causes of action and expenses (including reasonable attorneys'
fees and expenses), whether or not covered by insurance, caused or asserted to
have been caused, directly or indirectly, by or as a result of (i) the
performance of Management Services, (ii) any other acts or omissions of the
Management Company and its employees or (iii) any breach of or failure to
perform any
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obligation under this Agreement or the Transaction Documents by the Management
Company and/or its partners, agents, employees and/or subcontractors (other than
the Medical Group) during the Term.
SECTION 13. TERMINATION.
13.1. TERMINATION BY MEDICAL GROUP.
The Medical Group may terminate this Agreement effective immediately
by giving written notice of termination to the Management Company (a) in the
event of the filing of a petition in voluntary bankruptcy or an assignment for
the benefit of creditors by the Management Company or upon other action taken or
suffered, voluntarily or involuntarily, under any federal or state law for the
benefit of debtors by the Management Company, except for the filing of a
petition in involuntary bankruptcy against the Management Company which is
dismissed within ninety (90) days thereafter (a "Bankruptcy Event"), (b) in the
event the Management Company shall default in any material respect in the
performance of any duty or obligation imposed upon it by this Agreement and the
Management Company shall not have taken reasonable action commencing curing of
such default within thirty (30) days after written notice thereof has been given
to the Management Company by the Medical Group or the Management Company does
not thereafter diligently prosecute such action to completion, (c) in the event
that any of the representations and warranties made by the Management Company in
Section 7 is untrue or misleading in any material respect, provided that the
Medical Group shall have previously given written notice to the Management
Company describing in reasonable detail the nature of the item in question and
the Management Company shall not have cured such matter within thirty (30) days
of such notice or (d) in the event that the sale of shares of the Management
Company pursuant to its IPO is not consummated within forty-eight (48) months
after the Commencement Date.
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13.2. TERMINATION BY MANAGEMENT COMPANY.
The Management Company may terminate this Agreement effective
immediately by giving written notice of termination to the Medical Group (a) in
the event of a Bankruptcy Event relating to the Medical Group, (b) in the event
the Medical Group shall default in any material respect in the performance of
any duty or obligation imposed upon it by this Agreement and the Medical Group
shall not have taken reasonable action commencing curing of such default within
thirty (30) days after written notice thereof has been given to the Medical
Group by the Management Company or the Medical Group does not thereafter
diligently prosecute such action to completion, (c) in the event that any of the
representations and warranties made by the Medical Group in Section 6 is untrue
or misleading in any material respect, provided that the Management Company
shall have previously given written notice to the Medical Group describing in
reasonable detail the nature of the item in question and the Medical Group shall
not have cured such matter within thirty (30) days of such notice, or (d) in the
event the Medical Group is excluded from the Medicaid or Medicare program for
any reason.
13.3. TERMINATION BY MEDICAL GROUP OR MANAGEMENT COMPANY.
The Medical Group and the Management Company shall each have the right
to terminate this Agreement effective immediately by giving written notice of
termination to the other party pursuant to Section 28 of this Agreement.
13.4. EFFECT OF TERMINATION.
Upon the termination of this Agreement in accordance with the terms
hereof, neither party hereto shall have any further obligation or liability to
the other party hereunder, except as provided in Section 13.5 and in Section 27
hereof, and except to pay in full and satisfy any and all outstanding
obligations of the parties accruing through the effective date of termination.
In order to accomplish the foregoing, the Annual
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Medical Group Compensation Amount described in Section 5.3(b) shall be
calculated on or before the end of the fourth month following the termination
date, rather than on or before April 30 as specified in Section 5.3(b), and the
computation made under such section shall be made with respect to the portion of
the year ending on the termination date (if the termination date is other than
December 31). In making such computation, all Collections during January,
February, and March of such year shall be excluded, and all Collections during
the three-month period following termination shall be included. Additionally,
any payment required under the terms of Section 5.3(b)(ii) shall be made within
fifteen (15) days after the date by which the foregoing calculation is to be
made, rather than on May 15.
13.5. REPURCHASE OF ASSETS.
Promptly following termination of this Agreement for any reason, the
Management Company shall sell, transfer, convey, and assign to the Medical
Group, and the Medical Group shall purchase, assume, and accept from the
Management Company, at such price and upon such terms as may be agreed upon by
the parties -- or, if the parties are unable to agree, at fair market value,
determined in the manner set forth below -- all of the following items which are
used in connection with the professional practice and related activities of the
Medical Group and which, in the case of items (a), (b), (c) and (d), are
physically located in any of the offices of the Medical Group, subject to any
required consent from any third party having an interest therein:
(a) the Medical Equipment owned by the Management Company;
(b) the furniture, furnishings, trade fixtures, and office equipment
owned by the Management Company;
(c) the Management Company's rights and interests in any equipment
leased by the Management Company, subject to the
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Medical Group's assumption of the obligations accruing thereunder after the date
of termination of this Agreement;
(d) the supplies owned by the Management Company;
(e) the Management Company's rights and interests under all of the
Office Leases, subject to the Medical Group's assumption of the obligations
accruing thereunder after the date of termination of this Agreement; and
(f) the deposits of the Management Company relating to the Medical
Group.
Fair market value of the above described assets shall be determined by an
independent appraiser mutually agreed upon by the Medical Group and the
Management Company; provided, however, that if the Medical Group and the
Management Company are unable to agree upon such an appraiser, each of the
parties shall select an appraiser and the two appraisers thus selected shall
select a third appraiser. All of the appraisers shall appraise the assets, and
for purposes of determining the purchase price, the highest and lowest
appraisals shall be disregarded, and the remaining appraisal shall be used.
SECTION 14. RESCISSION/DISENGAGEMENT
14.1. RESCISSION/DISENGAGEMENT BY MEDICAL GROUP.
(a) On (i) the earlier to occur of (A) the second (2nd) anniversary of
the Commencement Date or (B) the filing by the Management Company of a
Preliminary Prospectus for the initial public offering of its common stock with
the Securities and Exchange Commission (the "Second (2nd) Anniversary") and (ii)
the seventh (7th) anniversary of the Commencement Date (the "Seventh (7th)
Anniversary"), the Medical Group, at its option, may rescind this Agreement and
disengage itself from further participation in and from all of its obligations
under the terms of this Agreement. The option may be exercised by the Medical
Group by giving 30
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days' prior written notice of rescission/disengagement to the Management
Company, on or before the Second (2nd) or the Seventh (7th) Anniversary, as the
case may be, and by the Medical Group complying with provisions of Sections
14.1(c) through 14.1(d) below (subject however, to the performance of the
obligations imposed upon the Management Company in Section 14.1(e) below). The
effective date (the "Effective Date") of the rescission/disengagement shall be
the date specified in the written notice (which shall be either the Second (2nd)
Anniversary or the Seventh (7th) Anniversary).
(b) Effect of Rescission/Disengagement. The effect of the
rescission/disengagement by the Medical Group pursuant to the provisions of this
Section 14.1 shall be identical to the effect of termination, as described in
Section 13.4 of this Agreement.
(c) Repurchase of Assets. Within 30 days following the Effective Date
of the rescission/disengagement by the Medical Group, the Management Company
shall, subject to the prior receipt of any required landlord and third party
consents, sell, transfer, convey and assign to the Medical Group and the Medical
Group shall purchase, assume and accept from the Management Company the property
described and under the terms provided in Section 13.5 of this Agreement.
(d) Repayment of Consideration. On or before the Effective Date of the
rescission/disengagement, the Medical Group shall deliver to the Management
Company the following:
(i) Cash Consideration:
(A) Second (2nd) Anniversary: In the event the Medical Group
exercises its option as of the Second (2nd) Anniversary, a dollar
amount equal to the aggregate cash consideration received by the
Medical Group or by the Eligible Parties (the amount of which is set
forth opposite
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the name of each of the Eligible Parties on Schedule III hereto) from
the Management Company upon execution of this Agreement, SAVE AND
EXCEPT for that portion of the cash consideration payable under the
terms of that one (1) certain Asset Purchase Agreement executed
contemporaneously with the execution of this Agreement (the amount of
which is also set forth opposite the name of each of the Eligible
Parties on Schedule III hereto). The aggregate sum so determined shall
be payable to the Management Company in cash, by cashier's or
certified check or by wire transfer of good funds delivered to a
depository institution designated by the Management Company;
(B) Seventh (7th) Anniversary: In the event the Medical
Group shall exercise its option as of the Seventh (7th) Anniversary,
it shall have no obligation to return any portion of the cash
consideration received by the Medical Group upon execution of this
Agreement.
(ii) Stock of Management Company:
(A) Second (2nd) Anniversary: In the event the Medical Group
shall exercise its option as of the Second (2nd) Anniversary, all
shares of stock of the Management Company received by the Eligible
Parties associated with the Medical Group shall be returned and
redelivered to the Management Company. In the event any portion of the
shares to be returned and redelivered shall have been previously
disposed of by the Eligible Parties associated with the Medical Group,
the Fair Market Value (as defined in the Restricted Stock Agreement)
of such portion, determined as of the Second (2nd) Anniversary, shall
be payable
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to the Management Company in cash, by cashier's or certified check or
by wire transfer of good funds delivered to a depository institution
designated by the Management Company;
(B) Seventh (7th) Anniversary: In the event the Medical
Group shall exercise its option as of the Seventh (7th) Anniversary,
fifty percent (50%) of the shares of stock of the Management Company
received by the Eligible Parties associated with the Medical Group
upon execution of this Agreement shall be returned and redelivered to
the Management Company. In the event any portion of the shares to be
returned and redelivered shall have been previously disposed of by the
Eligible Parties associated with the Medical Group, the Fair Market
Value of such portion, determined as of the Seventh (7th) Anniversary,
shall be payable to the Management Company in cash, by cashier's or
certified check or by wire transfer of good funds delivered to a
depository institution designated by the Management Company.
(e) Repayment of Management Fee. The performance of the obligations of
the Medical Group under the provisions of Sections 14.1(b) through (d) above
shall be expressly subject to and conditioned upon the delivery from the
Management Company to the Medical Group, in cash, by cashier's or certified
check or by wire transfer of good funds delivered to a depository institution
designated by the Medical Group, of the following amount:
(i) Second (2nd) Anniversary: In the event the Medical Group
shall exercise its option as of the Second (2nd) Anniversary, the
Management Company shall deliver to the Medical Group fifty percent (50%)
of the Management Fees paid by the Medical Group under
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the terms of this Agreement after the Commencement Date and on or before
the Second (2nd) Anniversary;
(ii) Seventh (7th) Anniversary: In the event the Medical Group
shall exercise its option as of the Seventh (7th) Anniversary, the
Management Company shall have no obligation to return any portion of the
Management Fees paid by the Medical Group under the terms of this
Agreement.
14.2. DISENGAGEMENT OF INDIVIDUAL MEMBER.
On each of the Second (2nd) Anniversary and the Seventh (7th)
Anniversary, a member of the Medical Group (the "Disengaging Member") may,
at his option, disengage from further participation in and from further
obligations under the terms and provisions of this Agreement. The option
may be exercised by a Disengaging Member by giving written notice of his
disengagement to the Management Company and by complying with the
obligations imposed by Sections 14.2(b)-14.2(c) below (subject however, to
the performance by the Management Company of the obligations imposed in
Section 14.2(c)(iii) below). The Effective Date of the disengagement shall
be the date specified in the written notice (which shall be either the
Second Anniversary or the Seventh Anniversary).
(a) Effect of Disengagement. The effect of the disengagement by the
Disengaging Member pursuant to the provisions of this Section 14.2 shall,
insofar as the Disengaging Member is concerned, be identical to the effect
of termination, as described in Section 13.4 of this Agreement. However,
the disengagement by the Disengaging Member shall have no effect upon the
continuing rights and obligations of the Medical Group vis-a-vis the
Management Company under the terms of this Agreement.
(b) Repurchase of Assets. Within thirty (30) days after the Effective
Date of the disengagement (that is, thirty
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(30) days after the Second (2nd) Anniversary or the Seventh (7th) Anniversary,
as the case may be), the Disengaging Member shall have the right, option and
privilege to purchase the furnishings, fixtures, furniture and equipment
contained in the Disengaging Member's personal office. Such option shall be
exercised by notifying the Management Company in writing of the Disengaging
Member's election to exercise the option and specifying the particular items of
property which the Disengaging Member desires to purchase. The purchase price
for such property items shall be determined in the manner provided in Section
13.5 of this Agreement.
(c) Repayment of Consideration. On or before the Effective Date of
disengagement, the Disengaging Member shall deliver to the Management Company
the following:
(i) Cash Consideration:
(A) Second (2nd) Anniversary: In the event the Disengaging
Member exercises his option as of the Second (2nd) Anniversary, a
dollar amount equal to the aggregate cash consideration received by
the Disengaging Member (the amount of which is set forth opposite such
Disengaging Member's name on Schedule III hereto) from the Management
Company upon execution of this Agreement, SAVE AND EXCEPT for the
Disengaging Member's portion of the cash consideration payable under
the terms of that one (1) certain Asset Purchase Agreement executed
contemporaneously with the execution of this Agreement (the amount of
which is also set forth opposite such Disengaging Member's name on
Schedule III hereto). The aggregate sum, so determined, shall be
payable to the Management Company in cash, by cashier's or certified
check or by wire transfer of good funds
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delivered to a depository institution designated by the Management
Company;
(B) Seventh (7th) Anniversary: In the event the Disengaging
Member shall exercise his option as of the Seventh (7th) Anniversary,
he shall have no obligation to return any portion of the cash
consideration received by such Disengaging Member upon execution of
this Agreement.
(ii) Stock of Management Company:
(A) Second (2nd) Anniversary: In the event the Disengaging
Member shall exercise his option as of the Second (2nd) Anniversary,
all shares of stock of the Management Company received by the
Disengaging Member shall be returned and redelivered to the Management
Company. In the event any portion of the shares to be returned and
redelivered shall have been previously disposed of by the Disengaging
Member, the Fair Market Value of such portion, determined as of the
Second (2nd) Anniversary, shall be payable to the Management Company
in cash, by cashier's or certified check or by wire transfer of good
funds delivered to a depository institution designated by the
Management Company;
(B) Seventh (7th) Anniversary: In the event the Disengaging
Member shall exercise his option as of the Seventh (7th) Anniversary,
fifty percent (50%) of the shares of stock of the Management Company
received by the Disengaging Member upon execution of this Agreement
shall be returned and redelivered to the Management Company. In the
event any portion of the shares to be returned and redelivered shall
have been
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previously disposed of by the Disengaging Member, the Fair Market
Value of such portion, determined as of the Seventh (7th) Anniversary,
shall be payable to the Management Company in cash, by cashier's or
certified check or by wire transfer of good funds delivered to a
depository institution designated by the Management Company.
(iii) Repayment of Management Fee. The performance of the
obligations of the Disengaging Member under the provisions of Sections
14.2(b) and 14.2(c) shall be expressly subject to and conditioned upon the
delivery from the Management Company to the Disengaging Member, in cash, by
cashier's of certified check or by wire transfer of good funds delivered to
a depository institution designated by the Disengaging Member, of the
following amount:
(A) Second (2nd) Anniversary: In the event the Disengaging
Member shall exercise his option as of the Second (2nd) Anniversary,
the Management Company shall deliver to the Disengaging Member, fifty
percent (50%) of the Management Fees paid by the Medical Group under
the terms of this Agreement and allocable to income of the Medical
Group attributable to the Disengaging Member, after the Commencement
Date of this Agreement and on or before the Second (2nd) Anniversary.
(B) Seventh (7th) Anniversary: In the event the Disengaging
Member shall exercise his option as of the Seventh (7th) Anniversary,
the Management Company shall have no obligation to return any portion
of the Management Fees paid by the Medical Group under the terms of
this Agreement.
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14.3. SUPPLEMENTAL RESCISSION/DISENGAGEMENT RIGHT.
(a) If, on or before the Second (2nd) Anniversary, the Management
Company shall be providing Management Services within the metropolitan San
Antonio, Bexar County, Texas trade area for fewer than sixteen (16) medical
doctors having areas of specialty providing musculo-skeletal services which are
similar and complimentary to the areas of specialty represented by Management
Company affiliated physicians and the Medical Group, then in such event this
Agreement may be rescinded and terminated, at the election of the Medical Group.
If it shall so elect by notice in writing to the Management Company, delivered
on or before thirty (30) days before the Second (2nd) Anniversary, the Medical
Group shall no longer participate in or be obligated under the terms and
provisions of this Agreement if it shall comply with the provisions of Sections
14.3(c) through 14.3(d) below (subject however, to the performance by the
Management Company of the obligations imposed in Section 14.3(e) below). In such
case, the Effective Date of the rescission shall be the Second (2nd)
Anniversary.
(b) Effect of Rescission. The effect of the rescission of this
Agreement pursuant to the provisions of this Section 14.3 shall be identical to
the effect of termination, as described in Section 13.4 of this Agreement.
(c) Repurchase of Assets. Within 30 days following the Effective Date
of the rescission of this Agreement pursuant to the provisions of this Section
14.3, the Management Company shall sell, transfer, convey and assign to the
Medical Group and the Medical Group shall purchase, assume and accept from the
Management Company the property described and under the terms provided in
Section 13.5 of this Agreement.
(d) Repayment of Consideration. On or before the Effective Date of the
rescission of this Agreement, the Medical Group shall deliver to the Management
Company the following:
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(i) Cash Consideration: A dollar amount equal to the aggregate
cash consideration received by the Medical Group or by the Eligible Parties
(the amount of which is set forth opposite the name of each of the Eligible
Parties on Schedule III hereto) from the Management Company upon execution
of this Agreement, SAVE AND EXCEPT for that portion of the cash
consideration payable under the terms of that one (1) certain Asset
Purchase Agreement executed contemporaneously with the execution of this
Agreement (the amount of which is also set forth opposite the name of each
of the Eligible Parties on Schedule III hereto). The aggregate sum so
determined shall be payable to the Management Company in cash, by cashier's
or certified check or by wire transfer of good funds delivered to a
depository institution designated by the Management Company.
(ii) Stock of Management Company: All shares of stock of the
Management Company received by the Medical Group or the Eligible Parties
shall be returned and redelivered to the Management Company. In the event
any portion of the shares to be returned and redelivered shall have been
previously disposed of by the Medical Group or the Eligible Parties, the
Fair Market Value of such portion, determined as of the Second Anniversary,
shall be payable to the Management Company in cash, by cashier's or
certified check or by wire transfer of good funds delivered to a depository
institution designated by the Management Company.
(e) Return of Management Fee. The performance of the obligations of
the Medical Group under the provisions of Section 14.3(c) and 14.3(d) above
shall be expressly subject to and conditioned upon the delivery by the
Management Company to the Medical Group of fifty (50%) of the Management Fees
paid by the Medical Group after the Commencement Date of this Agreement
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and prior to or on the Second (2nd) Anniversary. Such sum shall be payable to
the Medical Group in cash, by cashier's or certified check or by wire transfer
of good funds delivered to a depository institution designated by the Medical
Group.
14.4. WAIVER OF RESCISSION/DISENGAGEMENT RIGHT.
Notwithstanding anything contained herein to the contrary, the parties
hereto expressly agree and acknowledge that if the Medical Group or any proposed
Disengaging Member, as applicable, shall fail to deliver the notice of
rescission/disengagement referenced in Sections 14.1-14.3 hereof within the time
periods prescribed by said Sections, then the Medical Group or such proposed
Disengaging Member, as the case may be, shall be deemed to have expressly and
irrevocably waived its or his right to rescind and/or disengage from the
Management Services Agreement pursuant to the applicable provisions of Sections
14.1-14.3 hereof.
14.5. CONTINUATION OF MANAGEMENT FEES
The parties hereto acknowledge that in the event this Agreement is
terminated or rescinded (or the parties disengage) pursuant to the provisions of
Article 13 or 14 hereof, the Management Company shall be entitled to all
Management Fees otherwise payable hereunder for all services provided by the
Medical Group through and including the date of such termination, rescission or
disengagement. This provision shall survive any such termination, rescission or
disengagement, and for purposes thereof, the parties agree that the transfer of
funds provided for in Section 5.1 hereof shall continue until such time as the
Management Company has collected all Management Fees to which it is entitled.
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SECTION 15. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
15.1. NON-DISCLOSURE.
Neither the Management Company nor the Medical Group, nor their
respective employees, stockholders, consultants or agents shall, at any time
after the execution and delivery hereof, directly or indirectly disclose any
Confidential or Proprietary Information relating to the other party hereto to
any person, firm, corporation, association or other entity, nor shall either
party, or their respective employees, stockholders, consultants or agents make
use of any of such Confidential or Proprietary Information for its or their own
purposes or for the benefit of any person, firm, corporation or other entity
except the parties hereto or any subsidiary or affiliate thereof. The foregoing
obligation shall not apply to any information which a party hereto can establish
to have (a) become publicly known without breach of this Agreement by it or
them, (b) to have been given to such party by a third party who is not obligated
to maintain the confidentiality of such information, or (c) is disclosed to a
third party with the prior written consent of the other party hereto.
15.2. CONFIDENTIAL OR PROPRIETARY INFORMATION.
The term "Confidential or Proprietary Information" means all
information known to a party hereto, or to any of its employees, stockholders,
officers, directors or consultants, which relates to the Transaction Documents,
patient medical and billing records, trade secrets, books and records, supplies,
pricing and cost information, marketing plans, strategies and forecasts. Nothing
contained herein shall prevent a party hereto from furnishing Confidential or
Proprietary Information pursuant to a direct order of a court of competent
jurisdiction.
SECTION 16. NON-COMPETITION.
In consideration of the premises contained herein and the
consideration to be received hereunder, and in consideration
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of and as an inducement to the Management Company to consummate the transactions
contemplated hereby, the Medical Group hereby (a) agrees to the Non-Competition
provisions attached hereto as Schedule VIII and (b) agrees to require each of
the Eligible Parties, and each person who after the date hereof becomes entitled
to receive shares (or options to receive shares) in the Management Company in
connection with his or her performance of services for the Medical Group, to
execute a Stockholder Non-Competition Agreement substantially in the form
attached hereto as Exhibit B.
SECTION 17. OBLIGATIONS OF THE MANAGEMENT COMPANY
17.1. NO PRACTICE OF MEDICINE.
The Medical Group and the Management Company acknowledge that certain
federal and state statutes severely restrict or prohibit the Management Company
from providing medical services. Accordingly, during the Term, the Management
Company shall not provide or otherwise engage in services or activities which
constitute the practice of medicine, as defined in applicable state or federal
law, except in compliance therewith.
17.2. NO INTERFERENCE WITH PROFESSIONAL JUDGMENT.
Without in any way limiting Section 17.1 hereof, during the Term, the
Management Company shall not interfere with the exercise of professional
judgment by any physician or other licensed health care professional who is a
partner, employee, or contractor of the Medical Group, nor shall the Management
Company interfere with, control, direct, or supervise any physician or other
licensed health care professional in connection with the provision of Medical
Services. The foregoing shall not preclude the Management Company from assisting
in the development of professional protocols and monitoring compliance with
policies and procedures that have been instituted in accordance with this
Agreement.
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17.3. COMPENSATION COMMITTEE.
The Management Company shall establish a compensation committee (the
"Compensation Committee") which is comprised of members of the Board of
Directors of the Management Company who are not employees of the Management
Company. The compensation payable to the five (5) most highly compensated
management employees of the Management Company shall be subject to the approval
of the Compensation Committee.
17.4. BUDGETS.
The Board of Directors of the Management Company shall establish
budgets for the expenses of the Management Company, and the approval of the
Board of Directors shall be required in connection with any expenses in excess
of any such approved budget; provided, however, that following consummation of
an initial public offering of the Company's Common Stock, the responsibility of
the Board of Directors with respect to such budgets shall be exercised in
accordance with the standards applicable to the conduct of business of public
companies.
17.5. CONTRACTS WITH VENTURE CAPITAL FIRMS.
The Management Company shall not enter into any consulting agreement
or other contract or arrangement with any venture capital firm (or affiliate
thereof) providing financing to the Management Company under which compensation
will be payable to any such venture capital firm (or affiliate thereof).
17.6. STOCK HELD BY CERTAIN INDIVIDUALS OR ENTITIES.
▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D. and any venture capital firm providing funds to
the Management Company ("Selling Shareholders") shall give to the Eligible
Parties the right to participate on a pro rata basis (based on the number of
shares, whether preferred or common, calculated on an as-converted basis, held
by the Eligible Parties and by any other shareholders who hold the same rights
that are conferred by this Section 17.6,
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including members of other physician groups) in any proposed sale of stock
(whether preferred or common) in the Management Company from any of the Selling
Shareholders to any unaffiliated third party or parties, and the Management
Company shall require the Selling Shareholders to comply with the obligations
set forth in this Section 17.6; provided, however, that the obligations under
this Section 17.6 shall become null and void upon the consummation of an initial
public offering of the Management Company's common stock.
17.7. CONVERTIBLE PREFERRED STOCK.
The Management Company shall not sell any common stock or take any
other action the effect of which sale or other action would be to give a holder
of convertible preferred stock the right to convert any number of shares of
convertible preferred stock into a greater number of shares of common stock;
provided, however, that the obligations under this Section 17.7 shall become
null and void upon the consummation of an initial public offering of the
Management Company's common stock.
17.8. REPRESENTATION ON BOARD OF DIRECTORS.
The Management Company shall take such actions as may be necessary to
provide that a physician member of the Medical Group may attend and observe
meetings of the Management Company's Board of Directors; provided, however, that
such physician member shall not be entitled to vote on any matters acted upon by
the Management Company's Board of Directors; provided further, that the
obligations under this Section 17.8 shall become null and void upon the
consummation of an initial public offering of the Management Company's common
stock.
SECTION 18. ASSIGNMENT.
The Management Company shall have the right to assign its rights and
delegate its obligations hereunder to any affiliate and to assign its rights
hereunder to any lending institution from which the Management Company or any
affiliate
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obtains financing for security purposes or as collateral. Except as set forth in
the preceding sentence, neither the Management Company nor the Medical Group
shall have the right to assign their respective rights and delegate their
respective obligations hereunder without the prior written consent of the other
party; provided, however, that after the consummation of an initial public
offering of the Management Company's common stock, the Medical Group's consent
shall not be required in connection with a sale of all or substantially all of
the stock or assets of the Management Company or the merger, consolidation, or
reorganization of the Management Company.
SECTION 19. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed sufficient if personally delivered, sent
by nationally-recognized overnight courier, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile if also sent by
nationally recognized overnight courier for next day delivery, addressed as
follows:
If to the Management Company:
Bone, Muscle and Joint, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D., President
with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Held, Esq.
If to the Medical Group:
South Texas Spinal Clinic, P.A.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to:
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Law Offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Nations Bank Plaza
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, and (c) in the case of mailing, on the third business day following
the day on which the piece of mail containing such communication is posted.
SECTION 20. BENEFITS OF AGREEMENT.
This Agreement shall bind and inure to the benefit of any successors
to or permitted assigns of the Management Company and the Medical Group.
SECTION 21. GOVERNING LAW; ARBITRATION.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas without giving effect to the laws
and principles thereof, or of any other jurisdiction, which would direct the
application of the laws of another jurisdiction.
(b) All disputes, controversies, differences or claims arising out of,
relating to or in connection with this Agreement, or the breach thereof, except
controversies involving less than $5,000, shall be finally settled by binding
arbitration in San Antonio, Bexar County, Texas pursuant to the arbitration
rules of the American Arbitration Association. Arbitration shall take place
before three arbitrators with one arbitrator selected by each of the Management
Company and the Medical Group and a third arbitrator selected by the two
arbitrators chosen by the parties. The governing law of the arbitration shall be
the law
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set forth in Section 21(a). Any award or decision rendered by the arbitrators
shall clearly set forth the factual and legal basis for such award or decision.
Judgment on the award or decision rendered by the arbitrators shall be
non-appealable and enforceable in the Presiding District Court of Bear County,
Texas. Each party shall bear its own legal and administrative costs and expenses
relating to the arbitration and the Management Company and the Medical Group
shall equally share the fees and expenses of the arbitrators and the
administration of the arbitration by the American Arbitration Association.
SECTION 22. HEADINGS.
Section headings are used for convenience only and shall in no way
affect the construction of this Agreement.
SECTION 23. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement and the various exhibits hereto and thereto, contain
the entire understanding of the parties with respect to its subject matter, and
neither this Agreement nor any part of it may in any way be altered, amended,
extended, waived, discharged or terminated except by a written agreement signed
by each of the parties hereto.
SECTION 24. ATTORNEYS' FEES.
Notwithstanding anything contained herein to the contrary, in the
event of any dispute or controversy arising out of or relating to this
Agreement, the prevailing party shall be entitled to recover from the other
party all reasonable costs and expenses, including arbitrators' fees and
expenses, attorneys' fees and accountants' fees, incurred in connection with
such dispute or controversy.
SECTION 25. COUNTERPARTS.
This Agreement may be executed in counterparts, and each such
counterpart shall be deemed to be an original
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instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 26. WAIVERS.
Any party to this Agreement may, by written notice to the other party,
waive any provision of this Agreement. The waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
SECTION 27. SURVIVAL OF TERMINATION.
Notwithstanding anything contained herein to the contrary, Sections
3.3(f), 3.6, 11, 12, 13.4, 13.5, 15, 16(a), 18, 19, 20, 21, 24, 26, 28, and this
Section 27 shall survive any expiration or termination of this Agreement.
SECTION 28. CONTRACT MODIFICATION FOR PROSPECTIVE LEGAL EVENTS.
In the event any state or Federal laws or regulations, now existing or
enacted or promulgated after the date hereof, are interpreted by judicial
decision, a regulatory agency or legal counsel of both parties in such a manner
as to indicate that the structure of this Agreement may be in violation of such
laws or regulations, the Medical Group and the Management Company shall amend
this Agreement as necessary to avoid such violation. To the maximum extent
possible, any such amendment shall preserve the underlying economic and
financial arrangements between the Medical Group and the Management Company. If
an amendment is not possible, either party shall have the right to terminate
this Agreement. Any dispute between the parties hereto arising under this
Section 28 with respect to whether this Agreement violates any state or Federal
laws or regulations shall be jointly submitted by the parties and finally
settled by binding arbitration in San Antonio, Texas, pursuant to the
arbitration rules of the National Health Lawyers Association Alternative Dispute
Resolution Service. Arbitration shall take place before one arbitrator appointed
in accordance with such rules. The
-98-
governing law of the arbitration shall be the law set forth in Section 21. Any
decision rendered by the arbitrator shall clearly set forth the factual and
legal basis for such decision. The decision rendered by the arbitrator shall be
non-appealable and enforceable in any court having jurisdiction thereof. The
administrative costs of the arbitration and the arbitrator fees shall be equally
borne by the parties. Each party shall pay its own legal costs and fees in
connection with such arbitration.
* * * * *
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IN WITNESS WHEREOF, the parties have duly executed this Management
Services Agreement as of the date first above written.
SOUTH TEXAS SPINAL CLINIC, P.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
President
BONE, MUSCLE AND JOINT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D., President
▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D., President
and Chief Executive Officer
AGREED AND ACCEPTED BY
THE ELIGIBLE PARTIES
AS TO SECTIONS 4, 9.7,
14.1, 14.2, 14.3, 14.4
and 14.5:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
/s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
---------------------------
M. ▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, D.O.
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, D.O.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
ACCEPTED AND AGREED
AS TO SECTION 17.6
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
DELPHI VENTURES III, L.P.
By: DELPHI MANAGEMENT PARTNERS
III, L.L.C., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing Member
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing Member
DELPHI BIOINVESTMENTS III, L.P.
By: DELPHI MANAGEMENT PARTNERS
III, L.L.C., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing Member
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing Member
OAK INVESTMENT PARTNERS VI, LIMITED
PARTNERSHIP
By: OAK ASSOCIATES VI, LIMITED
PARTNERSHIP, its General Partner
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇, Managing Member
▇▇▇ ▇. ▇▇▇▇▇▇, Managing Member
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
By: OAK VI AFFILIATES, LLC,
its General Partner
By:/s/ ▇▇▇ ▇. ▇▇▇▇▇▇, Managing Member
▇▇▇ ▇. ▇▇▇▇▇▇, Managing Member
Annex A
Medical Group Key Personnel
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
C. ▇▇▇▇▇▇ ▇▇▇▇▇▇ III, M.D.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, D.O.
▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
ANNEX B
-------
to Management Services Agreement
--------------------------------
Management Company Key Employees
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
EXHIBIT F - - Medical Equipment Master Lease
ATTACHMENTS
-----------
SCHEDULES
---------
SCHEDULE I -- New Ancillary Services -- Exceptions
SCHEDULE II -- Management Company Operating Cost Budget
SCHEDULE III -- Equity Participation
SCHEDULE IV -- Draw Date and Draw Percentage
SCHEDULE V -- Management Fee -- Applicable Percentage
SCHEDULE VI -- Professional Practice Cost Savings
SCHEDULE VII -- Computation Example
SCHEDULE VIII -- Non-Competition
SCHEDULE IX -- Royalties
SCHEDULE 6.4 -- Financial Information
SCHEDULE 6.5 -- Absence of Undisclosed Liabilities
SCHEDULE 6.6 -- Absence of Changes
SCHEDULE 6.7 -- Tax Matters
SCHEDULE 6.8 -- Litigation, Etc.
SCHEDULE 6.10 -- Accounts Receivable; Accounts Payable
SCHEDULE 6.11 -- Labor Relations; Employees
SCHEDULE 6.12 -- Employee Benefit Plans
SCHEDULE 6.13 -- Insurance
SCHEDULE 6.14 -- Real Property
SCHEDULE 6.15 -- Burdensome Restrictions
SCHEDULE 6.16 -- Disclosure
SCHEDULE 7.2 -- Equity Investments
SCHEDULE 7.3(a) -- Issued and Outstanding Stock
SCHEDULE 7.3(c) -- Options; Conversion Rights
SCHEDULE 7.5 -- Permits, Authorizations, Consents, Approvals,
Notifications, and Filings
SCHEDULE 7.6 -- Financial Information
SCHEDULE 7.7 -- Absence of Undisclosed Liabilities
SCHEDULE 7.8 -- Absence of Changes
SCHEDULE 7.9 -- Tax Matters
SCHEDULE 7.10 -- Litigation, Etc.
SCHEDULE 7.11 -- Compliance; Governmental Authorizations
SCHEDULE 7.12 -- Accounts Receivable; Accounts Payable
SCHEDULE 7.13 -- Labor Relations; Employees
SCHEDULE 7.14 -- Employee Benefit Plans
SCHEDULE 7.15 -- Insurance
SCHEDULE 7.16 -- Real Property
SCHEDULE 7.17 -- Burdensome Restrictions
SCHEDULE 7.18 -- Disclosure
ANNEXES
-------
ANNEX A -- Medical Group Key Personnel
ANNEX B -- Management Company Key Employees
EXHIBITS
--------
EXHIBIT A -- Asset Purchase Agreement
EXHIBIT B -- Stockholder Non-Competition Agreement
EXHIBIT C -- Restricted Stock Agreement
EXHIBIT D -- Assignment of Lease
EXHIBIT E -- Office Sublease
EXHIBIT F -- Medical Equipment Master Lease
INDEX OF DEFINED TERMS
----------------------
Term Page
---- ----
Additional Terms ........................................... 3
Administrative Personnel ................................... 16
Agreement .................................................. 1
Ancillary Division ......................................... 31
Ancillary Service Start-Up Costs ........................... 32
Ancillary Service Start-Up Period .......................... 32
Annual Draw Amount ......................................... 23
Annual Medical Group Compensation Amount ................... 23
Applicable Percentage ...................................... 26
Asset Purchase Agreement ................................... 1
Authorized Management Company Operating Costs .............. 28
Authorized Partners ........................................ 13
Balance Sheet .............................................. 35
Balance Sheet Date ......................................... 35
Bankruptcy Event ........................................... 81
Base Term .................................................. 3
Billable Items ............................................. 30
▇▇▇▇▇▇▇▇ ................................................... 24
BMJ Formation Documents .................................... 44
Budgets .................................................... 21
Certificate of Designation ................................. 44
Collections ................................................ 24
Commencement Date .......................................... 3
Compensation Committee ..................................... 70
Competitive Business .......................................101
Confidential or Proprietary Information .................... 69
Corporate Overhead ......................................... 27
Cost Savings ............................................... 96
Documents .................................................. 13
Draw Date .................................................. 93
Draw Percentage ............................................ 22
Eligible Parties ........................................... 21
Employee Plans ............................................. 42
Employees .................................................. 41
Equipment .................................................. 7
ERISA ...................................................... 42
Excluded Costs ............................................. 27
Facility ................................................... 59
FF&E ....................................................... 7
Incentive Based Costs ...................................... 96
Internal Financial Statements .............................. 35
IPO ........................................................ 94
Management Business ........................................ 1
Management Company ......................................... 1
Management Company Balance Sheet ........................... 46
Management Company Balance Sheet Date ...................... 47
Management Company Bank .................................... 22
Management Company Costs ................................... 27
Management Company Employees ............................... 52
Management Company Key Employee ............................ 49
Management Company Operating Costs ......................... 27
Management Company Real Property ........................... 54
Management Company Returns ................................. 50
Management Company Transaction Documents ................... 44
Management Fee ............................................. 44
Management Services ........................................ 2
Medical Business ........................................... 1
Medical Equipment .......................................... 7
Medical Equipment Master Lease Payments .................... 26
Medical Group .............................................. 1
Medical Group Bank ......................................... 12
Medical Group Collections Account .......................... 12
Medical Group Cost ......................................... 30
Medical Group Key Personnel ................................ 38
Medical Group Services ..................................... 24
Medical Group Transaction Documents ........................ 34
Medical Personnel .......................................... 19
MGC ........................................................ 94
Monthly Draw ............................................... 22
MSAs ....................................................... 86
New Ancillary Service Medical Equipment .................... 31
New Ancillary Services ..................................... 9
New Medical Office ......................................... 29
New Medical Office-Start-Up Costs .......................... 29
New Ancillary Services ..................................... 9
New Medical Office ......................................... 29
New Medical Office Start-Up Costs .......................... 29
New Medical Office Start-Up Period ......................... 29
Office Lease ............................................... 5
Office Sublease ............................................ 5
Office Sublease Payments ................................... 26
OGC ........................................................ 94
Operating Account .......................................... 22
Professional Practice Cost Savings ......................... 26
Real Property .............................................. 43
Restricted Stock Agreement ................................. 83
Returns .................................................... 38
Review Financial Statements ................................ 35
SEC ........................................................ 94
Selling Shareholders ....................................... 71
Shares ..................................................... 87
Stock ...................................................... 80
Stockholders Agreement ..................................... 46
Tax ........................................................ 39
Taxes ...................................................... 39
Tenant Improvement ......................................... 56
Term ....................................................... 3
Transaction Documents ...................................... 80
Unaudited Financial Statements ............................. 47
MANAGEMENT SERVICES AGREEMENT
BETWEEN
BONE, MUSCLE AND JOINT, INC.
AND
SOUTH TEXAS SPINAL CLINIC, P.A.
Effective as of November 1, 1996