1
EXHIBIT 10.11
================================================================================
SERVICE AGREEMENT
Dated as of the _____ day of ______________, 1997
by and among
AMERICAN PHYSICIAN PARTNERS, INC.,
ROCKLAND RADIOLOGICAL GROUP, P.C.
and
THE GREATER ROCKLAND RADIOLOGICAL GROUP, P.C.
================================================================================
2
TABLE OF CONTENTS
Page
----
ARTICLE I - Definitions......................................................................................... 2
Section 1.1 Definitions........................................................................ 2
ARTICLE II - Relationship of the Parties........................................................................ 8
Section 2.1 Independent Contractors............................................................ 8
Section 2.2 Practice of Medicine............................................................... 8
Section 2.3 No Payment or Other Compensation for Referrals..................................... 9
Section 2.4 Group's Internal Matters........................................................... 9
ARTICLE III - Services to be Provided by Administrator.......................................................... 9
Section 3.1 General............................................................................ 9
Section 3.2 General Administrative Services.................................................... 10
Section 3.3 Facilities......................................................................... 14
Section 3.4 Acquisition and Assistance......................................................... 15
Section 3.5 Financial Planning and Budgeting................................................... 16
Section 3.6 Personnel.......................................................................... 17
Section 3.7 Provider and Payor Relationships................................................... 17
Section 3.8 Inventory and Supplies............................................................. 18
Section 3.9 Advertising and Public Relations................................................... 18
Section 3.10 Quality Assurance.................................................................. 19
Section 3.11 Other Consulting and Advisory Services............................................. 19
Section 3.12 Events Excusing Performance........................................................ 19
ARTICLE IV - Obligations of the Group........................................................................... 19
Section 4.1 Employment of Physician Employees and Physician Extender Employees................. 19
Section 4.2 Professional Services.............................................................. 20
Section 4.3 Medical Practice................................................................... 20
Section 4.4 Group's Internal Matters........................................................... 20
Section 4.5 Name............................................................................... 21
Section 4.6 Compliance with Laws............................................................... 21
Section 4.7 Ancillary Services................................................................. 22
Section 4.8 Premises and Personal Property..................................................... 22
Section 4.9 Practice Employee Benefit Plans.................................................... 22
Section 4.10 Events Excusing Performance........................................................ 22
ARTICLE V - Joint Planning Board................................................................................ 23
Section 5.1 Formation and Operation of the Joint Planning Board................................ 23
Section 5.2 Duties and Responsibilities of the Joint Planning Board............................ 23
Section 5.3 Acts of the Joint Planning Board................................................... 24
Section 5.4 Joint Planning Board Meetings...................................................... 25
3
Page
----
ARTICLE VI - Restrictive Covenants.............................................................................. 26
Section 6.1 Restrictive Covenants of the Group................................................. 26
Section 6.2 Restrictive Covenants.............................................................. 28
Section 6.3 Enforcement of Restrictive Covenants and Other Provisions.......................... 29
Section 6.4 Remedies........................................................................... 30
Section 6.5 Condition Precedent to Release of Obligations...................................... 30
Section 6.6 Service Area Rights and Obligations................................................ 30
Section 6.7 Survival of Certain Covenants...................................................... 32
Section 6.8 Definition......................................................................... 32
ARTICLE VII - Financial and Security Arrangements............................................................... 33
Section 7.1 Service Fee........................................................................ 33
Section 7.2 Payments........................................................................... 33
Section 7.3 Advances........................................................................... 33
Section 7.4 Security Agreement................................................................. 33
Section 7.5 Adjustment of Fees................................................................. 34
Section 7.6 Priority of Payments............................................................... 34
ARTICLE VIII - Records.......................................................................................... 34
Section 8.1 Records............................................................................ 34
ARTICLE IX - Insurance and Indemnification...................................................................... 35
Section 9.1 Insurance to be Maintained by the Group............................................ 35
Section 9.2 Insurance to be Maintained by Administrator........................................ 35
Section 9.3 Continuing Liability Insurance Coverage............................................ 35
Section 9.4 Additional Insureds................................................................ 36
Section 9.5 Indemnification.................................................................... 36
ARTICLE X - Term and Termination................................................................................ 37
Section 10.1 Term of Agreement.................................................................. 37
Section 10.2 Extended Term...................................................................... 37
Section 10.3 Termination by the Group........................................................... 37
Section 10.4 Termination by Administrator....................................................... 38
Section 10.5 Effective Date of Termination...................................................... 39
Section 10.6 Purchase of Assets................................................................. 39
Section 10.7 Terms of Purchase.................................................................. 41
Section 10.8 Exception to Purchase.............................................................. 42
Section 10.9 Effect Upon Termination............................................................ 42
ARTICLE XI - Dispute Resolution................................................................................. 43
Section 11.1 Informal Dispute Resolution........................................................ 43
Section 11.2 Arbitration........................................................................ 43
Section 11.3 Arbitrators........................................................................ 43
4
Page
----
Section 11.4 Applicable Rules................................................................... 44
ARTICLE XII - General Provisions................................................................................ 45
Section 12.1 Assignment......................................................................... 45
Section 12.2 Amendments......................................................................... 45
Section 12.3 Waiver of Provisions............................................................... 45
Section 12.4 Additional Documents............................................................... 45
Section 12.5 Attorneys' Fees.................................................................... 46
Section 12.6 Contract Modifications for Prospective Legal Events................................ 46
Section 12.7 Parties In Interest; No Third Party Beneficiaries.................................. 46
Section 12.8 Entire Agreement................................................................... 46
Section 12.9 Severability....................................................................... 46
Section 12.10 Governing Law...................................................................... 47
Section 12.11 No Waiver; Remedies Cumulative..................................................... 47
Section 12.12 Communications..................................................................... 47
Section 12.13 Captions........................................................................... 47
Section 12.14 Gender and Number.................................................................. 47
Section 12.15 Reference to Agreement............................................................. 47
Section 12.16 Notice............................................................................. 47
Section 12.17 Inflation Adjustment............................................................... 48
Section 12.18 Counterparts....................................................................... 48
Section 12.19 Defined Terms...................................................................... 48
Section 12.20 Parent Obligations................................................................. 48
5
LIST OF EXHIBITS
Exhibit Description
------- -----------
1.1 Allocation of Practice Expenses
3.2(a) Exceptions to Exclusive Management Services
3.3(a) Premises
7.1 Services Fee
7.4 Security Agreement
6
SERVICE AGREEMENT
This Service Agreement (this "Agreement"), dated effective as of
_______________, 1997, is entered into by and among American Physician Partners,
Inc., a Delaware corporation ("Parent"), Rockland Radiological Group, P.C., a
New York corporation ("Administrator"), and The Greater Rockland Radiological
Group, P.C., a New York professional corporation ("Group").
R E C I T A L S:
A. The Group owns and operates a radiology medical practice providing
services in the Dutchess, Orange, Rockland, Ulster and Westchester areas in New
York State, and in the Bergen County area in New Jersey including providing
services at two (2) hospital(s) and providing professional and technical
radiology services to the general public through individual physicians who are
licensed to practice medicine in the States of New York and New Jersey and who
are employed or otherwise retained by the Group.
B. Administrator is in the business of owning certain assets of medical
practices and providing management, administrative, and other non-medical
radiological support services to radiological and radiation oncology medical
practices including, without limitation, furnishing necessary facilities,
equipment, non-physician personnel, supplies and non-physician support staff
services.
C. The Group desires to obtain the services of Administrator in
performing such non-medical business functions so as to permit the Group to
devote its full professional time and attention to the rendering of professional
and technical radiology and related services to its patients.
D. The Group and Administrator have determined a fair market value for
the services to be rendered by Administrator, and based on this fair market
value, have developed a procedure for compensation of Administrator, all as more
particularly set forth in this Agreement.
E. Administrator is willing to commit significant management and
capital resources to the Group to allow for the Group's further growth, all as
provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and on the terms and subject to the
conditions herein set forth, the parties hereto agree as follows:
1
7
ARTICLE I
Definitions
Section 1.1 Definitions. For the purposes of this Agreement, the
following definitions shall apply:
"Acquisition" shall mean the acquisition described in the Acquisition
Agreement.
"Acquisition Agreement" shall mean the Agreement and Plan of
Reorganization and Merger, dated _______________, 1997, by and among Parent and
Group.
"Acquisition Consideration" shall mean the Parent Common Stock and
other consideration furnished pursuant to the Acquisition Agreement by Parent in
connection with the Acquisition.
"Acquisition Effective Date" shall mean the date the Acquisition is
effective pursuant to the terms of the Acquisition Agreement.
"Adjustments" shall mean any adjustments on an accrual basis for
uncollectible accounts receivable or discounts and allowances, including but not
limited to, Medicare and Medicaid disallowances or other third-party contractual
allowances, workers' compensation, employee/dependent health care benefit
programs, professional courtesies, and other activities to the extent they do
not generate a collectible fee or offset a fee previously recorded.
"Administrator" shall have the meaning as set forth in the first
paragraph hereof.
"Administrator Account" shall have the meaning set forth in Section
3.2(b)(ii).
"Administrator Expenses" shall mean, as determined pursuant to GAAP
applied on a consistent basis, any expenses of Administrator or Parent or any of
their Affiliates not incurred specifically for providing services to the
Practice including, without limitation: (A) any legal, accounting or other
professional expenses incurred by Administrator, Parent or any of their
Affiliates including those in connection with the Acquisition, (B) any expenses
pertaining to the coordination of qualified retirement and benefit plans of the
Group, Parent, Administrator and their Affiliates incurred by Administrator,
Parent or any of their Affiliates in connection with the Acquisition and
pertaining to the transfer of Group's employees to Administrator or Parent as a
result of the Acquisition; and (C) all taxes of Administrator, Parent or any
Affiliate not incurred for the benefit of Practice including, without
limitation, income taxes of Administrator, Parent or any Affiliate (but
specifically excluding any sales and use taxes related to the Practice which
shall be a Practice Expense).
"Affiliate" with respect to any person shall mean a person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such person. Neither
Administrator nor the Group is deemed to be an Affiliate of the other.
2
8
"Allocable Expenses" shall mean those Practice Expenses which are
attributable in part to both Technical Expenses and Professional Expenses, and
which shall be allocated as provided in Exhibit 1.1 attached hereto.
"APPI Group" shall mean Administrator, Parent and their Affiliates and
all professional associations or corporations or other entities to which
Administrator, Parent, or their Affiliates provide management services.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential and Proprietary Information" shall have the meaning set
forth in Section 6.1(d).
"Deposit Account" shall mean the bank account established for the Group
to deposit any and all payments intended for the payment of global fees,
professional fees and technical fees related to the Practice.
"ERISA" shall have the meaning set forth in Section 4.9.
"Excluded Practice Expenses" shall mean, as determined pursuant to GAAP
applied on a consistent basis: (i) any salaries, benefits, payroll taxes, or
other distributions made to Group Physician Stockholders, Physician Employees
and Physician Extender Employees; (ii) any federal, state or other income taxes
applicable to the Group; (iii) all professional related expenses of the
physicians, including but not limited to, professional meetings, seminars, dues
and subscriptions other than such seminars or meetings that Administrator or
Parent requests or requires that any Physician Employees or Physician Extender
Employees attend; (iv) all costs and expenses associated with the performance of
professional services to or for the benefit of the Group by legal, accounting,
investment, financial or other advisors specifically retained by the Group
including, without limitation, all such costs and expenses incurred by the Group
in connection with the Acquisition; and (v) such other professional expenses
incurred by the Practice which are not Practice Expenses or Administrator
Expenses.
"Fair Market Value" shall mean as to any asset, the fair market value
of such asset as mutually determined by an Independent Financial Expert selected
by Administrator and an Independent Financial Expert selected by the Group,
provided further that in the event that the Independent Financial Experts
selected by Administrator and the Group cannot agree on the Fair Market Value
within ninety (90) days prior to the Purchase Closing then the two (2)
Independent Financial Experts shall mutually select a third Independent
Financial Expert to determine the Fair Market Value which determination shall be
binding on the parties hereto. Each such Independent Financial Expert may use
any customary and generally accepted method of determining fair market values,
and shall take into account the effect of any liabilities, liens, claims or
encumbrances that may reasonably be expected to have an effect on the Fair
Market Value. The cost of any Independent Financial Experts retained by any
person hereunder shall be paid one-half by Administrator and one-half by the
Group.
3
9
"Full-time Physician Employee" shall mean any Physician Employee who
would be eligible to participate in any qualified employee benefit plan of the
Group.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board and Securities and
Exchange Commission or their respective successors.
"Group Account" shall mean the bank account established by the Group
solely for the benefit of the Group and into which Administrator shall deposit
the residual amounts to which the Group is entitled following the application of
the priority of payments set forth in Section 7.6 below.
"Group Physician Stockholders" shall mean those Physician Employees and
Physician Extender Employees who own an interest, directly or indirectly, in the
equity capital of the Group.
"HCFA" shall mean the Health Care Financing Administration or any
successor.
"Independent Financial Expert" shall mean any nationally-recognized
accounting or investment banking firm regularly engaged in the business of
evaluating assets of medical practices and associated businesses which (i) does
not (and whose directors, officers, employees, Affiliates or stockholders do
not) have a material direct or indirect financial interest in Administrator,
Parent or any of their Affiliates or in the Group or any of its Affiliates, (ii)
has not been, and at the time it is called upon to give independent financial
advice to the parties hereto is not (and none of whose directors, officers,
employees, Affiliates or stockholders is) a promoter, director or officer of
Administrator, Parent or any of their Affiliates or of the Group or any of its
Affiliates, and (iii) has not been retained to render advice, service or an
opinion to Administrator, Parent or the Group or any of their Affiliates within
the past five-year period except as an Independent Financial Expert for purposes
of this Agreement. Notwithstanding the preceding, prior retention of any
accounting or investment banking firm by Administrator, Parent or the Group or
any of their Affiliates shall not disqualify such firm from serving as an
Independent Financial Expert pursuant to this Agreement; provided, that (i) such
firm was retained solely to evaluate the fair market value of assets of other
medical practices and (ii) the individuals providing services to Independent
Financial Expert are not the same as those previously rendering services and
such firm establishes appropriate procedures to prevent disclosure of any
confidential information. Any individual performing services on behalf of an
Independent Financial Expert shall have at least five (5) years of experience in
evaluating the fair market value of assets of medical practices and associated
businesses.
"IRS" shall mean the Internal Revenue Service.
"Joint Planning Board" shall mean the joint board described in, and
established pursuant to, Section 5.1.
4
10
"Managed Care Contracts" shall have the meaning set forth in Section
3.7.
"Managed Care Payors" shall have the meaning set forth in Section 3.7.
"Parent" shall have the meaning set forth in the first paragraph
hereof.
"Parent Common Stock" shall mean the common stock, $.0001 par value per
share, of Parent.
"Payment Date" shall have the meaning set forth in Section 7.2.
"Personal Property" shall have the meaning set forth in Section 3.3(b).
"Physician Employee Employment Agreements" shall mean the employment
agreements entered into between the Group and each Physician Employee.
"Physician Employees" shall mean those individuals who are physicians
employed by the Group, or by shareholders, members or partners of the Group, or
who are otherwise under contract or associated with the Group from time to time
to provide professional medical services to patients of the Practice.
"Physician Extender Employees" shall mean those individuals who are
employed by or otherwise under contract or associated with the Practice from
time to time such as advanced practice nurses (APNs), physician assistants
(PAs), or any other position that generates a professional charge.
"Practice" shall mean all business operations conducted by the Group
and shall include, without limitation, (i) the Technical Operations and (ii) the
Professional Operations.
"Practice Expenses" shall mean, as determined pursuant to GAAP applied
on a consistent basis, all operating and non-operating expenses of the Group,
Administrator and/or Parent or their Affiliates (including, without limitation,
Allocable Expenses), on an accrual basis and without markup, specifically and
only to the extent incurred in connection with the management, administration or
operation of the Professional Operations and the Technical Operations. Provided,
however, that, notwithstanding anything contained herein to the contrary, (i)
Administrator Expenses and Excluded Practice Expenses shall not be included in
Practice Expenses, and (ii) only expenses incurred by Administrator and/or
Parent with respect to the provision of non-medical business services relating
to the operation of the Practice shall be deemed Practice Expenses.
"Practice Related Liabilities" shall have the meaning set forth in
Section 10.6(b).
"Practice Site(s)" shall mean any facilities, including satellite
locations at which the Group provides care to patients.
5
11
"Premises" shall mean the premises provided to the Practice pursuant to
Section 3.3(a).
"Professional Expenses" shall mean all operating and non-operating
Practice Expenses, determined on an accrual basis and without ▇▇▇▇-up, incurred
by Administrator and/or Parent or their Affiliates to the extent incurred in
connection with the Professional Operations including, without limitation: (i)
salaries, benefits and other direct costs of employees of Administrator who
perform services solely for the Professional Operations; (ii) direct costs of
all employees of Administrator engaged solely to provide services to improve
performance of the Professional Operations; (iii) leases for assets utilized
solely for the benefit of the Professional Operations; (iv) personal and
property taxes assessed against Administrator's assets utilized solely for the
benefit of Professional Operations; (v) interest on indebtedness assumed solely
by Administrator as a result of the Acquisition, or incurred by Administrator to
finance or refinance such indebtedness, and/or in connection with making
advances and capital available to the Practice, in each case, for the benefit of
the Professional Operations; (vi) any provider tax assessed against the
Professional Operations and any sales and use tax related solely to the
Professional Operations; (vii) direct expenses of requisite and obligatory
professional licensing and insurance costs solely related to the Professional
Operations; (viii) any amortization of any intangible asset set forth on
Parent's, Administrator's or their applicable Affiliates' financial statements
(as applicable) used solely in connection with the Professional Operations;
provided, however, no amortization with respect to goodwill of the Acquisition
shall be set forth on such financial statements; (ix) any depreciation of assets
to the extent used solely in connection with the Professional Operations; and
(x) other expenses incurred by Administrator solely in providing services for
the direct benefit of the Professional Operations; provided, however, that
Administrator Expenses, Excluded Practice Expenses and Technical Expenses shall
not be included in Professional Expenses.
"Professional Operations" shall mean all business and operations
conducted by the Group including, without limitation, the provision of
professional medical services to patients by Physician Employees and Physician
Extender Employees at any Practice Site, but specifically excluding Technical
Operations.
"Professional Revenues" for any month shall mean all fees and income of
the Practice, as determined pursuant to GAAP applied on a consistent basis,
recorded each month (net of Adjustments) by or on behalf of the Practice,
generated by the Professional Operations including, but not limited to, any fees
generated by Physician Employees and Physician Extender Employees in their
professional capacity such as medical director fees, consulting fees, and fees
for expert testimony, but excluding any income derived by any such Physician
Employee from any outside medical activity or related source not required to be
assigned to the Group or the Practice as described in Section 6.2 hereof.
Global-fee Practice revenues shall be allocated between Professional Revenues
and Technical Revenues based upon the RVUs. To the extent RVUs or similar
measures are no longer established by HCFA, global-fee Practice revenues shall
be allocated between Professional Revenues and Technical Revenues based upon the
last available RVU allocation [percentages - deleted in NY versions] on a
modality-by-modality basis.
6
12
"Purchase Assets" shall have the meaning set forth in Section 10.6(a).
"Purchase Closing" shall have the meaning set forth in Section 10.7.
"Purchase Price" shall have the meaning set forth in Section 10.6(c).
"Restrictive Covenants" shall have the meaning set forth in Section
6.2.
"RVUs" shall mean the relative value units in effect from time to time
as established by HCFA.
"Security Agreement" shall have the meaning set forth in Section 7.4.
"Stockholder Employment Agreements" shall mean the employment
agreements entered into between the Group and each Group Physician Stockholder.
"Tax Returns" shall include all federal, state, local, franchise,
property and other tax returns.
"Technical Employees" shall mean those persons who are employed or
otherwise under contract as employees of the Technical Operations from time to
time including, without limitation, technologists who provide services in the
diagnostic or therapeutic areas of the Practice.
"Technical Expenses" shall mean all operating and non-operating
expenses, determined on an accrual basis and without ▇▇▇▇-up, incurred by
Administrator and/or Parent or their Affiliates to the extent incurred in
connection with the Technical Operations including, without limitation: (i)
salaries, benefits and other direct costs of employees of Administrator who
perform services solely for the Technical Operations, and all salaries and
benefits of Technical Employees; (ii) direct costs of all employees of
Administrator engaged to provide services solely to improve performance of the
Technical Operations; (iii) leases for assets utilized solely for the benefit of
the Technical Operations; (iv) personal and property taxes assessed against
Administrator's assets utilized solely for the benefit of the Technical
Operations; (v) interest on indebtedness incurred solely by Administrator in
connection with making advances and capital available to the Technical
Operations; (vi) any provider tax assessed against the Technical Operations and
any sales and use tax related solely to the Technical Operations; (vii) direct
expenses of requisite and obligatory licensing and insurance costs solely
related to the Technical Operations; (viii) any amortization of any intangible
asset set forth on Parent's, Administrator's or their applicable Affiliates'
financial statements (as applicable) to the extent used solely in connection
with the Technical Operations, provided, however, no amortization with respect
to goodwill of the Acquisition shall be set forth on such financial statements;
(ix) any depreciation of assets to the extent used solely in connection with the
Technical Operations; and (x) other expenses incurred by Administrator in
providing services solely for the direct benefit of the Technical Operations;
provided, however, that Administrator Expenses, Professional Expenses and
Excluded Practice Expenses shall not be included in Technical Expenses.
7
13
"Technical Operations" shall mean outpatient imaging centers and/or
radiation oncology centers, hospital radiology departments, mobile imaging
services or any other operations utilizing facilities or equipment owned or
managed by Administrator, Parent or any of their Affiliates, or in which
Administrator, Parent or any of their Affiliates hold or own an ownership or
equity interest in, and which generate Technical Revenues.
"Technical Revenues" shall mean all fees and income of the Practice, as
determined pursuant to GAAP applied on a consistent basis, that are recorded
each month (net of Adjustments) by or on behalf of the Practice, for the use of
Administrator's facilities and equipment, net of any Professional Revenues.
Global-fee Practice revenues shall be allocated between Professional Revenues
and Technical Revenues based upon RVUs. To the extent RVUs or similar measures
are no longer established by HCFA, global-fee Practice revenues shall be
allocated between Professional Revenues and Technical Revenues based upon the
last available RVU allocation [percentages - deleted in NY versions] on a
modality-by-modality basis.
"Termination Date" shall have the meaning set forth in Section 10.5.
"Termination Notice" shall have the meaning set forth in Section
10.5(a).
ARTICLE II
Relationship of the Parties
Section 2.1 Independent Contractors. The Group and Administrator intend
to act and perform as independent contractors, and the provisions hereof are not
intended to create any partnership, joint venture, agency or employment
relationship between the parties. Administrator and the Group agree that the
Group shall retain the exclusive authority to direct the medical, professional,
and ethical aspects of its medical practice. Administrator shall neither
exercise control or direction over the medical methods, procedures or decisions
nor interfere with the physician-patient relationships of the Group, which shall
be maintained strictly between the physicians of the Group, Physician Employees
and/or Physician Extender Employees and their patients.
Section 2.2 Practice of Medicine. The parties hereto acknowledge that
neither Administrator nor Parent is authorized or qualified to engage in any
activity which may be construed or deemed to constitute the practice of medicine
and that nothing herein shall be construed as the practice of medicine by
Administrator or Parent. To the extent any act or service required of
Administrator is construed or deemed to constitute the practice of medicine,
Administrator is released from any obligation to provide, and the Group shall be
deemed not to have requested Administrator to provide, such act or service
without otherwise affecting the other terms of this Agreement.
8
14
Section 2.3 No Payment or Other Compensation for Referrals. The parties
hereby agree that the benefits to the Group hereunder do not require, are not
payment or compensation in cash or in kind for, and are not in any way
contingent upon the admission, referral or any other arrangement for the
provision of any item or service offered by Administrator or any of its
Affiliates to any of the Group's patients in any facility controlled, managed or
operated by Administrator.
Section 2.4 Group's Internal Matters. The Group shall be solely
responsible for matters involving its corporate governance, employees and
similar internal matters, including, but not limited to, preparation and
contents of such reports to regulatory authorities governing the Professional
Operations that the Group is required by law to provide, and distribution of
salaries and professional fee income among the Group Physician Stockholders,
Physician Employees and Physician Extender Employees. Administrator shall assist
the Group, where necessary and appropriate, by providing the information and
data to be included in such reports.
ARTICLE III
Services to be Provided by Administrator
Section 3.1 General.
(a) Scope of Services Provided. Administrator shall provide or arrange
for the services set forth in this Article III, and the costs, fees, expenses
and other disbursements incurred by Administrator or Parent in connection
therewith shall be included in Practice Expenses, except to the extent such
costs, fees or expenses are expressly included in Excluded Practice Expenses or
Administrator Expenses. Administrator is authorized to perform its services
hereunder as is necessary or appropriate for the efficient operation of the
Practice, including, without limitation, performance of some of the business
office functions at locations other than the Practice. Except to the extent
necessary to comply with applicable laws, regulations or professional ethical
standards, the Group will not act in a manner which would prevent Administrator
from performing its duties hereunder and will provide such information and
assistance to Administrator as is reasonably required by Administrator to
perform its services hereunder. Administrator shall cause its employees, to
comply with all applicable federal, state and local laws, rules and regulations
in Administrator's provision of services hereunder.
(b) Alternative Management Arrangements.
(i) If Administrator fails to perform, provide or arrange for
the services set forth in this Article III in a manner reasonably consistent
with commercially available services offered by third party providers of
physician practice management services of the type and scope offered by
Administrator, then the Group shall provide written notice of such event to
Administrator, Parent or their Affiliates, including reasonable evidence of such
commercially available services. Administrator shall deliver to the Group within
thirty (30) days after receipt
9
15
by Administrator of such written notice a written plan detailing the methods and
procedures Administrator, Parent or their Affiliates shall utilize to restore
the level of service contemplated by this Agreement. In the event Administrator
fails to restore the level of service contemplated by this Agreement in
accordance with such plan submitted or in any event within ninety (90) days, the
Group shall be entitled to reimbursement by Administrator for the reasonable
costs and expenses of obtaining such service on a temporary basis until such
time Administrator demonstrates its ability to perform such service at the level
contemplated by this Agreement. Nothing contained in this subsection (b)(i)
shall be construed to limit the Group's ability to provide notice of a Material
Administrator Default pursuant to Section 10.3(b) of this Agreement.
(ii) If Administrator is unable to perform or is released from
performing any service which is required of Administrator because such service
is construed or deemed to constitute the practice of medicine, Administrator
shall deliver to the Group notice of such an event. The Group shall be entitled
to reimbursement by Administrator for the reasonable costs and expenses of
obtaining such services until such time Administrator is able to perform or
provide such service in accordance with applicable law.
Section 3.2 General Administrative Services.
(a) Exclusive Management Services; Scope of Services. Except as
provided in Exhibit 3.2(a), the Group hereby engages Administrator to serve as
its exclusive manager and administrator of non-medical business services
relating to the operation of the Practice, subject to matters reserved for the
Group or referred to the Joint Planning Board as herein contemplated, and
Administrator shall have all necessary authority and hereby agrees to perform
such services. The Group agrees that the purpose and intent of this Agreement is
to relieve the Group to the maximum extent possible of the administrative,
accounting, purchasing, non-physician personnel and other non-medical business
aspects of the Practice. Administrator agrees that the Group, Physician
Employees and Physician Extender Employees, and only the Group, Physician
Employees and Physician Extender Employees, will perform the professional
medical functions of the Practice. Administrator shall have no authority,
directly or indirectly, to perform, and shall not perform, any professional
medical function. Administrator may, however, advise the Group as to the
relationship between the Group's performance of professional medical functions
and the overall administrative and business functions of the Practice to the
extent permitted by applicable law.
(b) Billing and Collection.
(i) Administrator shall, in the name of and on behalf of the
Group, ▇▇▇▇ patients, insurance companies, Managed Care Payors, and other
third-party payors and collect all fees for services rendered in connection with
the Practice at the Premises or any Practice Site(s) (including all fees
generated by both the Technical Operations and the Professional Operations), for
services performed outside the Practice for its hospitalized patients, and for
all other professional and Practice services. The Group hereby appoints
Administrator for the term of this Agreement to be its true and lawful
attorney-in-fact, for the following purposes:
10
16
(A) to ▇▇▇▇ patients, insurance companies, Managed
Care Payors, and other third-party payors in the Group's name and on its behalf;
(B) to collect accounts receivable resulting from
such billing not otherwise purchased by Administrator (as provided for in
Section 3.2(e) hereof) in the Group's name and on its behalf;
(C) to receive payments on behalf of the Group from
insurance companies, prepayments received from health care plans, Medicare,
Medicaid, Managed Care Payors and all other third-party payors;
(D) to ensure the collection and receipt in
Administrator's name and for Administrator's account of all accounts receivable
of the Practice purchased by Administrator, and to deposit such collections in
the Account;
(E) to take possession of and endorse in the name of
the Group and deposit into the Deposit Account (and/or in the name of an
individual physician, such payment intended for purpose of payment of
professional fees related to the Practice) any notes, checks, money orders,
insurance payments and other instruments received in payment of accounts
receivable not otherwise purchased by Administrator; and
(F) upon the prior consent of the Group, which
consent shall not be unreasonably withheld or delayed, to initiate the
institution of legal proceedings in the name of the Group or a Physician
Employee to collect any accounts and monies owed to the Group or the Physician
Employee, to enforce the rights of the Group or the Physician Employee, as the
case may be, as creditor under any contract or in connection with the rendering
of any service, and to contest adjustments and denials by governmental agencies
(or their fiscal intermediaries) as third-party payors.
(ii) The Group hereby appoints Administrator as its true and
lawful attorney-in-fact to deposit into the Deposit Account all Professional
Revenues and Technical Revenues collected by Administrator as provided for in
this Section 3.2(b). The Group covenants, and shall cause all Physician
Employees and Physician Extender Employees to covenant, to forward any payments
received with respect to any Professional Revenues or Technical Revenues
generated for services provided by the Group or any of its Physician Employees
and Physician Extender Employees to Administrator for deposit. Administrator
shall have the right to withdraw funds from the Deposit Account and all owners
of the Deposit Account shall execute a revocable standing transfer order (the
"Transfer Order") under which the bank maintaining the Deposit Account shall
periodically transfer the entire balance of the Deposit Account to a separate
bank account owned solely by Administrator (the "Administrator Account"). The
Group and Administrator hereby agree to execute from time to time such documents
and instructions as shall be required by the bank maintaining the Deposit
Account and mutually agreed upon to effectuate the foregoing provisions and to
extend or amend such documents and instructions. Any action by the Group that
materially interferes with the operation of this Section, including but not
limited to, any failure to deposit or to have Administrator deposit any
11
17
Professional Revenues and/or Technical Revenues into the Deposit Account, any
withdrawal of any funds from the Deposit Account not authorized by the express
terms of this Agreement or any other written agreement executed by each of the
parties, or any revocation of or attempt to revoke the Transfer Order (otherwise
than upon expiration or termination of this Agreement), will constitute a breach
of this Agreement and will entitle Administrator, in addition to any other
remedies it may have at law or in equity, to seek a court ordered assignment of
the rights provided to Administrator pursuant to subparagraph (i) above.
(iii) All monies shall be accounted for by Administrator as
being distinctly attributable to the Group. The Group may perform the functions
or exercise the rights set forth in this Section 3.2(b) only with the prior
written consent of Administrator. The Group shall execute such documents in form
and substance as approved by Administrator and its legal counsel to permit
Administrator to exercise the rights and powers granted to Administrator
pursuant to this Section 3.2(b). The Group shall cooperate with, and at the
request of Administrator shall provide reasonable assistance to, Administrator
with the functions set forth herein. In the performance of the services
described in this Section 3.2(b), Administrator shall use commercially
reasonable efforts to collect such professional fees and shall comply with all
applicable Managed Care Contracts and all applicable laws, rules and
regulations.
(c) Accounting. Administrator shall administer and maintain the
operation of an appropriate accounting system with respect to the operation of
the Practice, and Administrator shall perform all bookkeeping and accounting
services necessary or appropriate for the efficient operation of the Practice,
including the maintenance, custody and supervision of business records, ledgers
and reports; the establishment, administration and implementation of accounting
procedures, controls and systems; and implementation and management of
computer-based management information systems. The Group and its authorized
representatives shall have the right to review all financial books and records
maintained by Administrator relating to the operation of the Practice and to the
cash management transfer and uses contemplated by Section 3.2(d) hereof. Such
information shall be provided by Administrator to the Group in any media
reasonably requested upon reimbursement of Administrator's actual cost.
(d) Cash Management. Administrator shall manage the cash and cash
equivalents of the Group and Administrator shall be entitled (and is hereby
authorized) to transfer such cash to the account of Administrator and to use
such cash for purposes as Administrator deems appropriate, subject to and
consistent with the terms and provisions of this Agreement. Nothing in this
Section 3.2(d) shall be construed to limit or otherwise modify the requirement
that Administrator disburse funds in fulfillment of the obligations of the Group
and Administrator under this Agreement.
(e) Purchase of Accounts Receivable and Right of Offset. Effective each
business day of the month and subject to applicable law, Administrator shall
purchase all accounts receivable of the Group arising during the day or days
just ended and shall make payment to Group therefor or offset, without further
notice or authorization, sums owed Administrator by Group as the parties have
agreed herein. The purchase price shall be an amount equal to the aggregate face
amount of the accounts receivable being sold less contractual adjustments and
12
18
estimated allowances for bad debt as determined from time to time based on
recent historical collection experience of one year or less. Administrator shall
make appropriate adjustments for bad debt and contractual allowances following
the close of each fiscal quarter of the Administrator.
(f) Obligations of Administrator. Administrator shall supply to the
Group all ordinary, necessary or appropriate services for the efficient
operation of the Practice, including without limitation, clerical, accounting,
purchasing, payroll, legal, bookkeeping and computer services, information
management, preparation of Tax Returns, printing, postage and duplication
services and medical transcribing services; provided, however, that the Group
may elect to prepare its own Tax Returns, in which case, the cost of preparing
such Tax Returns in excess of $2,500 per annum shall be included in Excluded
Practice Expenses. Administrator shall prepare monthly unaudited accrual or
cash-basis (as designated by the Group) financial statements for the Group
containing a balance sheet, income statement and monthly operational reports
which detail payments, charges and accounts receivable statistics, monthly
reconciliation reports on cash management and any other financial reports
reasonably requested by a member of the Joint Planning Board designated by the
Group, which shall be delivered to the Group as soon as practicable, but no
later than thirty (30) days after the end of each calendar month. The Group may
elect to have an audit conducted with respect to such financial statements by an
accounting firm selected by Group in its sole discretion, in which case the cost
of such audit shall be included in Excluded Practice Expenses unless such audit
discloses a material discrepancy, equal to or greater than ten percent (10%) of
the residual amount to which the Group is entitled following application of the
priority of payment set forth in Section 7.6 below in which case the cost shall
be an Administrator Expense.
(g) Records and Files.
(i) Administrator's Business and Financial Records. At all
times during and after the term of this Agreement, including any extensions or
renewals hereof, all business records, including but not limited to, business
agreements, books of account, personnel records, general administrative records
and all information generated under or contained in the management information
system pertaining to Administrator's obligations hereunder, and other business
information of Administrator of any kind or nature, except for patient medical
records and the Group's Records (as defined in subparagraph (ii) below), shall
be and remain the sole property of Administrator; provided that during and after
termination of this Agreement, the Group shall be entitled to reasonable access
to such records and information, including the right to obtain copies thereof in
any media reasonably requested by the Group, for any purpose related to patient
care or the defense of any claim relating to patient care or the business of
Administrator or the Group or to the relationships of the parties hereto, and
the Administrator agrees to safeguard such records for such period as may be
required by applicable federal or state law following termination of this
Agreement, but in no event less than six (6) years. Administrator hereby agrees
to preserve the confidentiality of such patient medical records and to use the
information in such records only for the limited purposes necessary to perform
management services and, within the limits of its responsibilities hereunder, to
ensure that provision is made for appropriate care for patients of the Practice.
13
19
(ii) The Practice's Business and Financial Records. At all
times during and after the term of this Agreement, the business agreements,
financial, operational, corporate and personnel records and information relating
exclusively to the business and activities of the Group and patient medical
records and charts (hereinafter referred to as the "Group's Records") shall be
and remain the sole property of the Group.
(iii) Access to Records. At all times during and after the
term of this Agreement, each party and its authorized agents shall be entitled,
upon request and with reasonable advance notice, to obtain access (within not
more than 30 days following receipt of such notice by the other party or
parties) to all records of the other party directly related to the performance
of such party's obligations pursuant to this Agreement; provided, however, that
such right shall not allow for access to patient, medical and other records that
must be kept confidential as required by law. Either party, at its expense,
shall have the right to make copies in any media of any records to which it has
access pursuant to this subparagraph (iii).
(iv) Compliance with Law. The management of all files and
records by Administrator and the Group shall comply with all applicable federal,
state and local statutes and regulations.
(h) Collections. Subject to the consent requirement contained in
Section 3.2(b)(i)(F), Administrator shall take such action as is reasonably or
lawfully necessary in the name of and on behalf of the Group to collect fees and
pay in a timely manner on behalf of Group all Practice Expenses, except as
otherwise agreed between Administrator and the Group.
Section 3.3 Facilities.
(a) Premises. Administrator shall make available to the Group the
Premises that are described in Exhibit 3.3(a) attached hereto and such other
improvements made by Administrator or Parent for the use of the Group hereunder.
The Premises shall be subject to such expansion or reduction as reviewed and
approved by the Joint Planning Board. Administrator shall obtain for the Group
all utilities reasonably required in connection with the use of the Premises and
shall provide for the proper cleanliness of the Premises, including normal
janitorial and maintenance services and refuse disposal, including medical
waste. Administrator shall maintain the Premises in good condition and make or
cause to be made all necessary repairs thereto.
(b) Personal Property. Administrator shall provide the Group with the
use of the equipment, furniture, fixtures, furnishings and other personal
property acquired in the Acquisition or any replacements thereto, together with
such other equipment, furniture, fixtures, furnishings and other personal
property necessary or appropriate for the efficient operation of the Practice
acquired by Administrator or Parent (subject to review and approval of the Joint
Planning Board) for the use of the Group pursuant to the terms hereof
(collectively, the "Personal Property"). Administrator shall maintain the
Personal Property in good condition and make or cause to be made all necessary
repairs thereto.
14
20
(c) Expenses. All costs, fees, expenses and other disbursements
incurred by Administrator, Parent or their Affiliates in connection with the
Premises and the Personal Property, including, without limitation, all
reasonably necessary costs of repairs, maintenance and improvements, utility
expenses (i.e., telephone, electric, gas and water), janitorial services, refuse
disposal, real or personal property lease cost payments and expenses, interest,
refinancing expenses, depreciation, loss on disposition of assets, taxes and
casualty, liability and other insurance, shall be included in Practice Expenses.
To the extent the Premises or Personal Property are used in connection with the
Professional Operations, the costs and expenses associated with such usage shall
be allocated between Professional Expenses and Technical Expenses as approved by
the Joint Planning Board.
(d) Disposition. Subject to provisions contained in existing agreements
to which Administrator or Parent is or becomes a party and, where necessary and
appropriate for the efficient operation of the Practice, nothing herein shall be
construed as precluding Administrator or Parent from selling, leasing or
otherwise disposing of all or any part of the Premises, Personal Property, real
property, improvements, trade names, trademarks and other intangible property;
provided, however, any such sale, lease or disposition shall be subject to the
prior review and approval of the Joint Planning Board and shall not eliminate or
diminish Administrator's obligations hereunder.
(e) No Warranties or Representations. The Group acknowledges that
Administrator makes no warranties or representations, express or implied, as to
the fitness, suitability or adequacy of the Premises or the Personal Property,
or any other property furnished under this Agreement, for the conduct of a
medical practice or for any other particular purpose.
Section 3.4 Acquisition and Assistance.
(a) Employment of Physicians. Subject to consultation with the Joint
Planning Board, in the event a decision is made by the Group to employ
additional physicians, if requested by the Group, Administrator will assist the
Group in the identification and selection of physicians or physician groups or
practices that may be beneficial in the operation of the Practice. Subject to
consultation with the Joint Planning Board, in the event that a decision is made
by the Group to pursue the employment of selected physicians, if requested by
the Group, Administrator will provide recruiting, consulting, negotiating and
other advisory services in connection with such transaction. Notwithstanding the
preceding, as set forth in and subject to the provisions of Section 4.1 hereof,
the Group shall have complete control of and responsibility for the hiring of
all Physician Employees and Physician Extender Employees.
(b) Acquisitions. In the event that the Group contemplates acquiring or
affiliating with a physician group, practice or other entity, and such
acquisition or affiliation involves the use or expenditure of Administrator's
and/or Parent's cash or other resources including the assumption of any Practice
Expenses or liabilities incurred or reasonably expected to be incurred as a
result of such an acquisition or affiliation including, without limitation,
capital and personnel (collectively, the "Resources"), then the Group shall
first consult with the Joint Planning Board and Administrator, and any decision
to make such affiliation or acquisition shall
15
21
be subject to prior approval of Administrator, which decision of the
Administrator shall be provided to the Group in a reasonable and timely manner
following satisfactory review of the physician group, practice or other entity
to be acquired or affiliated with and the terms and provisions of the proposed
affiliation or acquisition and in any event within 30 days following
notification of proposed transaction and receipt of all necessary information
related thereto. If such contemplated acquisition or affiliation does not
involve the use or expenditure of any of Administrator's and/or Parent's
Resources, then such decision shall be in the sole discretion of the Group.
Notwithstanding any provision contained herein to the contrary, any person or
entity with which the Group affiliates or acquires shall be subject to the terms
and conditions of this Agreement. If a decision is made to proceed with any
affiliation or acquisition of a physician group or practice, the Group may seek
from Administrator, and Administrator shall provide the Group with, consulting,
negotiation and other services including without limitation, legal, accounting
and other professional advisory services in connection with such affiliation or
acquisition, provided, however, that if the Group does not utilize the
Resources, the transaction costs including legal, accounting or other advisory
services of such affiliation or acquisition shall be the sole responsibility of
the Group.
Section 3.5 Financial Planning and Budgeting.
(a) Budgeting. Administrator shall collaborate with the Group and the
Joint Planning Board in the preparation of all annual capital and operating
budgets. These annual budgets shall be subject to the review, amendment and
approval or disapproval of the Board of Directors of Parent or a committee
designated by such Board of Directors. For purposes of developing the initial
annual operating budget, the Joint Planning Board shall take into account the
categories of expenses determined by Administrator and Joint Planning Board. The
projected annual operating budget for each subsequent year shall be subject to
the approval of the Joint Planning Board and shall reflect the Group's
anticipated staffing requirements for the next fiscal year, as well as other
anticipated expenses of the Practice. For purposes of developing the annual
capital budget, the Joint Planning Board will include budgeted amounts for any
anticipated expansion of existing facilities, acquisition of new facilities,
acquisition or upgrades of equipment, any practice asset acquisitions, and any
other anticipated capital expenses of the Practice.
(b) Capital Expenditures. Subject to the terms contained herein,
Administrator will make funds available for capital expenditures and
improvements by Administrator on behalf of the Practice as follows:
(i) Budgeted Expenditures. All budgeted capital expenditures
and improvement projects shall be subject to final review and approval by the
Joint Planning Board prior to the making of any actual expenditure. Such review
and approval shall be based on confirming that the assumption, facts and
circumstances on which the decision to budget for such expenditure was based
still support and justify the actual expenditures.
16
22
(ii) Non-Budgeted Expenditures. Requests for non-budgeted
capital expenditures and improvement projects shall be evaluated and prepared by
the Joint Planning Board in consultation with the Group and Administrator. All
requests for non-budgeted capital expenditures and improvements at or for the
benefit of the Practice in excess of either $75,000 individually or an aggregate
amount equivalent to $2,500 multiplied by the number of Full-time Physician
Employees employed at the time the capital budget for such Group for the
applicable year is determined (provided, however, that such aggregate amount
shall not exceed $250,000 for any calendar year) must be approved by the Board
of Directors of Parent or by any committee specifically designated by the Board
of Directors of Parent for such purposes.
(c) Capital Improvements and Expansion. Subject to Section 3.5(b), any
site or Premises renovation, expansion or reduction plans and/or capital
equipment expenditures with respect to the Practice shall be reviewed and
approved by the Joint Planning Board and shall be based upon economic
feasibility, productivity and then current market conditions in light of both
the particular project and the Group as a whole.
Section 3.6 Personnel. Administrator shall provide non-physician
professional support (other than Physician Extender Employees) including,
without limitation, nurses, technologists, physicists and administrative,
clerical, secretarial, bookkeeping and collection personnel as is reasonably
necessary for the efficient conduct of the Practice's operations. All such
personnel shall be duly qualified by education or experience for their
respective positions and shall possess all licenses which may be required by
law. Such personnel shall be employees of Administrator, and Administrator shall
determine and cause to be paid the salaries and benefits of all such personnel.
Such personnel shall be supervised by and comply with the directions and orders
of Administrator, except as otherwise required by applicable law. If the Group
is dissatisfied with the services of any such personnel who provide services
primarily for the Practice at the Premises, the Group shall consult with
Administrator, and Administrator shall in good faith determine whether the
performance of that employee could be brought to acceptable levels through
counsel and assistance, or whether such employee should be considered for
termination. If Administrator determines to retain such employee and the Group
is still dissatisfied with the services provided by such employee after a
reasonable period of time, Administrator shall either relocate such employee or
otherwise cease to utilize such employee in providing services to the Practice
hereunder. Administrator shall maintain established working relationships
wherever possible and Administrator shall make every effort consistent with
sound business practices to honor the specific requests of the Group with regard
to the assignment of Administrator's employees.
Section 3.7 Provider and Payor Relationships. Administrator shall
provide financial and business assistance to the Group in the negotiation,
establishment, supervision and maintenance of contracts and relationships
(collectively, the "Managed Care Contracts") with all managed care,
institutional health care providers and payors, health maintenance
organizations, preferred provider organizations, exclusive provider
organizations, Medicare, Medicaid, insurance companies, hospitals and other
similar persons (collectively, "Managed Care Payors"). Approval, disapproval,
termination or amendment of any contract or relationship of such Managed Care
Payors with the Group shall, after consultation with the Joint Planning
17
23
Board, be the responsibility of the Group. Notwithstanding the preceding
language, if a contract or relationship between any Managed Care Payor and the
Group involves or affects a contract or relationship with any other physician
group or practice serviced or managed by Administrator, Parent or any of their
Affiliates (the "Other Practices") and a consensus among the Group and the Other
Practices cannot be reached regarding the contract or relationship, then the
ultimate decision as to the approval, disapproval, termination or amendment of
such contract or relationship involving the Group, the Other Practices and such
Managed Care Payor shall be determined by the affirmative vote of the Physician
Board Members (as defined below) who hold a majority of the Group Voting Power
(as defined below). For purposes of this Section 3.7, (i) the term "Physician
Board Members" shall mean (a) those members appointed by the Group who serve on
the Joint Planning Board and (b) those persons appointed by the Other Practices
who serve on the Other Practices' joint boards (in a similar capacity to the
Joint Planning Board) as part of their contractual relationship with Parent,
Administrator or any of their Affiliates, and (ii) the term "Group Voting Power"
shall mean the total voting percentage which may be cast by the Physician Board
Members on a collective basis, with the percentage of votes able to be cast by
any Group or Other Practice, as applicable, shall be equal to the quotient
determined by dividing (x) the total estimated annual professional revenues to
be generated by the Group from such Managed Care Contract as determined by
Administrator, Parent or their Affiliates, as appropriate, in its sole
discretion, by (y) the total estimated annual professional revenues to be
generated by the Group and all Other Practices from such Managed Care Contract
as determined by the Administrator, Parent or their Affiliates, as appropriate,
in its sole discretion.
Section 3.8 Inventory and Supplies. Administrator shall order, purchase
and provide to the Group on a timely basis inventory and supplies, and such
other ordinary, necessary or appropriate materials which are requested by the
Group and which the Group shall reasonably determine to be necessary in the
operation of the Practice on the same terms commercially available to
Administrator. Such inventory, supplies and other materials shall be included in
Practice Expenses at their cost to Parent or Administrator, as the case may be.
Section 3.9 Advertising and Public Relations. In consultation with the
Joint Planning Board, Administrator shall implement (and design where requested)
an appropriate local public relations or advertising program on behalf of the
Practice, with appropriate emphasis on public awareness of the availability of
services at the Practice. Prior to publication or distribution of such marketing
or public relations material or information, Administrator shall submit such
material to the Group for its review and approval, which shall not be
unreasonably withheld. Administrator shall also design and implement all
national or other non-local public relations or advertising programs on behalf
of the Practice, the cost of which shall be included in Administrator Expenses,
except to the extent such national programs are reasonably designed to replace
or supplement the marketing benefits derived from local public relations or
advertising programs, in which case, a pro rata share of such costs will be
included in Practice Expenses as determined by the Joint Planning Board. The
parties hereto agree that all public relations and advertising programs shall be
conducted in compliance with applicable standards of medical ethics, laws and
regulations.
18
24
Section 3.10 Quality Assurance. Subject to Article II, Administrator
shall assist the Group in fulfilling its obligations to its patients to maintain
a high quality of medical and professional services. Any expenses that are
related to the overall maintenance of Administrator's quality assurance program
shall be included in Administrator Expenses; provided, however, that any
expenses related to such program that are incurred for services provided solely
for the direct benefit of the Practice shall be included in Practice Expenses.
Section 3.11 Other Consulting and Advisory Services. Administrator will
provide such consulting and other advisory services as reasonably requested by
the Group in all areas of the Group's business functions, including, without
limitation, financial planning, acquisition and expansion strategies,
development of long-term business objectives and other related matters.
Section 3.12 Events Excusing Performance. In the event of strikes,
lock-outs, calamities, acts of God, unavailability of supplies or other events
over which Administrator has no control, Administrator shall not be liable to
the Group for failure to perform any of the services required hereunder and the
Group shall not have the right to terminate this Agreement pursuant to Section
10.3(b), for so long as such events continue and for a reasonable period of time
thereafter; provided however that if such events continue and Administrator is
not able to perform any material portion of the services required hereunder for
a period of 120 consecutive days or more, either Administrator or Group may
terminate this Agreement by written notice to the other.
ARTICLE IV
Obligations of the Group
Section 4.1 Employment of Physician Employees and Physician Extender
Employees. Except as set forth in Article V, the Group shall have complete
control of and responsibility for the hiring, compensation, supervision,
training, evaluation and termination of its Physician Employees and Physician
Extender Employees. The Group shall conduct an appropriate and reasonable due
diligence review in connection with the hiring of any physician or the
acquisition of any physician group or practice. Although Administrator may
provide payroll and other related services to the Group, the Group shall be
solely responsible for the payment of such Physician Employees' and Physician
Extender Employees' salaries and wages, payroll taxes and all other taxes now or
hereafter applicable to their employment. The Group and its Physician Employees
and Physician Extender Employees shall not have any claim under this Agreement
or otherwise against Administrator or Parent for workers' compensation,
unemployment compensation or Social Security benefits, all of which shall be the
sole responsibility of the Group. The Group shall only employ or contract with
licensed physicians or other persons meeting applicable credentialing guidelines
established by the Group after consultation with the Joint Planning Board. The
Group shall cooperate in the obtaining and retaining of professional liability
insurance by ensuring that its Physician Employees and Physician Extender
Employees, and other employees who may have malpractice exposure or liability,
are insurable and by participating in an ongoing risk management program.
19
25
Section 4.2 Professional Services. The Group shall provide professional
services to its patients in compliance at all times with ethical standards,
laws, rules and regulations applicable to the operations of the Practice, the
Physician Employees and Physician Extender Employees. The Group shall ensure
that each Physician Employee and each Physician Extender Employee has all
required licenses, credentials, approvals or other certifications to perform his
or her duties and services for the Practice and, in the event that the Group
becomes aware of any disciplinary actions or medical malpractice actions
initiated against any Physician Employee or Physician Extender Employee, the
Group shall promptly inform Administrator of such action and the underlying
facts and circumstances. If required by applicable law, any state or federal
regulatory agency or any contractual obligations, the Group shall carry out a
program to monitor the quality of medical care practiced at the Practice;
provided, however, that the preceding language shall not limit the Group's
obligation to participate in or comply with any programs established by
Administrator or Parent for purposes of ensuring that the Group complies with
applicable law. The Group shall employ Physician Employees and Physician
Extender Employees as is necessary to provide efficient medical care to patients
of the Practice.
Section 4.3 Medical Practice. The Group shall use and occupy the
Premises exclusively for the practice of medicine and for providing other
related services and products. Unless otherwise approved in writing in advance
by Administrator, which approval shall not be unreasonably withheld or delayed,
it is expressly acknowledged by the parties hereto that the professional medical
practice or practices conducted at the Premises shall be conducted solely by
Physician Employees, and, no other physician or medical practitioner shall be
permitted to use or occupy the Premises; provided, however, if any test or
procedure is required to be performed jointly with another physician who is not
a Physician Employee or Physician Extender Employee, then such physician may use
and occupy the Premises for purposes of performing such procedure or test so
long as the Group receives usual and customary fees in connection with such
procedure or test. The Group shall be solely and exclusively in control of all
aspects of the practice of medicine and the delivery of medical services at the
Group's facilities and at such outpatient surgery centers, acute care hospitals
and other facilities as the Group may deem appropriate from time to time. The
rendition of all professional medical services, including, but not limited to,
diagnosis, treatment, therapy, the prescription of medicine and drugs, and the
supervision and preparation of medical reports shall be the sole responsibility
of the Group. From time to time the Group, after consultation with the Joint
Planning Board, will adopt and implement fee schedules for (i) non-prepaid
patients which shall be reasonable in relation to fees generally being charged
in the same or similar market areas and (ii) for all rebillings and recovery
items on prepaid Managed Care Contracts which are authorized and permitted by
such contracts. A copy of such agreements and any amendment thereto shall be
provided to Administrator for review no later than thirty (30) days prior to the
proposed effective date thereof.
Section 4.4 Group's Internal Matters. The Group shall be responsible
for matters involving its corporate governance, employees and similar internal
matters, including, but not limited to, preparation and contents of such reports
to regulatory authorities governing the Group that the Group is required by law
to provide, distribution of professional fee income among the Group Physician
Stockholders, disposition of the Group's property and stock (subject to any
20
26
restrictions contained herein), hiring and firing of its employees, licensing
and implementing all compliance plans and procedures as described in Section
4.6. Except for the expenses attributable to the distribution of professional
fee income among the Group Physician Stockholders, which will be included in
Excluded Practice Expenses, the costs incurred in connection with the foregoing
matters shall be Practice Expenses.
Section 4.5 Name. Administrator agrees that the Group shall be entitled
to use on a non-exclusive and non-transferable basis for the term of this
Agreement the names set forth on Schedule 4.5 as may be necessary or appropriate
in the performance of the Group's services and obligations hereunder.
Section 4.6 Compliance with Laws. The Group shall, and shall use its
best efforts to cause the Physician Employees, Physician Extender Employees and
other employees of the Group to, comply with all applicable federal, state and
local laws, rules, regulations and restrictions in the conduct of the Practice's
business. Without limiting the generality of the foregoing, the Group shall
comply and shall cause each Physician Employee, Physician Extender Employee and
other employee of the Group to comply, with all laws applicable to the operation
of the Practice in the generation, transportation, treatment, storage, disposal
or other handling of radioactive, medical, biological or hazardous materials or
waste, and the Group shall not, and shall use its best efforts to prohibit any
Physician Employee, Physician Extender Employee and any employee of the Group
from:
(a) entering into any contract, lease, agreement or arrangement,
including, but not limited to, any joint venture or consulting agreement, to
provide services, lease space, lease equipment or engage in any other venture or
activity with any physician, hospital, pharmacy, home health agency or other
person or entity which is in a position to make or influence referrals to, or
otherwise generate business for, the Practice, if such transaction is in
violation of any applicable law, rule or regulation;
(b) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment from a Managed Care Payor or any other Payor;
(c) knowingly and willfully making or causing to be made a false
statement or representation of a material fact for use in determining rights to
any benefit or payment from a Managed Care Payor or any other Payor;
(d) failing to disclose knowledge by a claimant of the occurrence of
any event affecting the initial or continued right to any benefit or payment on
its own behalf or on behalf of another, with intent to fraudulently secure such
benefit or payment;
(e) knowingly and willfully paying, soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offering to pay or receive such
remuneration (i) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
21
27
payment may be made in whole or in part by Medicare or Medicaid, or (ii) in
return for purchasing, leasing, or ordering, or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid; and
(f) referring a patient for health services or products to or providing
health services to a patient upon a referral from an entity or person with which
the physician or an immediate family member has a financial relationship, other
than as permitted by exceptions set forth in federal or state anti-referral laws
or regulations; and
(g) undertaking any action that is not in accord with the regulatory
compliance plans, policies and manuals developed by or in conjunction with
Administrator.
Section 4.7 Ancillary Services. Except as set forth in Section 3.4(b),
the Group shall not acquire, establish or commence the operation of any
satellite location, medical office, imaging center, health maintenance
organization, preferred provider organization, exclusive provider organization
or similar entity or organization established or operated by the Group after the
date hereof without the prior written consent of Administrator.
Section 4.8 Premises and Personal Property. The Group shall use its
best efforts to prevent damage, excessive wear and tear, and malfunction or
other breakdown of the Premises and Personal Property or any part thereof by the
Physician Employees and Physician Extender Employees or other employees of the
Group. The Group shall promptly inform Administrator both orally and in writing
of any and all necessary replacements, repairs or maintenance to any of the
Premises or Personal Property and any failures of equipment of which it becomes
aware. The Group shall comply with all covenants and provisions set forth in any
leases or subleases for the Premises entered into or assumed by Administrator
and Administrator agrees to make available to the Group copies of all such
leases to the Group.
Section 4.9 Practice Employee Benefit Plans. The Group shall not enter
into or offer to any Physician Employee or other employee of the Group or
Administrator any "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) without
the express written consent of Administrator, which consent shall not be
unreasonably withheld.
Section 4.10 Events Excusing Performance. In the event of strikes,
lock-outs, calamities, acts of God, unavailability of supplies or other events
over which the Group has no control, the Group shall not be liable to
Administrator, Parent or their Affiliates for failure to perform any of its
obligations required hereunder as may be materially restricted by any such event
and Administrator shall not have the right to terminate this Agreement pursuant
to Section 10.4(a), for so long as such events continue and for a reasonable
period of time thereafter; provided however that if such events continue and the
Group is not able to perform any material portion of its obligations required
hereunder for a period of 120 consecutive days or more, either the Group or
Administrator may terminate this Agreement by written notice to the other.
22
28
ARTICLE V
Joint Planning Board
Section 5.1 Formation and Operation of the Joint Planning Board.
(a) The parties hereto shall establish the Joint Planning Board which
shall be responsible for developing long-term strategic planning objectives and
management policies for the overall operation of the Practice and shall
facilitate communication and interaction between Administrator and the Practice.
The Joint Planning Board shall consist of no less than three (3) or more than
six (6) members. Administrator shall designate, in its sole discretion, two (2)
members of the Joint Planning Board, who shall serve at the pleasure of
Administrator and who may be removed or replaced by Administrator at any time.
The Group shall designate, in its sole discretion, no less than one (1) or more
than four (4) members of the Joint Planning Board, who shall serve at the
pleasure of the Group and who may be removed and replaced by the Group at any
time. Each member appointed by Administrator shall be entitled to one (1) vote
per member, and each member appointed by the Group shall be entitled to that
number of votes equal to the quotient determined by dividing (x) two (2) votes
by (y) the number of members designated by the Group to the Joint Planning
Board. The act of the members holding a majority of the voting power of the
Joint Planning Board shall be the act of the Joint Planning Board.
(b) Each member of the Joint Planning Board shall have the right to
vote on every matter either in person, by telephone, by written consent or by
one or more agents, who are also members of the Joint Planning Board, authorized
by a written proxy signed by the member and filed with the Joint Planning Board.
A proxy shall state that it either shall be voted for or against a specific
matter or matters identified in the proxy or shall be voted identically to the
vote of the agent specified in the proxy on any and all matters that may come
before and be voted on by the Joint Planning Board. A validly executed proxy
which does not state that it is irrevocable shall continue in full force and
effect unless (i) revoked by the member executing it, before the vote pursuant
to that proxy, by a writing delivered to the Joint Planning Board stating that
the proxy is revoked, or by a subsequent proxy executed by, or attendance at the
meeting and voting in person by, the member executing the proxy; or (ii) written
notice of the death or incapacity of the maker of that proxy is received by the
Joint Planning Board before the vote pursuant to that proxy is counted;
provided, however, that no proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy, unless otherwise provided in the proxy.
Section 5.2 Duties and Responsibilities of the Joint Planning Board.
The Joint Planning Board shall advise the Group on the following matters:
23
29
(a) Capital Improvements and Expansion. Subject to Section 3.5(b), any
site or Premises renovation, expansion or reduction plans and/or capital
equipment expenditures with respect to the Practice shall be reviewed and
approved by the Joint Planning Board and shall be based upon economic
feasibility, productivity and then current market conditions in light of both
the particular project and the Group as a whole.
(b) Annual Budgets. The Joint Planning Board shall collaborate with
Administrator on all annual capital and operating budgets prepared by
Administrator, as set forth in Section 3.5(b) and after the annual capital and
operating budgets have been approved as provided in Section 3.5(b), no
substantial changes may be made in such budgets without the approval of the
Joint Planning Board. For purposes of this Section 5.2, substantial means any
change individually or in the aggregate which would result in a change in excess
of five percent (5%) to the annual capital or operating budgets.
(c) Advertising. The Joint Planning Board shall consult with
Administrator on all local advertising and other marketing of the services
performed by or for the Group.
(d) Patient Fees. As a part of the annual operating budget, in
consultation with and upon recommendation of the Joint Planning Board, the Group
shall review and adopt the fee schedule for all professional services rendered
by the Practice.
(e) Ancillary Services and Fees. The Joint Planning Board shall approve
Practice-provided non-medical ancillary services (including, without limitation,
fees for technical services which do not generate Professional Revenues) based
upon the pricing, access to, and quality of such services and shall review and
adopt the fee schedule for all ancillary services.
(f) Provider and Payor Relationships. Subject to Section 3.7, decisions
regarding the establishment or maintenance of relationships with institutional
health care providers and payors shall be approved by the Group after
consultation with the Joint Planning Board.
(g) Strategic Planning. The Joint Planning Board shall develop a plan
which depicts the strategic direction of the Practice, as updated from time to
time. Such plan will, among other things, identify opportunities, objectives,
and the resources required to effect such plan.
(h) Capital Expenditures. The Joint Planning Board shall determine the
priority of capital expenditures in accordance with Section 3.5(b) hereof.
(i) Provider Hiring. The Joint Planning Board shall consult with the
Group to recommend the number and type of Physician Employees and Physician
Extender Employees required for the efficient operation of the Practice.
(j) Non-Physician Personnel. The Joint Planning Board shall consult
with Administrator to recommend the number and type of non-physician employees
required for the efficient operation of the Practice.
24
30
Section 5.3 Acts of the Joint Planning Board. Except as otherwise
specifically provided herein, the act of the members holding a majority of the
voting power of the Joint Planning Board shall be the act of the Joint Planning
Board. The Group agrees that, unless the following are approved in advance by
the Joint Planning Board and such act of the Joint Planning Board includes the
approval by both of the members designated by Administrator, it shall take no
action or implement any decision that would (i) require Administrator to expend
funds or incur obligations beyond those set forth under Sections 3.5 or 5.2 of
this Agreement; (ii) have a material adverse effect on the amount of
Administrator's management fee under Article VII; or (iii) otherwise have a
material adverse effect on Administrator's financial interests under this
Agreement. Except as provided in the prior sentence, the Group and Administrator
hereby agree to be bound by the act of the Joint Planning Board if such act was
approved by the members holding at least a majority of the voting power of the
Joint Planning Board. No action of the Joint Planning Board shall be effective
unless authorized by the members holding a majority of the voting power of the
Joint Planning Board present or represented by proxy at the applicable meeting.
In the event that a matter cannot be resolved by the Joint Planning Board due to
a tie vote, and no compromise can be reached, then either (x) the Board of
Directors of Parent or (y) a committee designated by the Board of Directors of
Parent containing at least one (1) physician member will make a final
determination on the matter in dispute provided that both the Group and
Administrator shall have had an opportunity to make a presentation to the Board
of Directors of Parent or a committee thereof, as applicable. A quorum of the
Joint Planning Board shall consist of the members holding a majority of the
voting power of the Joint Planning Board, present in person, by telephone, or by
proxy and the quorum must remain for the duration of the meeting.
Section 5.4 Joint Planning Board Meetings. Meetings of the Joint
Planning Board may be held by telephone or similar communication equipment so
long as all members participating in a meeting can hear and speak to each other.
The Joint Planning Board shall prepare and maintain written minutes of all
meetings and shall provide a copy of the minutes to the members within fifteen
(15) business days following each meeting.
(a) Regular Meetings. The Joint Planning Board shall hold not less than
four (4) regular meetings each year, at such specific times and places as the
members may determine.
(b) Special Meetings. A special meeting of the Joint Planning Board may
be called by fifty percent (50%) of the votes.
(c) Notice Requirement. A member calling a special meeting must provide
all other members with ten (10) days' advance written or telephonic notice.
Notice must be given or sent to the member's address or telephone number as
shown on the records of the Joint Planning Board. Notice may be delivered
directly to each member or to a person at the member's principal place of
business who would reasonably be expected to communicate that notice promptly to
the member.
25
31
(d) Waiver of Notice Requirement.
(i) Written Waiver, Consent or Approval. Notice of a special
meeting need not be given to any member who, either before or after the meeting,
signs a waiver of notice or a written consent to the holding of the special
meeting, or an approval of the minutes of the special meeting. Such waiver,
consent or approval need not specify the purpose of the special meeting. All
such waivers, consents, and approvals shall be filed with the Joint Planning
Board records or made a part of the minutes of the special meetings.
(ii) Failure to Object. Notice of special meeting need not be
given to any member who attends the special meeting and does not protest before
or at the commencement of the special meeting such lack of notice.
(iii) Quorum. The smallest number of members that hold votes
that exceed fifty percent (50%) of all voting power shall constitute a quorum of
the Joint Planning Board.
(iv) Proxies. The Joint Planning Board shall provide for the
use of proxies, telephonic conference calls, written consents or other
appropriate methods by which the full participation of the Group members and
Administrator members can be assured.
ARTICLE VI
Restrictive Covenants
The parties recognize that the services to be provided by Administrator
hereunder shall be feasible only if the Group operates active Professional
Operations and Technical Operations to which the physicians associated with the
Practice devote their full medical time and attention.
Accordingly, the parties hereto agree as follows:
Section 6.1 Restrictive Covenants of the Group.
(a) Noncompetition. During the term of this Agreement, the Group shall
not, without the prior written consent of Administrator, (i) establish, operate
or provide professional radiology, radiation oncology or diagnostic services at
any medical office, practice or other health care facility (other than a
Practice Site) providing services similar to those provided by the Practice or
enter into an agreement with any third party payor to provide such services,
(ii) enter into any other management or administrative services agreement or
other arrangement with any other person or entity (other than with
Administrator) for purposes of obtaining management, administrative or other
support services, or (iii) engage or participate in any business which engages
in competition with the business conducted by the APPI Group anywhere within 15
miles of any location at which any member of the APPI Group conducts business.
26
32
(b) Covenant Not to Solicit. During the term of this Agreement and for
twenty-four (24) months following the termination of this Agreement, the Group
shall not, without the prior written consent of Administrator: (i) unless the
Group acquires the Practice Assets pursuant to Article X, directly or indirectly
recruit or hire, or induce any party to recruit or hire any person who is an
employee of, or who has entered into an independent contractor arrangement with,
any member of the APPI Group; (ii) directly or indirectly, whether for itself or
for any other person or entity, call upon, solicit, divert or take away, or
attempt to solicit, call upon, divert or take away any customers, business, or
clients of any member of the APPI Group; (iii) directly or indirectly solicit,
or induce any party to solicit, any contractors of any member of the APPI Group,
to enter into the same or a similar type of contract with any other party; or
(iv) disrupt, damage, impair or interfere with the business of any member of the
APPI Group.
(c) Engagement of Administrator. If (i) this Agreement is terminated
pursuant to Section 10.4(a) or (c), and (ii) the Group does not acquire the
Purchase Assets as provided in Article X, then if the Group establishes,
operates or provides professional services at any office, practice, diagnostic
imaging center, hospital or other health care facility providing services
substantially similar to those provided by the Practice pursuant to this
Agreement anywhere within 15 miles of any location of any Practice Site(s), the
Group or any successor thereto shall engage Administrator as the sole and
exclusive manager and administrator of the nonprofessional functions and
services of such other office, practice, hospital or health care facility on the
same terms and conditions as contained herein.
(d) Administration's Obligations Regarding Proprietary Interest.
(i) Acknowledgement of Proprietary Interest. Administrator,
Parent or their Affiliates hereto recognize the proprietary interest of the
Group in any Confidential and Proprietary Information (as hereinafter defined).
Administrator, Parent and their Affiliates acknowledge and agree that any and
all Confidential and Proprietary Information of the Group ("Group's Confidential
and Proprietary Information") communicated to, learned of, developed or
otherwise acquired by Administrator, Parent and their Affiliates during the term
of this Agreement shall be the property of the Group. Administrator, Parent and
their Affiliates further acknowledge and understand that disclosure of any of
Group's Confidential and Proprietary Information will result in irreparable
injury and damage to the Group. As used herein, "Group's Confidential and
Proprietary Information" means all trade secrets and other confidential and/or
proprietary information of the Group, including information derived from
reports, investigations, research, work in progress, codes, marketing and sales
programs, financial projections, cost summaries, pricing formula, contract
analyses, financial information, projections, confidential filings with any
state or federal agency, and all other confidential concepts, methods of doing
business, ideas, materials or information prepared or performed for, by or on
behalf of the parties hereto by its employees, officers, directors, agents,
representatives, or consultants. Group's Confidential and Proprietary
Information shall not include any information which: (i) was known to
Administrator, Parent or their Affiliates prior to its disclosure by the Group;
(ii) is or becomes publicly known through no wrongful act of Administrator,
Parent or their Affiliates or any of their employees; (iii) is disclosed
pursuant to a statute, regulation or the
27
33
order of a court of competent jurisdiction, provided that the Administrator,
Parent or their Affiliates provide prior notice to the Group.
(ii) Covenant Not-to-Divulge Confidential and Proprietary
Information. Administrator, Parent and their Affiliates acknowledge and agree
that the Group is entitled to prevent the disclosure of Group's Confidential and
Proprietary Information. Administrator, Parent and their Affiliates agree at all
times during the term of this Agreement and thereafter to hold in strictest
confidence and not to disclose to any person, firm or corporation, except as may
be necessary for the discharge of its obligations under this Agreement, and not
to use, except in the pursuit of the business of the Practice, Group's
Confidential and Proprietary Information, without the prior written consent of
the Group; unless (i) such information becomes known or available to the public
generally through no wrongful act of Administrator, Parent or their Affiliates
or their employees or (ii) disclosure is required by law or the rule, regulation
or order of any governmental authority under color of law; provided, that prior
to disclosing any Group's Confidential and Proprietary Information pursuant to
this clause (iii), Administrator, Parent or their Affiliates shall, if possible,
give prior written notice thereof to the Group and provide the Group with the
opportunity to contest such disclosure. Administrator, Parent and their
Affiliates shall take all necessary and proper precautions against disclosure of
any of Group's Confidential and Proprietary Information to unauthorized persons
by any of its officers, directors, employees or agents. All officers, directors,
employees, and agents of Administrator, Parent and their Affiliates who will
have access to all or any part of the Group's Confidential and Proprietary
Information will be required to execute an agreement upon request, valid under
the law of the jurisdiction in which such agreement is executed, and in a form
acceptable to Administrator, Parent or their Affiliates and their counsel,
committing themselves to maintain the Group's Confidential and Proprietary
Information in strict confidence and not to disclose it to any unauthorized
person or entity. Upon termination of this Agreement for any reason, the
Administrator, Parent and their Affiliates and their employees shall cease all
use of any of the Group's Confidential and Proprietary Information and shall
execute such documents as may be reasonably necessary to evidence their
abandonment of any claim thereto.
(iii) Return of Materials. In the event of any termination of
this Agreement for any reason whatsoever, or at any time upon the request of the
Group, the Administrator, Parent and their Affiliates will promptly deliver or
cause to be delivered to the Group all documents, data and other information in
their possession that contain any Group's Confidential and Proprietary
Information. The Administrator, Parent and their Affiliates shall not take or
retain any documents or other information, or any reproduction or excerpt
thereof, containing any Group's Confidential and Proprietary Information, unless
otherwise authorized in writing by the Group. In the event of termination of
this Agreement, Administrator, Parent and their Affiliates will deliver to the
Group all documents and data pertaining to Group's Confidential and Proprietary
Information not otherwise purchased as part of the Acquisition.
(e) Group's Obligations Regarding Proprietary Interest.
28
34
(i) Acknowledgement of Proprietary Interest. The Group
recognizes the proprietary interest of the Administrator, Parent and their
Affiliates in any Confidential and Proprietary Information (as hereinafter
defined). The Group acknowledges and agrees that any and all Confidential and
Proprietary Information of Administrator, Parent or their Affiliates
("Administrators's Confidential and Proprietary Information") communicated to,
learned of, developed or otherwise acquired by the Group during the term of this
Agreement shall be the property of Administrator, Parent or their Affiliates.
The Group further acknowledges and understands that its disclosure of
Administrator's Confidential and Proprietary Information will result in
irreparable injury and damage to Administrator, Parent or their Affiliates. As
used herein, "Confidential and Proprietary Information" means all trade secrets
and other confidential and/or proprietary information of the Administrator,
Parent or their Affiliates, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales programs,
financial projections, cost summaries, pricing formula, contract analyses,
financial information, projections, confidential filings with any state or
federal agency, and all other confidential concepts, methods of doing business,
ideas, materials or information (other than the Group's patient records)
prepared or performed for, by or on behalf of the parties hereto by its
employees, officers, directors, agents, representatives, or consultants.
Confidential and Proprietary Information shall not include any information
which: (i) was known to the parties hereto prior to its disclosure by the
Administrator, Parent or their Affiliates; (ii) is or becomes publicly known
through no wrongful act of the Group or any of its employees; (iii) is disclosed
pursuant to a statute, regulation or the order of a court of competent
jurisdiction, provided that the Group provides prior notice to Administrator,
Parent or their Affiliates.
(ii) Covenant Not-to-Divulge Confidential and Proprietary
Information. The Group acknowledges and agrees that Administrator, Parent or
their Affiliates are entitled to prevent the disclosure of Confidential and
Proprietary Information. The Group agrees at all times during the term of this
Agreement and thereafter to hold in strictest confidence and not to disclose to
any person, firm or corporation, except as may be necessary for the discharge of
its obligations under this Agreement, and not to use, except in the pursuit of
the business of the Practice, Administrator's Confidential and Proprietary
Information, without the prior written consent of Administrator, Parent and
their Affiliates; unless (i) such information becomes known or available to the
public generally through no wrongful act of the Group or its employees or (ii)
disclosure is required by law or the rule, regulation or order of any
governmental authority under color of law; provided, that prior to disclosing
any Administrator's Confidential and Proprietary Information pursuant to this
clause (iii), the Group shall, if possible, give prior written notice thereof to
Administrator, Parent and their Affiliates and provide such parties with the
opportunity to contest such disclosure. The Group shall take all necessary and
proper precautions against disclosure of any Administrator's Confidential and
Proprietary Information to unauthorized persons by any of its officers,
directors, employees or agents. All officers, directors, employees, and agents
of the Group who will have access to all or any part of the Administrator's
Confidential and Proprietary Information will be required to execute an
agreement upon request, valid under the law of the jurisdiction in which such
agreement is executed, and in a form acceptable to Administrator, Parent and
their Affiliates and its counsel, committing themselves to maintain the
Administrator's Confidential and Proprietary Information in strict confidence
and not to disclose it to any unauthorized person or entity. Upon termination
29
35
of this Agreement for any reason, the Group and their employees shall cease all
use of any of the Administrator's Confidential and Proprietary Information and
shall execute such documents as may be reasonably necessary to evidence their
abandonment of any claim thereto.
(iii) Return of Materials. In the event of any termination of
this Agreement for any reason whatsoever, or at any time upon the request of
Administrator, Parent or their Affiliates, the Group will promptly deliver or
cause to be delivered to Administrator, Parent and their Affiliates all
documents, data and other information in their possession that contains any
Administrator's Confidential and Proprietary Information regarding
Administrator, Parent and their Affiliates. The Group shall not take or retain
any documents or other information, or any reproduction or excerpt thereof,
containing any Administrator's Confidential and Proprietary Information, unless
otherwise authorized in writing by the party possessing such Administrator's
Confidential and Proprietary Information. In the event of termination of this
Agreement, the Group will deliver to Administrator, Parent and their Affiliates
all documents and data pertaining to Administrator's Confidential and
Proprietary Information of the other parties not otherwise purchased as part of
the Purchased Assets.
(f) Third Party Beneficiaries. The members of the APPI Group not party
to this Agreement are hereby specifically made third party beneficiaries of this
Section 6.1, with the power to enforce the provisions hereof.
Section 6.2 Restrictive Covenants. The Group shall obtain and enforce
formal agreements with each Physician Employee who is either (i) a Group
Physician Stockholder or (ii), to the extent permitted under applicable law, a
Full-time Physician Employee which each contain certain restrictive covenants
thereof pertaining to covenants not to compete and/or solicit with and not to
divulge the Confidential and Proprietary Information of any member of the APPI
Group or the Practice (the "Restrictive Covenants"). Except as otherwise
approved by the Joint Planning Board, each Group Physician Stockholder or
Full-time Physician Employee shall agree, during the term of his/her employment
or contractor agreement with the Practice and for a period of twenty-four (24)
months after any termination of such agreement: (i) not to establish, operate or
provide professional radiology services at any office, practice, hospital or
health care facility providing services substantially similar to those provided
by the Practice pursuant to this Agreement within 15 miles of any location of
any Practice Site(s) and (ii) to be bound by non-solicitation, noncompetition
and nondisclosure of confidential/proprietary information and engagement of
Administrator covenants similar to those applicable to the Group as contained in
Section 6.1 hereof. Except as otherwise approved by the Joint Planning Board,
each Group Physician Stockholder or Full-time Physician Employee shall agree
that during the term of his/her employment or contractor agreement with the
Group (w) not to practice radiological medicine other than at the Premises or
such other location or Practice Site(s) as approved by the Joint Planning Board;
(x) to devote substantially all of his or her professional time, effort and
ability to the Practice; (y) to request in writing and receive in writing prior
approval from the Joint Planning Board to engage in any outside medical
activities; and (z) to turn over to the Practice, to be included in Professional
Revenues attributed to the Practice, any income derived by such Group Physician
Stockholder or Full-time Physician Employee from any outside medical activity or
related source from the following medically-related activities: teaching,
consulting,
30
36
medical research, inventions developed utilizing the Group's or the Practice's
time and material, testimony for litigation, and insurance examinations. The
Group shall not materially amend, alter or otherwise change any term or
provision of any Stockholder Employment Agreement or Physician Employee
Employment Agreement relating to the foregoing covenants in this Section 6.2
without the prior written consent of Administrator; notwithstanding the
foregoing, any such amendment, alteration or change shall not be inconsistent
with the terms or provisions of this Agreement. Following termination of this
Agreement, the Group shall not amend, alter or otherwise change any term or
provision of the Restrictive Covenants, unless such provisions are no longer in
force and effect pursuant to the terms of the applicable Stockholder Employment
Agreement or Physician Employee Employment Agreement at the time of termination
of this Agreement. In the event the Purchase Assets are acquired by the Group
pursuant to Article X, the obligation of the Group to enforce Restrictive
Covenants shall be limited to enforcement of non-solicitation and nondisclosure
of confidential/proprietary information covenants.
Section 6.3 Enforcement of Restrictive Covenants and Other Provisions.
The Group shall enforce the Stockholder Employment Agreements and, to the extent
permitted under applicable law, the Physician Employee Employment Agreements,
including, without limitation, the Restrictive Covenants. The costs and expenses
of such enforcement shall be included in Professional Expenses and all damages
and other amounts recovered thereby shall be included in Professional Revenues.
In the event that, after a request by Administrator, the Group does not pursue
any remedy that may be available to it by reason of a breach or default of the
Restrictive Covenants or any other provision of the Stockholder Employment
Agreements and, to the extent permitted under applicable law, the Physician
Employee Employment Agreements, upon the request of Administrator, the Group
shall assign to Administrator such causes of action and/or other rights it has
related to such breach or default and shall cooperate with and provide
reasonable assistance to Administrator with respect thereto; in which case, all
costs and expenses incurred in connection therewith shall be borne by
Administrator and shall be included in Administrator Expenses, and Administrator
shall be entitled to all damages and other amounts recovered thereby. In the
event the Purchase Assets are acquired by the Group pursuant to Article X, the
obligation of the Group to enforce Restrictive Covenants shall be limited to
enforcement of non-solicitation and nondisclosure of confidential/proprietary
information covenants.
Section 6.4 Remedies. Administrator and the Group acknowledge and agree
that a remedy at law for any breach or attempted breach of the provisions of
this Article VI shall be inadequate, and therefore, either party shall be
entitled to specific performance and injunctive or other equitable relief in the
event of any such breach or attempted breach, in addition to any other rights or
remedies available to either party at law or in equity. Each party hereto waives
any requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief. If any provision of
the Restrictive Covenants or this Article VI relating to the restrictive period,
scope of activity restricted and/or the territory described therein shall be
declared by a court of competent jurisdiction to exceed the maximum time period,
scope of activity restricted or geographical area such court deems reasonable
and enforceable under applicable law, the time period, scope of activity
restricted and/or area of restriction held reasonable and enforceable by the
court shall thereafter be the restrictive period,
31
37
scope of activity restricted and/or the geographical area applicable to such
provision of the Restrictive Covenants or this Article VI. The invalidity or
non-enforceability of any provision of the Restrictive Covenants or this Article
VI in any respect shall not affect the validity or enforceability of the
remainder of the Restrictive Covenants or this Article VI or of any other
provisions of this Agreement.
Section 6.5 Condition Precedent to Release of Obligations. In the event
a Group Physician Stockholder or Full-time Physician Employee terminates his/her
employment agreement with the Group, the Group shall be entitled to release
(with the consent of Administrator in its sole and absolute discretion) such
Group Physician Stockholder or Full-time Physician Employee from the restrictive
covenants contained in Section 6.2, above. In the event the Group elects to
release such Group Physician Stockholder or Full-time Physician Employee, the
Group hereby covenants that it shall obtain a formal agreement between each
Group Physician Stockholder or Full-time Physician Employee, as the case may be,
and Administrator which provides that, for a period of two (2) years following
termination of any employment agreement with the Group, such Group Physician
Stockholder or Full-time Physician Employee agrees to (a) engage Administrator
as the sole and exclusive manager and administrator of the non-medical functions
and services of said Group Physician Stockholder's or Full-time Physician
Employee's medical practice and (b) pay to Administrator the identical amount
[NY only] of revenues paid by the Group to the Administrator attributable to
such Group Physician Stockholder or Full-time Physician Employee derived from
such Group Physician Stockholder's or Full-time Physician Employee's performance
of professional medical services within 15 miles of any Practice Site.
Section 6.6 Service Area Rights and Obligations.
(a) Primary Service Area. During the term of this Agreement and within
any Primary Service Area, Parent, Administrator or their Affiliates shall not,
without the prior written consent of the Group, (i) acquire or lease the
non-medical assets (through an asset acquisition, merger or other consolidation
or otherwise) of any Radiologist, group of Radiologists or professional
corporation or association (or other professional entity) whose owners are
Radiologists, (ii) acquire any imaging center where, within a reasonable time
period following such acquisition, the Group will not be entitled to provide
professional Radiology services for such imaging center, or (iii) contract to
provide management and administrative services similar to those provided under
this Agreement to any Radiologist, group of Radiologists or professional
corporation or association (or other professional entity) whose owners are
Radiologists. Following a request for written consent by Administrator, Parent
or their Affiliates hereunder, the Group shall respond upon the earlier of (i)
within thirty (30) days from receipt of such request and all other necessary
information related thereto or (ii) one-half of the time during which
Administrator, Parent or their Affiliates must respond. In the event the Group,
Parent, Administrator or their Affiliates acquire a Professional Service
Opportunity, the Group shall accept such Professional Service Opportunity and
shall perform any and all professional Radiology services that are reasonably
required at such location(s) in accordance with the terms and provisions of this
Agreement; provided (x) that the professional reimbursement for such services is
reasonable in relation to the overall market environment and
32
38
work effort required and (y) the Group shall not be required to employ any
Radiologist previously associated with such Professional Service Opportunity.
(b) Secondary Service Area. During the term of this Agreement and
within any Secondary Service Area, Parent, Administrator or their Affiliates
shall first offer to the Group any New Professional Service Opportunity;
provided, however, that this provision shall not be applicable to any merger of
a Radiologist, group of Radiologists or professional corporation or association
(or other professional entity) whose owners are Radiologists with the Group.
Administrator shall give written notice (the "Administrator Notice") to the
Group describing the New Professional Service Opportunity. Within the earlier of
(i) thirty (30) days or (ii) one-half of the time during which the
Administrator, Parent or their Affiliates must respond to an offer described in
the Administrator's Notice, the Group shall deliver to Administrator a written
notice stating whether or not the Group elects to accept or reject the New
Professional Service Opportunity which election shall be binding on the Group.
If the Group does not elect to exercise the right or fails to provide the notice
to Administrator within the time frame herein provided, Administrator shall be
released from the right of first offer with respect to that particular New
Professional Service Opportunity. Prior to consummating any asset acquisition,
merger or other consolidation of any Radiologist, group of Radiologists, or
professional corporation or association (or other professional entity) whose
owners are Radiologists within any Secondary Service Area, Administrator shall
first consult with the Joint Planning Board.
(c) Determination of Primary and Secondary Service Area. The existence
and location of each of the Group's Primary Service Areas and Secondary Service
Areas shall be determined each time the Group, Parent, Administrator or their
Affiliates propose an acquisition, management relationship, Professional Service
Opportunity or New Professional Service
Opportunity as contemplated in subsections (a) and (b) above.
(d) Dispute Resolution. Any disputes regarding the interpretation of
the provisions of this Section 6.6 shall be referred to and decided by the Joint
Planning Board as provided in Section 5.3 of this Agreement.
(e) Definitions. The definitions utilized in connection with this
Section 6.6 shall have the following meanings:
"New Professional Service Opportunity" shall mean a Professional
Service Opportunity pursuant to which the Group or any other member of an APPI
Group managed by Parent, Administrator or their Affiliates is not currently
providing professional Radiology services.
"Primary Service Area" shall mean that area within a five (5) mile
radius from any imaging center owned, operated or managed by Administrator,
Parent or their Affiliates for which the Group provides professional Radiology
services or any hospital at which on-site professional Radiology services are
then provided by Physician Employee(s) or Physician Extender Employee(s) of the
Group.
33
39
"Professional Service Opportunity" shall mean any opportunity to
perform professional Radiology services for any hospital, hospital system or
imaging center under a formal agreement with such entity.
"Radiologist" shall mean and include both radiologists and
radiation oncologists.
"Radiology" shall mean and include diagnostic imaging,
interventional radiology and radiation oncology services.
"Secondary Service Area" shall mean (i) during the 12-month period
following the Acquisition Effective Date, that area which extends ten (10) miles
beyond the boundary of any Primary Service Area and (ii) during the remaining
term of this Agreement, that area which extends five (5) miles beyond the
boundary of any Primary Service Area.
Section 6.7 Survival of Certain Covenants. If this Agreement is
terminated pursuant to Section 10.4(a),(b) or (c), the provisions of Section 6.2
and Section 6.3 shall survive such termination if the actions or events giving
rise to a breach of the Restrictive Covenants or other provisions occurred prior
to such termination. If the Agreement is terminated pursuant to the preceding
sentence, all of the provisions of Section 6.1 shall survive. However,
regardless of the reason for termination, or upon expiration of this Agreement,
the provisions of Section 6.1(d),(e),(f) and (g) shall survive such termination
or expiration indefinitely unless otherwise expressly limited as to a period of
time.
Section 6.8 Definition. The term "Full-time Physician Employee" as used
in Sections 6.2 and 6.5 of this Article VI only, shall mean a Full-time
Physician Employee who shall have been employed by the Group for two (2) years;
provided, that such Full-time Physician Employee shall enter into a written
agreement at the commencement of the later of (i) his/her employment or (ii) the
Acquisition, which includes the provisions set forth in Sections 6.2 and 6.5,
above, and acknowledges his/her understanding that such provisions will be
enforceable against such Full-time Physician Employee following such two (2)
year period. Notwithstanding the foregoing, the Group shall be entitled to apply
to the Joint Planning Board for the purpose of requesting that a particular
Full-time Physician Employee not be required to execute an employment agreement
that contains the provisions contained in Sections 6.2 and 6.5, which such
release by Administrator shall not be unreasonably withheld.
ARTICLE VII
Financial and Security Arrangements
Section 7.1 Service Fee. The Group and Administrator agree that the
compensation set forth in this Article VII is being paid to Administrator in
consideration of the services provided and the substantial commitment and effort
made by Administrator hereunder and that such fees have been negotiated at arms'
length and are fair, reasonable and consistent with fair market value.
Administrator shall be paid the service fee (the "Service Fee") as set forth on
34
40
Exhibit 7.1 hereto. Payment of the Service Fee is not intended to and shall not
be interpreted or implied as permitting Administrator to share in the Group's
fees for medical services but is acknowledged as the negotiated fair market
value compensation to Administrator considering the scope of services and the
business risks assumed by Administrator.
Section 7.2 Payments. Except as otherwise set forth on Exhibit 7.1
hereto, the amounts to be paid to Administrator under this Article VII shall be
calculated by Administrator on the accrual basis of accounting and shall be
payable monthly. Payments due for any Service Fee shall be made by the Group
each calendar month as provided herein and shall be paid on the 15th day
following the end of such month (or the first preceding day that is a business
day if the 15th day is not a business day) (a "Payment Date"). Except as
otherwise set forth on Exhibit 7.1, such amounts paid shall be estimates based
upon available information for such month, and adjustments to the estimated
payments shall be made to reconcile final amounts due under Section 7.1 on the
next Payment Date.
Section 7.3 Advances. The Group shall be entitled to an advance from
Administrator of such additional sums, over and above the Group's right to the
amounts otherwise set forth in this Article VII, as shall be required by the
Group to pay Practice Expenses (excluding Technical Expenses) consistent with
the annual capital and operating budgets of the Practice (prepared as provided
in Section 3.5 hereof), the Service Fee as provided in Exhibit 7.1 hereto and
Excluded Practice Expenses at the discretion of Administrator. Any amounts
advanced to the Group pursuant to this Section 7.3 shall be repaid by the Group
in such priority as set forth in Section 7.6 below and shall bear interest at
Parent's then available, borrowing rate offered by Administrator's or Parent's
senior lender (which rate shall be charged consistently to each physician group
who enters into a Service Agreement with Administrator) until all such amounts
of principal and interest are repaid to Administrator as provided herein.
Notwithstanding the foregoing, no interest shall accrue or be paid by the Group
for amounts advanced to the Group pursuant to this Section 7.3 during the
forty-five (45)-day period immediately following the Acquisition Effective Date.
Section 7.4 Security Agreement. In order to enforce its rights granted
hereunder and subject to applicable law, the Group shall execute a Security
Agreement in substantially the form attached hereto as Exhibit 7.4 (the
"Security Agreement"), which Security Agreement grants a security interest in
all of the Group's accounts receivable (as more fully described in the Security
Agreement) to Administrator. In addition, the Group shall cooperate with
Administrator and execute all necessary documents in connection with the pledge
of such accounts receivable to Administrator or at Administrator's option, its
lenders.
Section 7.5 Adjustment of Fees. In addition to the adjustments provided
for in Section 7.2, Service Fees payable by Group pursuant to this Article VII
shall be adjusted as appropriate upon agreement of the parties upon the
divestiture or acquisition by the Group of, or affiliation with, a radiology or
diagnostic practice group. Whether or not Parent capital stock or funds are
utilized to fund the acquisition or affiliation, the Service Fee and other
related provisions of this Agreement shall be adjusted as agreed upon by the
parties on a case by case basis. Under either acquisition or affiliation model,
the precise adjustment to the Service Fee
35
41
and to other related provisions of this Agreement shall be a joint decision of
the parties, shall be memorialized in a written amendment to this Agreement, and
shall be based upon the methodology used to generally determine Services Fees
hereunder.
Section 7.6 Priority of Payments. Administrator shall administer and
make disbursements from amounts deposited into the Deposit Account or
transferred from the Deposit Account to pay (including, without limitation the
making of advances as provided in Section 7.3) the Practice Expenses and
Excluded Practice Expenses as the same become due and payable, and for which the
Group shall remain responsible; provided, however, that if Technical Expenses
exceed Technical Revenues, then the amount by which Technical Expenses exceed
Technical Revenues shall be excluded for purposes of the priority of payments
set forth below and the Group shall not be responsible for such amount. In
performing its obligations pursuant to Article III, on the fifteenth (15th) day
following the end of each calendar month, Administrator shall apply an amount
equal to the aggregate face amount of the prior month's accounts receivables,
less contractual adjustments and estimated allowances for bad debt as determined
in accordance with Section 3.2(e), in the following order of priority:
(a) payment of all accrued Practice Expenses for the prior month
(subject to the proviso in the preceding sentence;
(b) payment of the accrued Service Fee for the prior month;
(c) payment of outstanding balance of all amounts advanced to the
Group, through the end of the prior month, and applicable
interest thereon (as contemplated in Section 7.3); and
(d) payment of all Excluded Practice Expenses.
Any amounts which remain following the payment of the items set forth in
subparagraphs (a) through (d) above shall be deposited into the Group Account on
the fifteenth (15th) day following the end of each calendar month (or the first
preceding day if the 15th day is not a business day).
ARTICLE VIII
Records
Section 8.1 Records. All records relating in any way to the operation
of the Practice (other than Group Records) shall, subject to the obligations of
the Practice to maintain patient medical records pursuant to Section 3.2(g), at
all times be the property of Administrator as set forth in Section 3.2(g).
During the term of this Agreement, and for a reasonable time thereafter, the
Group or its agents shall have reasonable access during normal business hours to
the Group's and Administrator's personnel and financial records relating to the
Practice, including, but not limited to, records of collections, expenses and
disbursements as kept by Administrator in
36
42
performing Administrator's obligations under this Agreement, and the Group may
copy any or all such records.
ARTICLE IX
Insurance and Indemnification
Section 9.1 Insurance to be Maintained by the Group.
(a) During the term of this Agreement, the Group shall maintain
comprehensive professional medical/malpractice liability insurance with such
carrier as determined jointly by Administrator and the Group with minimum legal
limits or such higher limits as shall be required under the Group's contracts
with hospitals or other third parties. Such insurance shall be on a per claim
and per physician basis and a separate limit for the Group to the extent
available and permitted by law with such deductible as is mutually agreeable by
Administrator and the Group. All comprehensive professional medical/malpractice
liability insurance premiums and deductibles shall be included in Practice
Expenses; provided, that if the Group elects to maintain coverage that exceeds
minimum requirements, such additional premiums shall be included in Excluded
Practice Expenses. All costs, expenses and liabilities incurred by the Group in
excess of the limits of such policies identified in the preceding sentence shall
be included in Excluded Practice Expenses. Administrator, Parent or their
Affiliates shall attempt to secure excess liability for the types of coverages
contemplated by this Section 9.1(a). If successful, the Group shall have the
opportunity to purchase at Administrator's cost, as an Excluded Practice
Expense, such coverage to the extent permitted by the then-applicable
restrictions set forth in such policy.
(b) The Group, Administrator and Parent each waives any right one may
have against the other, to the extent allowed by the waiving party's insurance
coverage, on account of any loss or damage occasioned to any party by another
party, their respective real and personal property, the Premises or its
contents, arising from any risk generally covered by fire and extended coverage
insurance or from vandalism or malicious mischief; and the parties, on behalf of
their respective insurance companies, waive any right to subrogation, except
when such loss or damage is due to the gross negligence or willful misconduct of
the other party.
Section 9.2 Insurance to be Maintained by Administrator. During the
term of this Agreement, Administrator will provide and maintain (i) as a
Technical Expense, comprehensive professional medical/malpractice liability
insurance for all applicable employees of Administrator and (ii) as a Practice
Expense, comprehensive general liability and property insurance covering the
Practice's premises (including, without limitation, the Premises), personal
property and operations with such limits and coverages as a reasonable business
person under similar circumstances would maintain. All costs, expenses and
liabilities incurred by Administrator in excess of the limits of such policies
identified in subsections (i) and (ii) hereof shall be included in Administrator
Expenses.
37
43
Section 9.3 Continuing Liability Insurance Coverage. The Group shall
obtain or require each of its Physician Employees and Physician Extender
Employees to obtain continuing liability insurance coverage under either a "tail
policy" or a "prior acts policy," with the same limits and deductibles as the
insurance coverage provided pursuant to Section 9.1 upon the termination of such
physician's relationship with the Group for any reason, unless such physician
was covered with an occurrence-based policy while employed or retained by the
Group. In the event that the Group, any Physician Employee or Physician Extender
Employees fails to obtain such continuing liability insurance coverage,
Administrator may do so. The cost of such continuing liability insurance
coverage shall be included in Practice Expenses unless such cost is borne by the
Physician Employee.
Section 9.4 Additional Insureds. The Group and Administrator agree to
use their reasonable efforts to have each other named as an additional insured
on the other's respective professional liability insurance programs. The
additional cost, if any, associated therewith shall be a Practice Expense.
Section 9.5 Indemnification.
(a) By the Group. The Group shall indemnify, defend and hold
Administrator, Parent, their Affiliates and their respective officers,
directors, shareholders, employees, agents, attorneys and consultants (other
than such persons who are also officers, directors, shareholders, employees,
agents or consultants of the Group) harmless, from and against any and all
liabilities, losses, damages, claims, causes of action and expenses (including
reasonable attorneys' fees), not covered by insurance (including self-insured
insurance and reserves), whenever arising or incurred, that are caused or
asserted to have been caused, directly or indirectly, by or as a result of the
performance of medical services or the performance of any intentional acts,
negligent acts or omissions by the Group and/or its shareholders, employees
and/or subcontractors (other than Administrator, Parent, Affiliates or their
employees, officers, directors, agents, attorneys and consultants) during the
term of this Agreement. Provided, however, that in the event an indemnification
obligation under the preceding sentence arises as of the result of any act or
omission of a person who is an officer, shareholder or other equity holder,
director, employee, agent, attorney or consultant of Administrator, Parent or
any of their Affiliates (other than in connection with the activities of the
Joint Planning Board), such person shall not be entitled to indemnification in
connection therewith and any other adjustment as is equitable shall be made to
the Group's indemnification obligation arising thereby.
(b) By the Administrator. Administrator and Parent, jointly and
severally, shall indemnify, defend and hold the Group and its officers,
shareholders, directors, employees, agents, attorneys and consultants, harmless
from and against any and all liabilities, losses, damages, claims, causes of
action and expenses (including reasonable attorneys' fees), not covered by
insurance (including self-insured insurance and reserves), whenever arising or
incurred, that are caused or asserted to have been caused, directly or
indirectly, by or as a result of the performance of any intentional acts,
negligent acts or omissions by Administrator, Parent or Affiliates and/or any of
their respective shareholders, employees and/or subcontractors (other than the
Group or its employees) during the term of this Agreement. Provided, however
that
38
44
in the event an indemnification obligation under the preceding sentence arises
as a result of any act or omission of a person who is an officer, shareholder or
other equity holder, director, employee, agent, attorney or consultant of the
Group (other than in connection with the activities of the Joint Planning
Board), such person shall not be entitled to indemnification in connection
therewith and any other adjustment as is equitable shall be made to
Administrator's or Parent's indemnification obligation arising thereby.
ARTICLE X
Term and Termination
Section 10.1 Term of Agreement. This Agreement shall commence on the
date hereof and shall expire on the 40th anniversary hereof unless earlier
terminated pursuant to the terms of either Section 10.3 or Section 10.4 or
automatically extended pursuant to the terms of Section 10.2.
Section 10.2 Extended Term. Unless earlier terminated as provided for
in either Section 10.3 or Section 10.4, the term of this Agreement shall be
automatically extended for additional terms of five (5) years each, unless
either party delivers to the other party, not less than twelve (12) months nor
earlier than fifteen (15) months prior to the expiration of the preceding term,
written notice of such party's intention not to extend the term of this
Agreement.
Section 10.3 Termination by the Group. The Group may, in its sole
discretion, terminate this Agreement by giving written notice thereof to
Administrator (after the giving of any required notices and the expiration of
any applicable waiting periods set forth below) upon the occurrence of any the
following events:
(a) Administrator or Parent shall admit in writing its inability to
generally pay its debts when due, apply for or consent to the appointment of a
receiver, trustee or liquidator of all or substantially all of its assets, file
a petition in bankruptcy or make an assignment for the benefit of creditors, or
upon other action taken or suffered by Administrator or Parent, voluntarily or
involuntarily, under any federal or state law for the benefit of creditors,
except for the filing of a petition in involuntary bankruptcy against
Administrator or Parent which is dismissed within ninety (90) days thereafter.
(b) Administrator or Parent shall default in the performance of any
material duty or material obligation imposed upon it by this Agreement (a
"Material Administrator Default") and such default shall continue for a period
of sixty (60) days after written notice thereof has been given to Administrator
by the Group with a copy to the financial institution contemplated in Section
12.1(a) at the address provided by Administrator, provided that the Group may
terminate this Agreement, if and only if, such termination shall have been
approved by the affirmative vote of the holders of two-thirds of the interests
of the equity holders of the Group. The Group agrees that the financial
institution contemplated in Section 12.1(a) shall have the right, but not
39
45
the obligation, to cure any Material Adminstrator Default. Notwithstanding
anything to the contrary in this Agreement, following receipt by Administrator
of the notice of a Material Administrator Default and until such Material
Administrator Default shall be cured, the Group may take such action as may be
reasonably required to cover such Material Administrator Default so as to
maintain for the Group the same level of service as before the Material
Administrator Default, without prejudicing in any way the Group's other rights
and remedies, and may offset all of its costs from the amounts which may
otherwise be due to Administrator under this Agreement.
(c) An independent law firm with nationally recognized expertise in
health care law and acceptable to the parties hereto renders an opinion to the
parties hereto that (i) a material provision of this Agreement is in violation
of applicable law or any court or regulatory agency enters an order finding a
material provision of this Agreement is in violation of applicable law and (ii)
this Agreement can not be amended pursuant to Section 11.6 hereof to cure such
violation.
Section 10.4 Termination by Administrator. Administrator may, in its
sole discretion, terminate this Agreement by giving written notice thereof to
the Group (after the giving of any required notices and the expiration of any
applicable waiting periods set forth below) upon the occurrence of any of the
following events:
(a) The Group shall default in the performance of any material duty or
material obligation imposed upon it by this Agreement (a "Material Group
Default") and (i) the Group fails to deliver to Administrator within thirty (30)
days after written notice of such Material Group Default has been given to Group
a written plan (reasonably acceptable to Administrator) detailing the methods
and procedures that the Group shall utilize to cure such Material Group Default,
(ii) the Group has delivered a plan but has failed to utilize its best efforts
to cure such Material Group Default within sixty (60) days after written notice
thereof has been given to the Group by Administrator or (iii) the Group has
delivered the plan but, after utilizing its best efforts, is unable to cure such
Material Group Default within ninety (90) days after written notice thereof has
been given to the Group by Administrator. The term "Material Group Default" for
purposes of this Section 10.4 shall include, but not be limited to, (A) the
Group's admission in writing of its inability to generally pay its debts when
due, application for or consent to the appointment of a receiver, trustee or
liquidator of all or substantially all of its assets, filing of a petition in
bankruptcy or making an assignment for the benefit of creditors, or upon other
action taken or suffered by the Group, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors, except for the filing of a
petition in involuntary bankruptcy against the Group which is dismissed within
ninety (90) days thereafter or (B) the Group or any Physician Employee (1) fails
to adhere to any compliance plan, policy, or manual as described in Section 4.6
hereof that has been approved by the Group and made applicable to all
shareholders and employees of the Group, or (2) engages in any conduct or is
formally accused of conduct for which the Group's ability or license, or a
Physician Employee's license to practice medicine reasonably would be expected
to be subject to revocation or suspension, whether or not actually revoked or
suspended, or (3) is notified in writing of any adverse action by any state or
federal department or agency that has the effect of either excluding that
40
46
individual from participating in or from receiving reimbursement under any
program funded by the federal government or by any state government,
notwithstanding any available post-sanction remedies, or (4) is otherwise
disciplined by any licensing, regulatory or professional entity or institution,
the result of any of which event does or is reasonably expected to materially
adversely affect the Practice, the result of any of which event described in
subparagraphs (1) through (4) above, in the absence of termination of a
Physician Employee or a Physician Extender Employee or other action of the Group
to monitor and cure such act or conduct by such employee, does or reasonably
would be expected to materially and adversely affect the Practice or the Group.
Notwithstanding anything to the contrary in this Agreement, following receipt by
the Group of the notice of a Material Group Default, and until such Material
Group Default shall be cured, the Administrator may take such action as may be
reasonably required to cover such Material Group Default so as to maintain for
the Administrator the same level of service at the Premises as before the
Material Group Default, without prejudicing in any way Administrator other
rights and remedies, and may offset all of its costs of cover from amounts which
may otherwise due to the Group under this Agreement.
(b) An independent law firm with nationally recognized expertise in
health care law and acceptable to the parties hereto renders an opinion to the
parties hereto that (i) a material provision of this Agreement is in violation
of applicable law or any court or regulatory agency enters an order finding a
material provision of this Agreement is in violation of applicable law and (ii)
this Agreement can not be amended pursuant to Section 11.6 hereof to cure such
violation.
(c) At any time during the five-year period following the Acquisition
Effective Date if more than thirty-three and one-third percent (33 1/3%) of the
total number of Group Physician Stockholders and Full-time Physician Employees
retained or employed by the Group at the time of the Acquisition Effective Date
(with the exception of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D., or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇)
are no longer employed or retained by the Group for reasons other than (i)
death, (ii) permanent disability, (iii) loss of a hospital contract or
privileges for reasons other than voluntary resignation by the Group or a
failure to renew or a failure to respond to a reasonable proposal to extend the
term of such contract or (iv) voluntary closing of facilities by Administrator.
For purposes of this Section 10.4(c), if Parent and/or Administrator are
notified in writing by the Group at or prior to the Acquisition Effective Date
of any Physician Employee [or Physician Extender Employee] that intends to
retire prior to expiration of such five-year period, then such Physician
Employee or Physician Extender Employee shall not be counted for purposes of
determining the above percentage.
Section 10.5 Effective Date of Termination. Any termination of this
Agreement shall be effective (the "Termination Date") as follows:
(a) Immediately upon receipt of a termination notice pursuant to
Section 10.3 or Section 10.4 (a "Termination Notice") and expiration of
applicable cure periods; or
(b) Upon the expiration of this Agreement pursuant to Sections 10.1 or
10.2.
41
47
Section 10.6 Purchase of Assets. Upon the termination of this
Agreement, subject to the provisions of subparagraphs (a) through (e) set forth
below, if Administrator is the defaulting party, the Group shall have the option
to require Administrator and/or Parent to sell to the Group, and if the Group is
the defaulting party, Administrator and/or Parent shall have the option to
require the Group to purchase from Administrator and/or Parent, the Purchase
Assets and assume the Practice Related Liabilities below:
(a) Purchase Assets. The Group shall purchase, free and clear of all
liens and encumbrances other than those arising from Practice Related
Liabilities (as defined below), from Administrator and/or Parent or their
Affiliates, as the case may be, pursuant to subparagraph (c) below, all assets,
tangible or intangible real or personal, of Administrator, Parent or their
Affiliates that relate primarily to the Practice other than Administrator's,
Parent's or their Affiliates' accounting and financial records (the "Purchase
Assets"), including, but not limited to, without duplication, (i) all equipment,
furniture, fixtures, furnishings, inventory, supplies, improvements, additions
and leasehold improvements utilized by the Practice, (ii) any real estate owned
by Administrator, Parent or Affiliates that is occupied by or used primarily for
the benefit of the Practice, (iii) all unamortized intangible assets (including,
without limitation, goodwill) set forth on the financial statements of
Administrator, Parent or their Affiliates used solely in connection with the
Practice or otherwise resulting from the Acquisition; provided, however, that no
amortization with respect to the goodwill associated with the Acquisition shall
be set forth on such financial statements, (iv) all Confidential and Proprietary
Information that relates solely to the Practice, and (v) all other assets that
would be set forth on a balance sheet of Administrator, Parent or their
Affiliates prepared as of the date of the Purchase Closing relating primarily to
the Practice.
(b) Practice Related Liabilities. The Group shall assume all of
Administrator's and their Affiliates' liabilities, debt, payables and other
obligations (including lease and other contractual obligations), or portions
thereof, which relate directly or are directly attributable to the Practice
and/or the Purchase Assets other than previously accrued Practice Expenses (the
"Practice Related Liabilities").
(c) Purchase Price. The Purchase Price shall be the lesser of (i) Fair
Market Value of the Purchase Assets subject to the assumption of the Practice
Related Liabilities or (ii) the value of the Actual Consideration (defined
below)(alternatively, the "Purchase Price"); provided, however, the Purchase
Price shall not be less than the net book value of the Purchase Assets at the
Termination Date. The Purchase Price shall be paid pursuant to Section 10.7. For
purposes of this subparagraph (c), the term "Actual Consideration" shall mean
(i) cash consideration paid to the Group pursuant to the Acquisition Agreement
and (2) an amount equal to the number of shares of Parent Common Stock (as
adjusted for stock splits, stock dividends, recapitalizations, reorganizations,
or any similar transaction whereby the Parent Common Stock is increased or
decreased or exchanged for a different number or kind of securities) issued
pursuant to the Acquisition Agreement multiplied by the fair market value of
Parent Common Stock immediately prior to the time that a Termination Notice is
provided pursuant to Section 10.7. The Purchase Price shall be appropriately
adjusted to offset and account for any monetary obligations of the Group or
Administrator owing to the other as provided herein.
42
48
(d) Exercise of Option.
(i) The Group. Upon a termination of this Agreement, the Group
shall be entitled to exercise its option to require Administrator, Parent or
their Affiliates to sell the Purchase Assets and shall assume the Practice
Related Liabilities pursuant to this Section 10.6 at any time (unless this
Agreement is terminated pursuant to Section 10.4(a) or 10.4(c)).
(ii) Administrator. Upon termination of this Agreement,
Administrator shall be entitled to exercise its option to require the Practice
to purchase the Purchase Assets and assume the Practice Related Liabilities
pursuant to this Section 10.6 (i) during the five-year period following the
Acquisition Effective Date if this Agreement is terminated pursuant to Sections
10.3(c), 10.4(b) or 10.4(c) and (ii) at any time in the event of a termination
pursuant to Section 10.4(a).
(e) Notice. Each party shall exercise its option under this Section
10.6 by giving written notice thereof in the Termination Notice, if applicable,
or prior to ninety (90) days before the Termination Date if this Agreement
expires pursuant to Sections 10.1 or 10.2.
Section 10.7 Terms of Purchase. The closing of the transactions
contemplated by Section 10.6 (the "Purchase Closing") shall occur (a) on the
Termination Date if this Agreement expires pursuant to the terms of Sections
10.1 and 10.2, or (b) on a date mutually acceptable to the parties hereto that
shall be within 180 days after receipt of a Termination Notice. The parties
shall enter into an asset purchase agreement containing representations,
warranties and conditions customary to a transaction of this size involving the
purchase and sale of similar businesses. Subject to the conditions set forth
below, at the Purchase Closing, Administrator and/or its Affiliates, as the case
may be, shall transfer and assign the Purchase Assets to the Group, and in
consideration therefor, the Group shall (a) pay to Administrator, Parent and/or
their Affiliates an amount in cash or, at the option of the Group (subject to
the conditions set forth below), Parent Common Stock (valued pursuant to Section
10.6(c) hereof), or some combination of cash and Parent Common Stock equal to
the Purchase Price and (b) assume the Practice Related Liabilities. The
structure of the transaction set forth in this Section 10.7 shall, if possible,
be structured as a tax-free transaction under applicable law. Each party shall
execute such documents or instruments as are reasonably necessary, in the
opinion of each party and its counsel, to effect the foregoing transaction. The
Group shall, and shall use its best efforts to cause each shareholder of the
Group to, execute such documents or instruments as may be necessary to cause the
Group to assume the Practice Related Liabilities and to release Administrator,
Parent and/or their Affiliates, as the case may be, from any liability or
obligation with respect thereto. In the event the Group desires to pay all or a
portion of the Purchase Price in shares of Parent Common Stock, such transaction
shall be subject to the satisfaction of each of the following conditions:
43
49
(a) The holders of such shares of Parent Common Stock shall transfer to
Administrator, Parent and/or their Affiliates good, valid and marketable title
to the shares of Parent Common Stock, free and clear of all adverse claims,
security interests, liens, claims, proxies, options, stockholders' agreements
and encumbrances (not including any applicable securities restrictions and
lock-up arrangements with the Parent or any underwriter); and
(b) The holders of such shares of Parent Common Stock shall make such
representations and warranties as to title to the stock, absences of security
interests, liens, claims, proxies, options, stockholders' agreements and other
encumbrances and other matters as reasonably requested by Administrator, Parent
and/or their Affiliates.
In the event (i) the Fair Market Value of the Purchase Assets exceeds
net book value of the Purchase Assets, (ii) the Group has utilized commercially
reasonable efforts to obtain financing for such acquisition but is unable to
obtain such financing and (iii) there is either a Material Administrator Default
pursuant to Section 10.3(a) or (c) or a Material Group Default pursuant to
Section 10.4(b) triggering a sale of the Purchase Assets, the Group shall be
entitled to obtain financing from Administrator, Parent and/or their Affiliates
but only for the difference between the Fair Market Value of the Purchase Assets
and the net book value of the Purchase Assets. The terms of such financing shall
be for a five (5) year period at an interest rate equal to the prime rate (as
published in the Wall Street Journal) plus four percent (4%) or such lesser rate
as is required to be in conformance with all applicable state and federal law.
In the event the Group is entitled to obtain financing from Administrator,
Parent and/or their Affiliates, the Group shall execute and deliver to
Administrator, Parent and/or their Affiliates all such documentation necessary
and appropriate to effectuate the financing transaction including, without
limitation, a secured promissory note, security agreement and financing
statements and such documentation shall contain such representations, warranties
and conditions customary to a secured transaction of this size.
Section 10.8 Exception to Purchase. Notwithstanding anything contained
herein to the contrary, Administrator, Parent and/or their Affiliates shall not
be obligated to sell the Purchase Assets to the Group as provided in Section
10.6(d)(i) above if the Group is not able to pay the Purchase Price pursuant to
the terms set forth above and assume the Practice Related Liabilities at the
Purchase Closing. In such event, the Group shall surrender the Purchase Assets
to Administrator, Parent and/or their Affiliates as of the Purchase Closing. If
the Practice fails to so surrender the Purchase Assets, Administrator, Parent
and/or their Affiliates may, if permitted by applicable law, without prejudice
to any other remedy which it may have hereunder or otherwise, enter the Premises
and take possession of the Purchase Assets and expel or remove the Group and any
other person who may be occupying the Premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim for damages
therefor.
Section 10.9 Effect Upon Termination. Upon the Termination Date, except
as provided below, this Agreement shall terminate and shall be of no further
force and effect and all further obligations of Administrator, Parent and/or
their Affiliates and the Group under this Agreement shall terminate without
further liability of the Administrator, Parent and/or their Affiliates to the
Group or the Group to the Administrator, Parent and/or their Affiliates
44
50
(including, without limitation, any liability for loss of anticipated profits
over the remaining term of this Agreement or from a sale of the Purchase Assets
pursuant to this Article X at less than Fair Market Value), except with respect
to the obligations set forth below. The foregoing to the contrary
notwithstanding:
(a) Administrator, Parent and/or their Affiliates shall use their best
efforts to cooperate with the Group for the appropriate transfer of management
services.
(b) Each party hereto shall provide the other party with reasonable
access to books and records owned by it to permit such requesting party to
satisfy reporting and contractual obligations which may be required of it.
(c) Any other amounts due and owing but unpaid to either Administrator,
Parent and/or their Affiliates or the Group as of the Termination Date shall be
paid promptly by the appropriate party.
(d) Any and all covenants and obligations of either party hereto which
by their terms or by reasonable implication are to be performed, in whole or in
part, after the termination of this Agreement, shall survive such termination,
including, without limitation, the obligations of the parties pursuant to the
following Sections: 6.1(b), 6.1(c), 6.1(d), 6.1(e), 6.1(g), 6.2, 6.3, 9.5,
Article VIII and the applicable provisions of Article X and XI.
ARTICLE XI
Dispute Resolution
Section 11.1 Informal Dispute Resolution. In the event of any claim,
controversy, dispute or disagreement between or among the parties hereto which
is not subject to the dispute resolution methodology set forth in Article V
hereof, the parties hereto agree that such other claims, controversies, disputes
or disagreements shall be presented to the Joint Planning Board for hearing and
resolution. In the event the Joint Planning Board is unable to resolve such
matter within a reasonable period following presentation to the Joint Planning
Board, such matter shall be presented to either (a) the Board of Directors of
Parent or (b) a committee designated by the Board of Directors of Parent which
contains at least one (1) physician member. The Board of Directors of Parent or
such committee shall meet within thirty (30) days to attempt to resolve such
claim, controversy, dispute or disagreement.
Section 11.2 Arbitration. If a claim, controversy, dispute or
disagreement arising out of or relating to this Agreement, which is not subject
to the alternative dispute resolution methodology contained in Article V hereof,
cannot be resolved by the informal means set forth in Section 11.1, the parties
hereto agree that any such claim, controversy, dispute or disagreement between
or among any of the parties shall be governed exclusively by the terms and
provisions of this Article XI; provided, however, that within ten (10) days from
the date which any claim, controversy, dispute or disagreement cannot be
resolved by the informal means
45
51
set forth in Section 11.1 and prior to commencing an arbitration procedure
pursuant to this Article XI, the parties shall meet to discuss and consider
other alternative dispute resolution procedures other than arbitration,
provided, however that if the parties hereto agree to an alternative to
arbitration they may agree to an alternative set of rules, including rules of
evidence and procedure. If at any time prior to the rendering of the decision by
the arbitrator (or pursuant to such other alternative dispute resolution
procedure) as contemplated in this Article XI to the extent a party makes a
written offer to the other party proposing a settlement of the matter(s) at
issue and such offer is rejected, then the party rejecting such offer shall be
obligated to pay the costs and expenses (excluding the amount of the award
granted under the decision) of the party that offered the settlement from the
date such offer was received by such other party if the decision is for a dollar
amount that is less than the amount of such offer to settle. Notwithstanding the
foregoing, the terms and provisions of this Article XI shall not preclude any
party hereto from seeking, or a court of competent jurisdiction from granting, a
temporary restraining order, temporary injunction or other equitable relief for
any breach of (i) any noncompetition or confidentiality covenant or (ii) any
duty, obligation, covenant, representation or warranty, the breach of which may
cause irreparable harm or damage.
Section 11.3 Arbitrators. In the event there is a claim, controversy,
dispute or disagreement among Administrator and the Group arising out of or
relating to this Agreement (including any claim based on or arising from an
alleged tort) and the parties hereto have not reached agreement regarding an
alternative to arbitration, the parties agree to select within 30 days of notice
by a party to the other of its desire to seek arbitration under this Article XI
one arbitrator mutually acceptable to Administrator and the Group to hear and
decide all such claims under this Article XI. If such matter or action involves
health-care issues, then the arbitrator shall have such qualifications as would
satisfy the requirements of the National Health Lawyers Association Alternative
Dispute Resolution Service. Each of the arbitrators proposed shall be impartial
and independent of all parties. If the parties cannot agree on the selection of
an arbitrator within said 30-day period, then any party may in writing request
the judge of the United States District Court for the Southern District of New
York (White Plains) senior in term of service to appoint the arbitrator and,
subject to this Article XI, such arbitrator shall hear all arbitration matters
arising under this Article XI.
Section 11.4 Applicable Rules.
(a) Each arbitration hearing shall be held at a place in Weschester or
Rockland Counties, New York, acceptable to the arbitrator. The arbitration shall
be conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association to the extent such rules do not conflict with the terms
hereof. The decision of the arbitrator shall be reduced to writing and shall be
binding on the parties and such decision shall contain a concise statement of
the reasons in support of such decision. Judgment upon the award(s) rendered by
the arbitrator may be entered and execution had in any court of competent
jurisdiction or application may be made to such court for a judicial acceptance
of the award and an order of enforcement. The charges and expenses of the
arbitrator shall be shared equally by the parties to the hearing.
46
52
(b) The arbitration shall commence within ten (10) days after the
arbitrator is selected in accordance with the provisions of this Article XI. In
fulfilling his duties with respect to determining the amount of any loss, the
arbitrator may consider such matters as, in the opinion of the arbitrator, are
necessary or helpful to make a proper valuation. The arbitrator may consult with
and engage disinterested third parties to advise the arbitrator. The arbitrator
shall not add any interest factor reflecting the time value of money to the
amount of any loss and shall not award any punitive damages.
(c) If the arbitrator selected hereunder should die, resign or be
unable to perform his or her duties hereunder, the parties, or such senior judge
(or such judge's successor) in the event the parties cannot agree, shall select
a replacement arbitrator. The procedure set forth in this Article XI for
selecting the arbitrator shall be followed from time to time as necessary.
(d) As to any determination of the amount of any loss, or as to the
resolution of any other claim, controversy, dispute or disagreement, that under
the terms hereof is made subject to arbitration, no lawsuit based on such
claimed loss or such resolution shall be instituted by Administrator, or the
Group, other than to compel arbitration proceedings or enforce the award of the
arbitrator, except as otherwise provided in Section 11.2.
(e) All privileges under New York and federal law, including
attorney-client and work-product privileges, shall be preserved and protected to
the same extent that such privileges would be protected in a federal court
proceeding applying New York law.
ARTICLE XII
General Provisions
Section 12.1 Assignment.
(a) Administrator shall have the right to assign its rights hereunder
to Parent or any direct or indirect wholly-owned subsidiary of Administrator or
Parent (that remains a wholly-owned subsidiary of Administrator or Parent) or to
a financial institution as collateral security for the indebtedness of Parent,
Administrator or their Affiliates without the consent of the Group. No
assignment under subsection (a) shall relieve Administrator or Parent of their
obligations hereunder without the consent of the Group.
(b) Administrator, Parent and their Affiliates shall provide notice to
the Group of Administrator's intent (i) to assign this Agreement (other than as
permitted in Section 12.1(a) herein), (ii) sell all or substantially all of the
assets of Administrator or (iii) effectuate a consolidation, merger or sale of a
majority of the capital stock of Administrator as soon as practicable following
a decision by the Parent's and Administrator's respective boards of directors to
seek such assignment or sale. The assignment of this Agreement (other than as
permitted in Section 12.1(a)), the sale of all or substantially all of the
assets of Administrator by Parent or a consolidation, merger or sale of a
majority of the capital stock of Administrator
47
53
shall not be permitted unless Administrator shall give written notice to the
Group stating the party who made the offer and specifying the purchase price
offered (the "Notice"). The Group shall have the option to repurchase the
Purchase Assets on the same terms and conditions set forth in the Notice. In the
event the Group fails to provide written notice to Administrator of its intent
to exercise its option to repurchase the Purchase Assets pursuant to this
Section 12.1 within the earlier of (i) thirty (30) days or (ii) one-half of the
time during which Administrator, Parent or their Affiliates must respond to an
offer following the Group's receipt of the Notice, the option contained in this
Section 12.1 shall be deemed null and void and of no further force and effect,
and Administrator shall be free to assign the Agreement, sell all or
substantially all of the assets of Administrator or sell or transfer all of the
capital stock Administrator without the consent of the Group. No assignment
under this subsection (b) shall relieve Administrator or Parent of their
obligations hereunder without the consent of the Group.
Section 12.2 Amendments. This Agreement shall not be modified or
amended except by a written document executed by all parties to this Agreement,
and such written modification(s) or amendment(s) shall be attached hereto.
Section 12.3 Waiver of Provisions. Any waiver of any terms and
conditions hereof must be in writing, and signed by the parties hereto. The
waiver of any of the terms and conditions of this Agreement shall not be
construed as a waiver of any other terms and conditions hereof.
Section 12.4 Additional Documents. Each of the parties hereto agrees to
execute any document or documents that may be reasonably requested from time to
time by the other party to implement or complete such party's obligations
pursuant to this Agreement.
Section 12.5 Attorneys' Fees. If legal action is commenced by either
party to enforce or defend its rights under this Agreement, the prevailing party
in such action shall be entitled to recover all reasonable attorneys' fees,
costs and expenses including, but not limited to, attorney's fees, costs and
expenses for trial, appellate proceedings and negotiations, in addition to any
other relief granted.
Section 12.6 Contract Modifications 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 independent legal counsel in such a manner as to indicate
that this Agreement or any provision hereof may be in violation of such laws or
regulations, the Group and Administrator shall amend this Agreement as necessary
to preserve the underlying economic and financial arrangements between the Group
and Administrator and without substantial economic detriment to either party. If
this Agreement cannot be so amended, the terms of Section 10.3(c) and 10.4(b)
shall apply. To the extent any act or service required of Administrator in this
Agreement should be construed or deemed, by any governmental authority, agency
or court to constitute the practice of medicine, the performance of said act or
service by Administrator shall be deemed waived and forever unenforceable and
the provisions of this Section 12.6 shall be applicable. Neither party shall
claim or assert illegality as a defense to the enforcement of this Agreement or
any provision
48
54
hereof; instead, any such purported illegality shall be resolved pursuant to the
terms of this Section 12.6 and Section 12.9.
Section 12.7 Parties In Interest; No Third Party Beneficiaries. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Except
as provided in Section 6.1(g), neither this Agreement nor any other agreement
contemplated hereby shall be deemed to confer upon any person not a party hereto
or thereto any rights or remedies hereunder or thereunder.
Section 12.8 Entire Agreement. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding the
subject matter hereof, and supersede all prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
Section 12.9 Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.10 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULE GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF NEW YORK.
Section 12.11 No Waiver; Remedies Cumulative. No party hereto shall by
any act (except by written instrument pursuant to Section 12.3 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto,. any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
49
55
Section 12.12 Communications. The Group and Administrator, Parent and
their Affiliates agree that good communication between the parties is essential
to the successful performance of this Agreement, and each pledges to communicate
fully and clearly with the other on matters relating to the successful operation
of the Practice.
Section 12.13 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 12.14 Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.15 Reference to Agreement. Use of the words "herein",
"hereof', "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16 Notice. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request, or
demand must be in writing to be effective and shall be deemed to be delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom notice
is sent or (ii) if delivered by mail (whether actually received or not), at the
close of business on the third business day next following the day when placed
in the mail, postage prepaid, certified or registered, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all other
parties in accordance herewith):
If to Administrator or Parent: American Physician Partners, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to the Group: The Greater Rockland Radiological Group, P.C.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President
50
56
with a copy to: Drake, Sommers, Loeb, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Section 12.17 Inflation Adjustment. The dollar amounts indicated in
Section 3.2(f) shall be adjusted for inflation during the term of this Agreement
based on the Consumer Price Index published for [insert applicable index]
commencing on the Acquisition Effective Date.
Section 12.18 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 12.19 Defined Terms. Terms used in the Exhibits attached hereto
with their initial letter capitalized and not otherwise defined therein shall
have the meanings assigned to such terms in this Agreement.
Section 12.20 Parent Obligations. All of the duties and obligations of
Administrator to the Group under this Agreement shall be deemed to be the joint
and several obligations of Administrator and Parent.
51
57
IN WITNESS WHEREOF, the parties hereto have executed this Service
Agreement as of the date first written above.
Group:
THE GREATER ROCKLAND RADIOLOGICAL GROUP, P.C.
By:__________________________________________
Title: President
Administrator:
ROCKLAND RADIOLOGICAL GROUP, P.C.
By:__________________________________________
Title:_______________________________________
Parent:
AMERICAN PHYSICIAN PARTNERS, INC.
By:__________________________________________
Title:_______________________________________
52
58
EXHIBIT 1.1
ALLOCATION OF PRACTICE EXPENSES
59
EXHIBIT 3.2(a)
EXCEPTIONS
60
EXHIBIT 3.3(a)
PREMISES
61
EXHIBIT 7.1
SERVICE FEE
62
EXHIBIT 7.4
SECURITY AGREEMENT
1