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Exhibit No. 10-3
INTERIM MANAGEMENT AGREEMENT
This Interim Management Agreement, made and entered into this 3rd day of
December, 1998, (the "Closing Date"), by and between Paradigm Health Services of
Ohio, Inc. ("Manager" or "Buyer"), and MHM Extended Care Services, Inc. ("ECS").
WHEREAS, ECS provides mental health services to certain nursing home
patients in the States of Tennessee and Georgia under contracts with nursing
homes and otherwise; and
WHEREAS, on the date of this Agreement, ECS and Manager have closed the
transaction contemplated by the Purchase Agreement between the parties dated as
of ______________,in which transaction Manager has purchased certain of the
assets and business of the Operations as defined therein, such purchase to be
effective as of the Effective Date;
WHEREAS, during the period of time between the Closing Date and the
Effective Date the parties wish to provide for the management of the Operations
on the terms and conditions herein;
NOW, THEREFORE, in consideration of the mutual promises set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Engagement. ECS hereby engages Manager to manage, administer and
operate the Operations, commencing on the Closing Date, and Manager hereby
accepts such engagement. As of the Closing Date and until the Effective Date,
ECS hereby authorizes Manager to supervise, manage and direct the day-to-day
operations of the Operations and to perform its duties and exercise its rights
under this Agreement. It is the intention of the parties that such management
and operation of the Operations by Manager shall be consistent with all
applicable standards, rules and regulations and of those federal, state and
local agencies having jurisdiction over or in connection with the Operations.
Manager acknowledges that the Operations do not include, and neither the
Purchase Agreement nor this Management Agreement extend to the operations
conducted by ECS in the State of Georgia pursuant to its PASARR contract with
the Georgia Department of Medical Assistance.
2. Relationship. It is expressly agreed by the parties hereto that
Manager is at all times hereunder acting and performing as an independent
contractor and that no act, commission or omission of either party hereto shall
be construed to make or render the other party its principal, agent, joint
venturer or associate, except to the extent specified herein. Wherever Manager
is required to seek the approval of ECS to
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perform any of the duties hereunder such approval shall not be unreasonably
withheld.
3. Responsibilities of Manager. For the term of this Agreement and
except as otherwise provided herein, as manager of the Operations, Manager shall
have the responsibility to conduct, supervise and manage all aspects of the
operation of the Operations, and shall have responsibility and commensurate
authority for, but not limited to, the following:
a. Charges. The establishment, maintenance, revision and
administration of the overall charge structure of the Operations.
b. Personnel Administration. At manager's expense, the hiring or
engaging as employees, independent contractors or otherwise, and supervision of
all personnel needed for the Operations, including the clinical, administrative
and financial staff, the administration of wage scales, rates of compensation,
employee benefits, conditions of employment, in-service training, attendance a
seminars or conferences, staffing schedules and job and position descriptions
with respect to all employees of or contractors to, the Operations.
c. Collection of Accounts. Subject to Section 6, the issuance of
bills for services furnished by the Operations and the collection of accounts
and monies owed during the management period.
d. Payment of Accounts and Indebtedness. The payment of payroll,
trade accounts, taxes, rents and all other expenses of operation and obligations
of the Operations arising after Closing, together with the obligation to provide
funding for such payments excluding ECS's one half share of the rent and
utilities for the Nashville premises.
e. Account and Financial Records. The establishment and
administration of accounting procedures and controls, and systems for the
development, preparation and safekeeping of records and books of accounting
relating to the business and financial affairs of the Operations.
f. Depositories for Funds. Maintenance of accounts in such banks,
savings and loan associations, and other financial institutions as Manager may
from time to time select, (including certificates of deposits) with such
balances therein (which may be interest-bearing or non-interest-bearing) as
Manager shall from time to time deem appropriate, taking into account the cash
needs of the Operations, and the disbursement from such accounts of such amounts
of the Operations' funds as Manager shall from time to time determine to be
appropriate in the discharge of the responsibilities of Manager under this
Agreement.
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g. Purchases. The purchase of drugs, supplies, and all other
materials and services which Manager shall deem to be necessary for the
operations, subject to all provisions hereof.
h. Administrative and Fiscal Services. Provision of all
administrative and fiscal services to the Operations, including collections,
accounting, auditing (by a certified public accountant selected by Manager),
bookkeeping, budgeting, patient ▇▇▇▇▇▇▇▇ and record keeping, accounts receivable
and accounts payable processing, electronic data processing and such other
services, including marketing, recruiting and quality control, as may from time
to time be required.
i. Patient Records. Supervision of maintenance of patient records and
record retrieval and provision of monitoring services to assist in quality
assurance reviews. After closing, ECS will provide manager with access to all
such records.
j. Contracts for Services. Manager shall be empowered to negotiate,
enter into, and administer on behalf of the Operations all contracts for
services which Manager may determine are necessary for the Operations, such
contracts to be upon such terms and for such rates of compensation as Manager
shall determine. ECS hereby appoints Manager as its agent and attorney in fact
to act for ECS with respect to that certain Employment Agreement dated as of
March 1, 1997, as amended, between ECS, Psychiatric Speciality Group, P.C. and
▇▇▇▇▇▇▇ ▇▇▇▇, M.D., with all authority and power ECS would have acting on its
own behalf. This appointment and power includes, but is not limited to,
renegotiation of the Employment Agreement, exercise of the rights of termination
provided therein, and enforcement of any and all of the provisions of the
Employment Agreement including those as to non-competition and confidentiality.
Manager shall be responsible for all obligations payable to ▇▇. ▇▇▇▇ after the
Closing Date. This appointment and power shall remain in effect until the
Effective Date, at which time it is acknowledged Manager will assume the
Employment Contract with ▇▇. ▇▇▇▇. Schedule 3(j) includes said contract and all
amendments thereto, together with all the agreements between ECS and ▇▇. ▇▇▇▇ or
Psychiatric Speciality Group, P.C.
4. Covenants by ECS.
a. Liabilities and Obligations. ECS shall not, during the term of
this Agreement, without approval of Manager, incur any new liabilities or
obligations in relation to the Operations, including without limitation,
employment arrangements, debts, mortgages, liens, credit arrangements, loans or
leases.
b. Prompt Consideration. In all matters requiring ECS's decision or
consent under the terms of this Agreement, ECS shall promptly consider such
matters and expeditiously advise Manager of its decision so as not to hinder,
damage or delay Manager in its management or direction of the Operations or its
accomplishment of its
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duties and responsibilities under the terms of this Agreement.
5. Covenants by Manager.
a. Compliance with Agreements and Contracts. Manager will not take
any action that would cause Operations to default on any of its contracts and
agreements.
b. Patient Confidentiality. With respect to patients who receive
treatment as part of the Operations, Manager shall assure compliance with all
statutes, regulations, and rules concerning patient confidentiality.
c. Manager covenants and agrees to use its best reasonable efforts to
obtain at the earliest practical date the Provider Numbers necessary to permit
Buyer to ▇▇▇▇ Medicare and Medicaid programs for services rendered, and ECS and
Manager covenant and agree to use their best reasonable efforts to obtain all
necessary consents of third parties to the assignment of the contracts to
Purchaser or its designee. The Company covenants and agrees not to assign such
contracts to any party other than Manager or a designee of Manager.
6. Collection of Accounts Receivable. Manager shall have the right to
collect and retain all accounts receivable arising with respect to the
Operations on and after the Closing Date, to the extent such accounts receivable
are assignable, and ECS hereby assigns to Manager all of its rights, title, and
interest in and to such accounts receivable. Promptly upon receipt of payment
for any accounts receivable arising with respect to the Operations on and after
the Closing Date that are not assignable, ECS shall forward such payment to
Manager. If Manager receives any payments of accounts receivable arising from
services rendered before the Closing Date, Manager will not negotiate payment of
the check, but shall instead promptly give ECS possession of the check. If such
check includes payment of an account or accounts receivable arising both from
the Operations before as well as after the Closing Date, the party receiving
such payment shall promptly forward to the other party such portion of the
payment to which that party is entitled.
7. Amounts Paid. No amount paid or to be paid hereunder is intended to
be, nor shall it be construed to be, an inducement or payment for referral of
patients by ECS to Manager or any affiliate of Manager or by Manager or any
affiliate of Manager to ECS. In addition, no amount paid or advanced hereunder
includes any discount, rebate, kickback or other reduction in charge. The
parties shall comply in all respects with all applicable requirements of the
Medicare and Medicaid Fraud and Abuse "safe-harbor" regulations (the "Safe
Harbor Regulations") as they may exist from time to time, including, but not
limited to, the requirements of the Safe Harbor Regulations regarding management
agreements, and any amendment thereto, and shall comply with all
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applicable directives, orders or other lawful pronouncements of any lawful
authority related to the Safe Harbor Regulations.
8. Limitation of Liability; Indemnifications.
a. ECS shall indemnify Manager and any and all subsidiaries, parents
and affiliates of Manager, and the officers, directors, stockholders and
employees of Manager and its subsidiaries, parents and affiliates, and shall
hold each of them harmless from and against, any and all liability, claims,
losses, costs, actions, judgment or damages, and any expenses relating thereto
(including reasonable attorneys' fees and expenses), arising (a) from the
ownership and/or operation of the Operations in respect of any and all periods
prior to the Closing under the Purchase Agreement and/or (b) as a result of the
acts or omissions (negligent or otherwise) of ECS's agents, officers or
employees prior to the Closing under the Purchase Agreement (including, without
limitation, any claims by, or liability to, third parties, any governmental
agency, or patients of the Operations. Provided, however, that this paragraph,
and the indemnification provided therein, shall not apply to the Assumed
Liabilities as defined in the Purchase Agreement and Manager shall remain fully
responsible for the Assumed Liabilities pursuant to the Purchase Agreement.
b. Manager shall indemnify ECS and any and all subsidiaries, parents
and affiliates, and the officers, directors, stockholders and employees of ECS
and its subsidiaries, parents and affiliates, and shall hold each of them
harmless from and against, any and all liability, claims, losses, costs,
actions, judgments or damages, and any expenses relating thereto (including
reasonable attorneys' fees and expenses), arising from (a) the Operations during
the term of this Agreement (including, without limitation, all payroll, trade
accounts, short and long-term indebtedness, taxes, rents, and all other expenses
of operations and obligations of the Operations to the extent that such expenses
or obligations accrue on or after the Closing Date) and/or (b) Manager's
performance under this Agreement and/or (c) as a result of the acts or omissions
(negligent or otherwise) of Manager's agents, officers or employees (including,
without limitation, any claims by, or liability to, third parties, Manager and
its subsidiaries and affiliates, any governmental agency, or patients of the
Operations.
c. Each party acknowledges that the other has made no representations
or warranties, express or implied, and assumes no financial or other
responsibilities or liabilities in connection with this Agreement except as
specifically provided herein and in the Purchase Agreement.
9. Insurance. Manager shall maintain at all times during the term of
this Agreement, at Manager's own expense, professional liability insurance
covering Manager and its employees, officers and directors with limits of one
million ($1,000,000) dollars per occurrence and three million ($3,000,000)
dollars in the aggregate.
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Manager shall maintain at all times during the term of this Agreement, at
Manager's own expense, general comprehensive liability insurance in such
amounts, with such coverages and with such companies as may be commercially
reasonable. All of the insurance required to be maintained under this Section
shall contain an endorsement naming ECS as additional insured thereunder and
shall not be cancelable without ten (10) days prior written notice to Manager
and ECS.
10. Term and Termination.
a. Term. The term of this Agreement shall begin on the date of
Closing under the Purchase Agreement and shall terminate on the Effective Date.
The Effective Date shall be the earlier of: (i) Manager obtaining its own
Provider Numbers for use in the Operations; or (ii) termination by Manager
pursuant to Section 10(b); or (iii) or six months from the Closing Date under
the Purchase Agreement, whichever first occurs.
b. Events of Default and Termination. Either party shall have the
right to terminate this Agreement prior to the Effective date: (i) on the
occurrence of a material breach hereof by the other party not cured within five
(5) business days of the giving of notice as to such breach; or (ii) if any
change in applicable law renders this Agreement, in whole or in material part,
illegal or unenforceable. Manager may terminate this Agreement at any time, with
or without cause, on three business days notice to ECS. Such termination shall
not effect transfer of the Acquired Assets under the Purchase Agreement and
Closing.
11. Notice. Any notice or other communication by either party to
the other shall be in writing and shall be deemed to have been given, if either
delivered personally or mailed, postage prepaid, registered or certified mail
addressed as follows:
To ECS: MHM Extended Care Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To Manager: Paradigm Health Services
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address, and to the attention of such other person or officer
as either party may designate in writing.
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12. Modification and Changes. This Agreement cannot be changed or
modified except by another agreement in writing executed by both parties.
13. Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provisions of this Agreement.
14. Confidentiality. The parties agree that the terms and conditions of
this Agreement shall remain confidential. No party shall distribute this
Agreement, or any part thereof, to an third parties unless required by law or by
contractual requirements.
15. Governing Law. This Agreement shall be deemed to have been made and
shall be construed and interpreted in accordance with the laws of the State of
Tennessee.
In witness whereof, the parties have executed this Agreement as of the
Effective Date.
MHM EXTENDED CARE SERVICES, INC.
By: [SIGNATURE]
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Its: Executive Vice President
PARADIGM HEALTH SERVICES of Ohio, INC.
By: [SIGNATURE]
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Its: President
The undersigned corporate partner of Paradigm Health Services, Inc. hereby
grantee's performance by Manager of its obligations hereunder, and agrees to
indemnify and hold ECS harmless as to any defaults by Manager or its obligations
hereunder.
PARADIGM HEALTH SERVICES, INC.
By: [SIGNATURE]
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Its: President
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