Exhibit 10.35
AMENDED AND RESTATED
PHYSICIAN SERVICES ORGANIZATION AGREEMENT
This Amended and Restated Physician Services Organization
Agreement ("AGREEMENT") is made and entered into as of the 1st day of May, 1996,
by and between CUMBERLAND VALLEY MEDICAL GROUP, LLC, a Maryland limited
liability company (hereinafter referred to as the "LLC") and DOCTORS HEALTH
SYSTEM, INC., a Maryland corporation (hereinafter referred to as "DOCTORS
HEALTH").
WHEREAS, the LLC is owned exclusively by and employs only
physicians licensed to practice medicine in Maryland and is organized and
dedicated solely to engage in the Practice of Medicine. Doctors Health is a
medical services organization organized and dedicated to hold title to various
assets related to the Practice of Medicine and to perform various management,
administrative and support services for physician groups and to develop and
administer an integrated healthcare network with an emphasis on managed care;
and
WHEREAS, Doctors Health wishes to contract with the LLC to
provide to the LLC certain assets, including leased office space, fixtures and
equipment, and certain management and support services, including financial,
managerial, administrative and employment services, in support of and with
respect to the LLC's Practice of Medicine, and the LLC wishes to secure such
assets and such services from Doctors Health and to appoint Doctors Health as
its exclusive agent and attorney-in-fact of and for the LLC, to enable Doctors
Health to act on behalf of the LLC in the provision of certain of such services,
all upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto, intending to be legally bound,
hereby covenant and agree as follows:
1. RECITALS; DEFINITIONS; ETC.
a.RECITALS.The above recitals are incorporated herein.
b.DEFINITION APPENDIX.When used in this Agreement with its initial
letter capitalized, a word shall have the meaning set forth in the Definition
Appendix attached as APPENDIX A hereto.
c.CERTAIN OTHER DEFINITIONS.When used in this Agreement with its
initial letter capitalized, a word that is not defined in APPENDIX A shall
have the meaning assigned to it elsewhere in this Agreement.
d. APPENDICES, EXHIBITS AND SCHEDULES. Attached hereto and forming an
integral part of this Agreement are various Appendices, Exhibits and Schedules,
all of which are incorporated into this Agreement as fully as if the contents
thereof were set out in full herein at each point of reference thereto.
e.REFERENCES. All references herein to any agreement, instrument or
other document shall include any and all amendments, modifications,
extensions, renewals, substitutions, supplements, Exhibits and Schedules to,
of and for such agreement, contract, instrument or document.
2. OFFICE SPACE AND EQUIPMENT.
a. PROVISION OF OFFICE SPACE AND EQUIPMENT. Doctors Health agrees
during the term of this Agreement to supply and provide, or to engage others to
supply, the commercially reasonable needs of the LLC for office space and
equipment, including all related materials and supplies, to enable the LLC to
engage in the Practice of Medicine, including, without limitation, the provision
of laboratory, testing and other ancillary services. Doctors Health will assist
the LLC in developing its Budgets and Business Plans and in assessing and
determining its needs for office space and equipment. The LLC agrees to keep
Doctors Health and the Quality Committee currently advised concerning its needs
for office space and equipment and shall promptly advise Doctors Health and the
Quality Committee of any changes in such needs.
b. SUBLEASE OF OFFICE SPACE. Doctors Health, as sublessor, and the LLC,
as sublessee, shall, simultaneously with the execution of this Agreement (or as
soon after Closing as is reasonably practicable), enter into a Sublease in form
substantially similar to EXHIBIT 2B attached hereto as a part hereof (each a
"SUBLEASE") for and in respect of each location where the LLC intends to
establish an office from which to engage in the Practice of Medicine as of the
Closing Date. Specifically, Doctors Health and the LLC will enter into a
Sublease for those portions of each of the buildings shown on SCHEDULE 2B
attached hereto as a part hereof (collectively, the "UNITS") consisting of the
medical office space designated in such Schedule (collectively, the "OFFICE
SPACE").
c. PROVISION OF EQUIPMENT. Doctors Health shall initially provide to
the LLC for use in its Practice of Medicine all fixtures, furnishings and
equipment existing in the Office Space at Closing, as shown on SCHEDULE 2C,
attached hereto as a part hereof (collectively, the "EQUIPMENT"). (The Office
Space and
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the Equipment, as repaired, replaced or maintained, shall be sometimes
referred to collectively as the "DEMISED PREMISES".)
d. USE OF DEMISED PREMISES. The LLC acknowledges and agrees that the
Demised Premises meet and fulfill its commercially reasonable needs for office
space and equipment as of the Closing Date. The LLC shall use the Demised
Premises solely for purposes related to the Practice of Medicine. The LLC shall
use and occupy the Office Space in a safe and reasonable manner, in accordance
with applicable governmental laws, regulations and/or orders. The LLC shall use
the Equipment in a safe and reasonable manner and in accordance with reasonable
operating standards.
e. REPAIR, REPLACEMENT AND RETURN OF EQUIPMENT. During the term of this
Agreement, Doctors Health agrees to install, repair, maintain and replace, or
cause to be installed, repaired, maintained and/or replaced, the Equipment,
including securing such improved or enhanced equipment for the LLC as Doctors
Health deems commercially reasonable. The LLC shall promptly notify Doctors
Health if any item of Equipment requires repair or replacement. The LLC shall,
upon the reasonable request of Doctors Health, return all Equipment to Doctors
Health in the same condition as of the Effective Date of this Agreement (or such
later date as of which any item of Equipment was provided to the LLC), ordinary
wear and tear, and obsolescence, excepted.
f. MAINTENANCE AND REPAIR OF OFFICE SPACE. Doctors Health shall
provide, or cause to be provided, maintenance, repair and replacement of the
systems and related equipment to the extent necessary for the proper operation
of the Office Space and for the Practice of Medicine, including, but not limited
to, mechanical, heat, ventilation, air conditioning, lighting, electrical and
plumbing systems. Doctors Health shall also provide, or cause to be provided,
appropriate janitorial services consisting of daily trash removal and light
dusting and vacuuming of the Office Space, provided that the LLC shall leave the
Office Space in a reasonably tidy and clean condition at the end of each day,
and such other more substantial janitorial services the LLC may reasonably
request. Doctors Health shall also provide for the removal of hazardous medical
waste generated by the LLC at the Office Space, provided that the LLC shall
comply with applicable regulatory waste handling, disposal and packaging
standards.
g. REASONABLE ACCESS. The LLC agrees to allow Doctors Health reasonable
access to the Demised Premises, where such entry will not unreasonably interfere
with the LLC's use or occupancy, or with the provision of medical care or the
rights of any patient, in order to provide any of the services or fulfill any of
the duties of Doctors Health set forth in this Agreement, and/or to take steps
Doctors Health deems necessary for the safety, improvement or preservation of
the Demised Premises.
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h. CHANGES, ADDITIONS OR IMPROVEMENTS TO OFFICE SPACE. The LLC may from
time to time request that Doctors Health make reasonable changes, additions or
improvements to the Office Space in order to permit the LLC to engage more
efficiently in the Practice of medicine or to enhance its profitability and,
subject to the limitations upon its leasehold or fee interest, Doctors Health
will endeavor to comply with such of the LLC's requests as it deems commercially
reasonable, provided that such changes shall comply with the applicable local,
state or Federal laws or regulations. The LLC shall not cause or permit
materialmen's, mechanics or other liens to be filed against the Office Space or
the Units or the interest of Doctors Health or any mortgagee in contravention of
any lease or mortgage, by whatever name, on the Office Space or the Units.
i. TAXES. Doctors Health shall pay before delinquency all real estate
and property taxes imposed upon the Office Space or the Units for which it is
responsible. The LLC shall pay before delinquency (and hereby authorizes Doctors
Health to pay on its behalf) all taxes, assessments, and other charges imposed
upon the LLC's operations or business conducted upon the Demised Premises,
and/or upon any property of the LLC located in the Demised Premises.
j. INSURANCE. The LLC shall maintain (and hereby authorizes Doctors
Health to acquire and maintain on its behalf) fire insurance with extended
coverage on the Demised Premises, business interruption insurance, general
liability insurance and professional liability insurance on any incidents
occurring in connection with the LLC's occupancy and use of the Demised
Premises, all of which policies shall be in amounts deemed reasonable by
Doctors Health and shall name Doctors Health as loss payee and as an
additional insured.
k.INDEMNIFICATION. The LLC shall indemnify and hold Doctors Health, its
employees, agents, officers, and partners or stockholders, as the case may be,
harmless from and against any and all demands, claims, judgments, losses and
damages, and any related costs or expenses (including reasonable attorneys'
fees) arising from any injury or damage to person or property caused by
the negligence or the misconduct of the LLC, its agents, servants or
employees, or of any other person entering upon or using the Demised Premises
under the express or implied invitation of the LLC, or resulting from the
violation of laws or regulations, or violation of the terms of this Agreement
by any of the foregoing.
L. ASSIGNMENT/PLEDGE/ENCUMBRANCE. The LLC may not, without Doctors
Health's prior written consent, assign, sell, pledge, mortgage, encumber or in
any manner transfer any interest in nor sublet the Demised Premises or any part
or item thereof, nor permit occupancy or use of the Demised Premises or
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any item thereof by any other Person other than in the ordinary course of the
LLC's business.
m. DAMAGE/DESTRUCTION/CASUALTY OF DEMISED PREMISES. In the event all or
any portion of the Demised Premises is damaged or destroyed by fire or other
casualty, Doctors Health shall use commercially reasonable efforts to restore
the damaged, or replace the destroyed, Demised Premises as soon as reasonably
possible and to make provision for temporary or interim use of such assets or
facilities in lieu of damaged or destroyed Demised Premises as may be reasonably
required to permit the LLC to continue its Practice of Medicine with minimal
disruption. Doctors Health shall have one hundred eighty (180) days to make
replacements, repairs and restorations, using insurance proceeds and such other
monies as Doctors Health may elect to contribute. In the event the Demised
Premises cannot be repaired, restored or replaced within such time period, or in
the event Doctors Health determines in its sole judgment that such repair,
restoration or replacement is not cost effective, Doctors Health shall have the
right to elect to terminate the LLC's lease or use of such portion of the
Demised Premises and to provide, pursuant to the terms hereof, such other
facilities, assets, equipment or office space as is reasonably appropriate to
permit the LLC and its physicians to resume its practice of medicine.
n.SUBORDINATION. The LLC agrees that this Agreement shall be and is
subordinate to the lien of any and all conditional sale agreements,
financing arrangements, mortgages, deeds of trust, and ground leases that may
now or hereafter be placed upon the Demised Premises, and to any and all
advances to be made thereunder, and to the interests thereon and all
renewals, consolidations, modifications, replacements and extensions thereof.
o. SUBLEASE RENEWALS. Doctors Health will provide to the LLC reasonable
notice of the expiration of the Sublease pursuant to which any Office Space is
occupied by the LLC or the termination of the LLC's right to occupy any Office
Space under any other circumstances and will confer with the LLC concerning the
renegotiation, or renewal of such lease or other occupancy right and the removal
of the LLC to other premises.
3. OPERATIONAL DUTIES OF DOCTORS HEALTH.
a. GENERAL MANAGERIAL DUTIES. The LLC hereby appoints Doctors
Health as its sole and exclusive manager, agent and administrator for, and
Doctors Health, for the benefit and on behalf of the LLC, agrees to use its
commercially reasonable efforts to perform, each of the following management
and support functions:
i.provide all general management services of and for the LLC,
including the establishment of operating and administrative policies and
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procedures, general oversight of the operation of the LLC, strategic planning,
including specifically with respect to financing, market development,
advertising and marketing (including one or more public relations programs that
seeks to enhance each physician's medical practice and extend the LLC's ability
to provide services by creating public awareness of the LLC and its Affiliates),
operation and overall management and control, financial reporting, insurance,
tax matters (other than for individual physicians) and personnel management;
ii. negotiate and implement such acquisitions, by purchase,
lease, or other contractual arrangements, of equipment, goods or services
for the LLC as Doctors Health shall deem commercially reasonable;
iii. provide a competent administrative staff for supervision
and performance of the business and administrative functions of the LLC. Each of
the administrative staff shall be employees of and responsible to Doctors
Health, but all salaries, benefits and other expenses related to the employment
of the administrative staff by Doctors Health shall be deemed Business Costs of
the LLC and paid by Doctors Health as such;
iv. assist the LLC in identifying and consummating the
acquisition of the medical practices of additional primary care physicians
and/or physician groups to become Members and employees of the LLC (provided,
however, that Doctors Health shall have no obligation to provide funding for any
such acquisition except to the extent that the Manger, in its sole discretion,
determines to do so), and recruit, employ, train, supervise and provide to the
LLC such services of non-physician professional staff personnel as may
reasonably be required to permit the LLC to engage in the Practice of Medicine,
including specifically but without limitation allied health professionals.
Except in the case of non-physician professionals who may be required to be LLC
employees for billing purposes ("Incident To Employees"), Doctors Health shall
have the authority to hire, discipline and terminate non-physician staff. In
hiring, Doctors Health shall comply in all material respects with requirements
of Federal, state and local law with respect to both the business and
professional obligations of the LLC and employment, generally. Each of the
non-physician professional staff except Incident To Employees shall be employees
of and responsible to Doctors Health, but all salaries, benefits and other
expenses related to the employment of the non-physician professional staff by
Doctors Health shall be deemed Business Costs of the LLC and paid by Doctors
Health as such;
v. furnish and install operating procedures, information and
other systems and controls as Doctors Health deems reasonable for the purpose
of providing effective management techniques and functions for the benefit of
the LLC;
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vi. prepare annual budgets (including operating and capital
budgets), business plans, financial forecasts and operating plans for the LLC;
vii. prepare and distribute internally prepared monthly
statements of revenue and expense, and such other reports as Doctors Health
may deem appropriate, to the Management Committee;
viii. consistent with the reasonable policies established by
the Management Committee and the Quality Committee and the general parameters
established by any LLC budget and business plan then in effect, seek to manage
the non-professional aspects of the LLC's business efficiently and economically;
ix. keep the Demised Premises and all other assets utilized by
the LLC, including improvements, furniture, furnishings, fixtures and other
equipment therein and appurtenant thereto, in reasonably good order and repair,
subject to ordinary wear and tear, and fully insured;
x. arrange for all commercially reasonable replacements,
improvements, supplies and changes in and to the Demised Premises and all
other assets utilized by the LLC, and in the furniture, furnishings, fixtures
and other Equipment;
xi. provide for and keep accessible to the LLC proper
financial and business books of account and other records, all of which
shall be open to inspection and examination and copying at the expense of the
LLC at any reasonable time during normal business hours;
xii. pay in a timely manner through disbursements of funds
from the LLC Accounts all of the direct and indirect costs and expenses
reasonably incurred (whether directly or indirectly) in connection with the
operation and administration of the LLC's Practice of Medicine (including in
such Practice of Medicine all laboratory, testing and other ancillary services),
whether incurred directly by the LLC or by Doctors Health on behalf of the LLC
("Business Costs"), including without limitation, the following charges (or,
where applicable and consistent with Section 4.c hereof, a reasonable allocative
share of such charges): (a) all personnel costs attributable to the LLC and its
Practice of Medicine, including (1) all salaries and benefits (but not bonus
payments, it being the express intent of the parties that the LLC will fund any
bonus payments to employee physicians from Managed Care Incentive Payments) for
physicians employed by the LLC, (2) salaries, wages, bonuses and all benefits of
professional and administrative staff employed by Doctors Health to provide
services directly to the LLC or its employee physicians in their practice of
medicine, but excluding employees whose services are provided directly to
Doctors Health (and only indirectly to the LLC) to enable Doctors Health to
provide managerial and other administrative services generally to the LLC and to
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any Additional Primary Care Entities or other healthcare providers with which
Doctors Health contracts, (3) salaries, professional fees or other compensation,
including bonuses and all benefits, of all physicians and non-physician
professionals and all other persons employed, contracted or otherwise retained
by Doctors Health to provide professional health care services or other services
or goods to the LLC or to the LLC's patients or customers, and (4) all employee
or personnel benefits, employee insurance costs, payroll taxes and all premiums
and charges for workmen's compensation; (b) maintenance, replacement and repair
charges and costs; (c) expenses for supplies for the Office Space and Equipment;
(d) all office and other administrative expenses, including office and medical
supplies, of the LLC; (e) dues and license fees and other professional expenses
for LLC employees and Manager employees providing services to the LLC; (f) water
and sewer, gas, electricity, telephone and other utility charges; (g) premiums
for insurance or bonds reasonably related to the LLC and amounts deducted from
insurance proceeds pursuant to policy terms; (h) all taxes, assessments, fees,
charges and similar expenses relating to the LLC or the operation thereof; (i)
charges for other equipment, goods, services (including professional and
consulting services) and utilities supplied to or for the benefit of the LLC;
(j) all acquisition, lease and financing expenses and payments, including all
leasehold expenses relating to office space, for the benefit of or relating to
the LLC; (k) costs of billing and collection of the LLC's fees and charges,
including contractors; and (l) such other expenses and charges as would normally
be considered as capital, operating or other expenses of the LLC under
recognized and customary accounting principles and practices, including expenses
incurred by Doctors Health on behalf of the LLC.
Doctors Health shall be obligated to, and shall, pay the LLC's Business
Costs only out of and from the cash that Doctors Health ACTUALLY collects in
respect of and from those LLC's receivables with respect to which it is
appointed as the LLC's agent as provided in Section 3.b hereof, and with respect
to those receivables assigned, transferred and conveyed to Doctors Health
pursuant to such provision, and with respect to any other amounts which Doctors
Health collects or receives on behalf of the LLC (collectively, the "Collected
LLC Cash"). If, in Doctors Health's sole discretion, the Collected LLC Cash is
or will be insufficient to permit Doctors Health to pay all of the LLC's
Business Costs in the ordinary course of business as such Business Costs accrue,
Doctors Health shall give preference in payment to, and shall pay first, those
of the LLC's Business Costs NOT attributable to the salaries or benefits of
physicians employed by the LLC who are also Members of the LLC ("Member
Physicians") ("Non-Member Business Costs") and only after all such Non-Member
Business Costs are satisfied (or reasonable provision therefor in the sole
discretion of Doctors Health has been made) shall Doctors Health pay to the LLC
the funds to enable the Member Physicians to be paid any salary or benefits to
which they may be entitled pursuant to their Professional Service Employment
Agreements with the LLC. To the extent Doctors Health does not have sufficient
Collected
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LLC Cash to pay to or for the benefit of the Member Physicians the
aggregate of all salary and benefits due to them (each such deficiency a "Member
Physician Salary Cost Deficiency") with respect to any month, (a) DHS shall pay
to the Member Physicians such amounts of the salary and benefits due to them in
any such month determined by multiplying the amount of Collected LLC Cash, if
any, Doctors Health deems available for such payments by a fraction, the
numerator of which is the amount of salary and benefits due in such month to
such Member Physician and the denominator of which is the aggregate of all
salary and benefits due in such month to all Member Physicians, and (b) Doctors
Health shall not be entitled to, and shall not receive, any Management Fee with
respect to such month. In addition, the amount of any Member Physician Salary
Cost Deficiency for such month shall, when added to all or any portion of any
Member Physician Salary Cost Deficiencies from prior months with respect to
which payment has not been made by Doctors Health, be deemed for purposes of the
calculation of the Management Fee pursuant to SECTION 4 hereof to be a "Business
Cost" with respect to each succeeding month through and including the month in
which such Member Physician Salary Deficiency has been paid in full, and Doctors
Health shall not be entitled to a Management Fee in any month during which there
are any Member Physician Salary Cost Deficiencies outstanding. In each month in
which there are no Member Physician Salary Cost Deficiencies outstanding, and in
each month where there exists sufficient LLC Collected Cash to pay all the LLC's
Business Costs and all outstanding Member Physician Salary Cost Deficiencies,
Doctors Health may pay to itself, from the LLC Accounts and after payment of all
of the LLC's Business Costs and outstanding Member Physician Salary Cost
Deficiencies, the Compensation to which it is otherwise entitled according to
the terms of SECTION 4 hereof.
Notwithstanding the foregoing, the LLC's Business Costs shall
NOT include, and Doctors Health shall have no
obligation either to pay from the LLC Collected Cash or otherwise, any costs,
expenses or other charges incurred by the LLC or presented to Doctors Health as
a result of: (a) any action taken by the LLC with respect to the employment
terms and conditions, including termination of employment, of any of its
employee physicians to which Doctors Health has not consented in writing; (b)
any breach or deficiency in performance by the LLC or any of its employee
physicians of or under any contract to which the LLC is a party or which was
negotiated by Doctors Health on behalf of the LLC; (c) violation of or failure
to comply with any statute, law, regulation, ordinance, interpretation, decision
or other similar requirement of any federal, state, or local political
jurisdiction, or of any agency, commission, board or other similar entity of any
of the foregoing jurisdictions or any professional organization with
jurisdiction or authority over the ability of the LLC or any of its employee
physicians to engage in the practice of medicine; (d) any willful or negligent
act or omission of the LLC or any of its employee physicians that results or may
result in an award of damages against the LLC or such employee physician whether
in tort, contract or otherwise; or (e) any act or omission on the
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part of the LLC or any of its employee physicians constituting fraud, willful
misrepresentation or other similar conduct.
xiii. pay in a timely manner any Managed Care Incentive
Payment to which the LLC is entitled pursuant to the provisions of SECTION 5
hereof with respect to any MCIP Year to permit the LLC to reward and provide
appropriate incentives to its physician employees, all pursuant to the terms of
SECTION 5 hereof; and
xiv. perform all other acts reasonably necessary or desirable
in the operation and maintenance of the LLC in accordance with the terms and
conditions of this Agreement, except that Doctors Health shall not provide
medical or related professional services or engage in the Practice of Medicine.
b. BILLING AND COLLECTION. The LLC hereby assigns, transfers and
conveys to Doctors Health all of its currently existing and future accounts
receivable with respect to all medical services previously provided or in the
future to be provided by the LLC (but not including any Medicare or Medicaid
payments currently owing, or which in the future become owing, to the LLC)
(collectively, the "Non-Medicare Receivables"). Doctors Health shall be entitled
to take any such action with respect to the Non-Medicare Receivables as it deems
appropriate in the exercise of its sole discretion. The LLC shall execute such
other documents and agreements as may be necessary to more fully and effectively
transfer the Non-Medicare Receivables to Doctors Health.
Doctors Health shall serve as billing and collection agent for
the LLC with respect to any Medicare and/or Medicaid payments currently owing,
or which in the future become owing, to the LLC (the "Medicare Receivables") and
shall ▇▇▇▇ for and endeavor to collect all such Medicare Receivables owed to the
LLC (reserving the right to send, with simultaneous notice to the LLC, selected
past-due accounts to a collection agency) and issue receipts therefor, if
required. The LLC hereby appoints Doctors Health as its agent and
attorney-in-fact for the collection of the Medicare Receivables. The LLC further
appoints Doctors Health as its attorney in fact and agent, to collect such
Medicare Receivables that Doctors Health deems uncollectible. Doctors Health
shall deposit all the Medicare Receivables in the bank accounts described in
SECTION 4.C. hereof.
Doctors Health will use its commercially reasonable efforts to:
i. provide to the LLC, upon reasonable prior notice, such
reasonably detailed reports with respect to the LLC's accounts receivable,
billing and collection status, including charges, receipts, and insurance
classifications of patients as the LLC may from time to time reasonably request;
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ii. should this Agreement be terminated, upon request
therefor, provide the LLC with a complete listing and print out of all active
patient accounts, all Medicare and third party insurer active billing records,
all demographic and charge data, and a final report detailing all data and
information pertinent to the LLC's accounts, in accordance with the normal
reporting capability of the billing system or contractor, if any, utilized for
the LLC's billing by Doctors Health; and
iii. use reasonable care in processing and storing the LLC's
data and records.
c. BANK ACCOUNTS.
i. Doctors Health has opened the bank accounts described in
this SECTION 3.C.I for the purpose of depositing, disbursing and otherwise
administering the Collected LLC Cash. Doctors Health shall establish policies
and procedures reasonably satisfactory for managing and administering such
accounts, including designation and authorization of persons authorized to sign
checks. Doctors Health may, upon reasonable notice to the LLC, open in its name
such other bank accounts, including without limitation interest bearing accounts
and reserve accounts, as it may deem appropriate. Doctors Health may also
transfer Collected LLC Cash between any or all such accounts as it may establish
hereunder. Until disbursed by Doctors Health in payment of the LLC's Business
Costs or Doctors Health's Management Fee from such accounts, the Collected LLC
cash (other than such portion attributable to the Non-Medicare Receivables)
shall be and remain the property of the LLC. Doctors Health shall deposit,
disburse and administer the Collected LLC Cash as follows:
A. Doctors Health, as the agent of the LLC, will from time to time
maintain accounts with one or more financially secure banking
institutions, into which it shall deposit promptly upon receipt all
Collected LLC Cash which it receives as the agent of the LLC and on the
LLC's behalf from Medicare and Medicaid and in respect of goods and
services provided pursuant to the Medicare and Medicaid programs
(collectively, the "LLC Medicare Account").
B. Doctors Health will from time to time maintain accounts with one or
more financially secure banking institutions, into which it shall deposit
promptly upon receipt all of the Collected LLC Cash it receives from any
sources other than those described in SECTION 3.C.I.A, above
(collectively, the "LLC Cash Account") (the LLC Medicare Account, the LLC
Cash Account and any other bank accounts established by Doctors Health
hereunder are hereinafter collectively referred to as the "LLC Accounts").
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ii. Doctors Health shall utilize the cash deposited in the LLC
Accounts for the purposes of paying the LLC Business Costs and Doctors Health's
Management Fee according to the following terms and conditions. Consistent with
the requirements of SECTION 3.A.XII hereof, Doctors Health shall give first
priority in the disbursement of funds from the LLC Accounts to the payment of
the Non-Member Business Costs. Doctors Health shall give second priority in the
disbursement of funds from the LLC Accounts to the payment of the salary and
benefits of the LLC's Member Physicians and to any Member Physician Salary Cost
Deficiencies. After all of the LLC's Business Costs (which, where appropriate,
shall include any Member Physician Salary Cost Deficiencies) have been paid,
Doctors Health may disburse and pay over to itself from the LLC Accounts Doctors
Health's Compensation calculated according to the provisions of SECTION 4.A
hereof. Subject to the requirements of applicable law, Manager may transfer
funds from the LLC Medicare Account to the LLC Cash Account in its discretion.
d. CONSULTANTS. Doctors Health may engage on behalf of the LLC
consultants to provide specialized services outside the normal scope of
management services, including, but not limited to, legal representation,
public accounting and labor relations. All reasonable charges for outside
consultants will be LLC Business Costs.
e. PERSONNEL. Doctors Health shall maintain supervisory control over
its personnel involved in providing to the LLC the assets, facilities and
services contemplated hereunder. Doctors Health will consult with the Quality
Committee if the LLC informs Doctors Health of any dissatisfaction with the
performance or staffing level of Doctors Health personnel without, however,
surrendering any of Doctors Health's discretion over the employment, discipline
and other conditions of employment related to Doctors Health employees.
f. CONSENT. In any instance in which Doctors Health is required under
the terms of this Agreement to obtain the LLC's or the Management Committee's
consent or approval in connection with any proposed action, expenditure or
decision of any type, if Doctors Health's recommendations are not approved and
consent or approval is not received, Doctors Health shall have no responsibility
to the LLC with respect to the subject matter of the proposed action,
expenditure, or decision other than to act as directed by the Management
Committee or to maintain the status quo if no direction is received. Doctors
Health shall not be considered to be in violation of this Agreement or any part
thereof as a result of, or in connection with, any matter in which the LLC or
the Management Committee did not consent to or approve any action proposed by
Doctors Health; unless and to the extent Doctors Health shall fail to act as
directed by the LLC or the Management Committee or to maintain the status quo.
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g. CONTRACTING. The LLC hereby authorizes Doctors Health to negotiate
and enter into, administer and terminate all contractual arrangements between
the LLC and Persons to whom the LLC provides goods or services or from whom the
LLC receives goods or services or with whom the LLC contracts to provide medical
professional or other services to the LLC's patients or customers. The LLC
hereby constitutes Doctors Health as the LLC's agent and attorney-in-fact for
the purpose of executing the authority granted Doctors Health pursuant to this
PARAGRAPH 3.G. The contracting authority afforded Doctors Health hereunder
includes, without limitation, the authority to contract with hospitals, other
physicians (including specialists), hospices, nursing homes, pharmacies,
laboratories, providers of transportation, home health care providers, nurses,
and other non-physician health care providers, medical equipment providers and
other providers of medical professional services and other health care services,
patients, customers, insurance companies, health maintenance organizations and
other managed care entities, employers, administrators and other third-party
payors of patient care services or goods provided by the LLC.
h. PATIENT RECORDS. Doctors Health shall provide to the LLC all patient
records of the LLC's physician employees and shall maintain and retain records
of all professional services provided by the LLC to its patients directly or
through contracts with other providers of medical professional services or other
health care services. Doctors Health shall maintain a complete file within the
LLC's offices of all such medical records and supporting documents.
i. MARKETING. Doctors Health shall provide to the LLC, directly or
through consultants, practice development assistance, including but not
limited to advertising, promotional and media materials and one or more
public relations programs designed to enhance each physician's medical
practice and extend the LLC's ability to provide services through increased
public awareness of the LLC and its Affiliates.
j. UTILIZATION MANAGEMENT; QUALITY ASSESSMENT AND IMPROVEMENT. Doctors
Health shall provide ongoing reviews of the LLC's utilization management, and
shall conduct quality assessment and improvement activities for the LLC,
including monitoring of patient satisfaction.
k. REGULATORY COMPLIANCE. Doctors Health shall advise the LLC regarding
compliance with all applicable state and Federal laws and regulations, including
Medicare regulations and policies concerning primary care physician services.
Notwithstanding the above, it shall be the LLC's sole responsibility to comply
with all such applicable state and Federal laws and regulations, including
Medicare regulations and policies concerning primary care physician services.
13
l. COMMERCIAL REASONABLENESS. Notwithstanding any other provision of
this Agreement, all obligations of Doctors Health hereunder, including, without
limitation, the obligations of Doctors Health to provide assets, facilities, and
services to the LLC in connection with the LLC's Practice of Medicine, shall be
limited, and shall be interpreted according to, a standard of commercial
reasonableness appropriate for application to primary care Medical Practices in
the Baltimore, Maryland SMA as determined by Doctors Health. Doctors Health, in
the performance of its obligations hereunder, including without limitation the
provision of assets, facilities and services to the LLC, shall in no event be
required to do anything or to make available to the LLC any asset, facility or
service, that Doctors Health in good faith believes is not commercially
reasonable and, subject to review under the provisions of SECTIONS 7.B and 7.C
hereof, Doctors Health shall have no duty to do, or omit to do, anything that
is, in the discretion of Doctors Health, commercially unreasonable.
4. COMPENSATION OF DOCTORS HEALTH; OBLIGATIONS OF THE LLC.
a. COMPENSATION. In consideration of the assets, facilities and
services provided by Doctors Health to the LLC pursuant to this Agreement, the
LLC hereby authorizes Doctors Health to pay to itself on behalf of the LLC from
the LLC Accounts, and Doctors Health shall be entitled to receive from the LLC,
Compensation (the "Compensation") calculated and paid monthly according to the
terms of this SECTION 4.A. The amount of Doctors Health's Compensation shall be
the amount determined by (i) subtracting the total amount of (A) all LLC
Business Costs (which, with respect to any month in which there are Member
Physician Salary Cost Deficiencies outstanding, shall include the aggregate of
all such deficiency amounts) that Doctors Health pays or is obligated to pay
through disbursements from the LLC Accounts or provides for by transfers to
reasonable reserves established by Doctors Health, and (B) all bank fees,
charges and other deductions from the LLC Accounts made by the depository bank,
during a calendar month from (ii) the amount of (A) all Collected LLC Cash
deposited by Doctors Health in the LLC Accounts, and (B) all interest earned on
or other amounts credited to the LLC Accounts by the depository bank, during
such calendar month. Doctors Health's Compensation shall be calculated and paid
on or before the tenth day of the month following the month for which payment is
being made. Doctors Health's Compensation shall be paid only out of Collected
LLC Cash remaining in the LLC Accounts after all LLC Business Costs (which, with
respect to any month in which there are Member Physician Salary Cost
Deficiencies outstanding, shall include the aggregate of all such deficiency
amounts) have been paid or provided for. Adjustments in the amount of the
Compensation for any month, if any, may be made after review of settled bank
statements by the independent certified public accountants retained by Doctors
Health to review the financial records of LLC (which may be Doctors
14
Health's accountants). Doctors Health shall permit the LLC's accountants to
review Doctors Health's calculation of its Compensation at least quarterly and
any disagreement or dispute between the LLC and Doctors Health relating to the
amount of the Compensation resulting from such review shall be subject to the
dispute resolution procedures of SECTIONS 7.B and 7.C hereof. Doctors Health
shall, if necessary, increase or decrease, as the case may be, the Compensation
next payable after its receipt of the results of such review (including dispute
resolution, if any) to reflect such results.
b. GENERAL COVENANTS OF THE LLC. The LLC acknowledges that Doctors
Health has undertaken to provide significant assets, facilities and services to
the LLC pursuant to this Agreement in reliance upon the LLC's undertaking
diligently to engage, and to use its best efforts to cause its physician
employees diligently to engage, in the Practice of Medicine. The LLC therefore
covenants and agrees that it will diligently engage in the Practice of Medicine
in the Baltimore SMA and will use its best efforts to cause its physician
employees diligently to engage in, and to devote their full-time professional
efforts to, the Practice of Medicine in the Baltimore SMA. The LLC further
covenants and agrees that it will use its best efforts to meet or exceed the
financial, professional service and other standards established for the LLC in
the business plans and budgets prepared for the LLC by Doctors Health and
approved by the Management Committee and, in furtherance thereof, will engage,
and use its best efforts to cause its physician employees to engage, in the
Practice of Medicine in the most efficient and economical manner possible,
consistent with all applicable professional and ethical standards and a standard
of commercial reasonableness appropriate for application to Medical Practices in
the Baltimore SMA, including, specifically, those matters set forth in SECTION
4.D below.
c. AUTHORIZATION OF PAYMENTS. The LLC acknowledges and agrees that its
intent in entering into this Agreement with Doctors Health is to secure from
Doctors Health all of the assets, facilities and non-physician services required
by the LLC to permit it to engage in the Practice of Medicine and, in
furtherance thereof, to enable and permit Doctors Health to pay, from the
Collected LLC Cash in the LLC Accounts, all of the reasonable costs and expenses
of providing such assets, facilities, and services, however and by whomever
incurred, by making disbursements of such Collected LLC Cash directly to
providers of assets, facilities or services or to the LLC or to Doctors Health
itself in reimbursement of costs or expenses incurred by either of them. The LLC
thus covenants and agrees that Doctors Health shall be entitled, and is hereby
authorized, to disburse from the Collected LLC Cash in the LLC Accounts such
funds as are required to pay all of the reasonable costs and expenses of
providing assets, facilities and services directly to the LLC pursuant to this
Agreement, it being the express understanding of the LLC that Doctors Health may
provide assets, facilities and services directly to Additional Primary Care
Entities and other medical service providers, and that such allocations of
15
costs incurred for the direct benefit of both the LLC and one or more Additional
Primary Care Entities or other medical service providers will be necessary.
Doctors Health shall, in its discretion, establish the basis for allocating each
category of direct cost and Doctors Health agrees to exercise such discretion in
a manner that results in the establishment of a basis for allocation of direct
costs that is reasonable and fair to the LLC and to each Additional Primary Care
Entity and any other provider entity to which such costs are allocated.
Disputes, if any, regarding such allocations shall be resolved first through the
Quality Committee and thereafter through the other procedures established in
SECTIONS 7.B and 7.C hereof. Doctors Health may, in its discretion, involve or
join as parties to such procedures any other medical service provider involved
directly or indirectly in a dispute between Doctors Health and the LLC or join
the LLC as a party in any dispute between Doctors Health and any other service
provider that relates to the LLC.
d. COVENANTS OF THE LLC AND EACH PHYSICIAN. Without limiting the
foregoing provisions of SECTION 4.A above, or the duties of any physician set
forth in any employment agreement with the LLC, the LLC agrees to provide, and
to use its best efforts to ensure that each of its physician employees and
contractors provides, at least the following services to DHS and to DHS/LLC
patients and otherwise complies with the following provisions:
(i) MEDICAL SERVICES. With respect to any managed care contract,
provide health care services, as an independent contractor to Doctors Health,
including Medicare services, and charity care in accordance with the policies,
procedures, guidelines, and requirements of Doctors Health and the Quality
Committee as are now in place or may hereafter be established. Emergency and
immediate health care services shall be provided by the LLC without regard to
ability to pay.
(ii) ON-CALL COVERAGE. Provide such night and weekend on-call coverage
as from time to time is determined by Doctors Health and the Quality Committee
to be necessary to make services as readily accessible to the community as
possible.
(iii) SUPERVISION. Monitor and review the clinical performance of all
staff, allied health professionals, and the LLC's physicians, in cooperation
with Doctors Health and the Quality Committee.
(iv) QUALITY ASSURANCE AND PEER REVIEW. Establish, with the cooperation
and involvement of Doctors Health and the Quality Committee, policies,
procedures and committees for quality assurance and peer review of all
physicians providing services to Doctors Health, cooperate fully with the
policies, procedures and activities of such committees, and conduct peer review
disciplinary activities in accordance with Maryland law.
16
(v) RECOMMENDATIONS. Conduct periodic reviews of medical and related
staffing to consider the needs of the LLC and/or Doctors Health for additional
primary care physicians, staff, allied health professionals and other
non-primary care physicians, and report the results of such reviews to the
management of Doctors Health and the Quality Committee; and provide such other
review and reports to Doctors Health and the Quality Committee as reasonably
requested by Doctors Health's management.
(vi) SURVEYS. Assist the management of Doctors Health with all
preparation for any inspections and on-site surveys of Doctors Health conducted
by governmental agencies and accrediting organizations.
(vii) MANAGED CARE CONTRACTS. Assist and cooperate with Doctors Health
in negotiating and developing managed care contracts, participate in any
preferred provider network established by or through Doctors Health or its
Affiliates, and provide services to all Managed Care Members covered by a
managed care plan that is entered into by Doctors Health, comply with the terms
of managed care contracts that are negotiated by Doctors Health for the benefit
of the LLC, and comply with all applicable Federal and state laws and managed
care plan terms affecting Doctors Health and the LLC.
(viii) RECORDS. Maintain all necessary and appropriate medical records
reflecting health care service provided to patients seen by LLC physicians in a
manner that is consistent with applicable law and that ensures that Doctors
Health has satisfied all applicable requirements for Payor contracts and
participation in public and private payment programs.
(ix) ADMINISTRATIVE DUTIES AND MARKETING. Cooperate with Doctors
Health's policies, procedures and activities pertinent to marketing, patient
relations, scheduling, billing, collections and other administrative matters,
and cooperate with Doctors Health`s efforts to ▇▇▇▇ and collect fees for
services rendered to patients.
(x) LITIGATION. Cooperate in all litigation matters affecting the LLC
and/or Doctors Health.
(xi) EDUCATION. Cooperate with Doctors Health and the Quality Committee
in the development and provision of all educational programs offered by Doctors
Health, and devote reasonable time and effort to such programs.
(xii) UTILIZATION REVIEW. Cooperate fully with the utilization review
policies, procedures and activities of Doctors Health, the Quality Committee and
third party payors. The LLC shall assist Doctors Health and the Quality
Committee in conducting utilization reviews all of the LLC's physicians.
17
(xiii) LICENSE. Ensure that the LLC's physicians at all times are
licensed to practice medicine in the State of Maryland or other jurisdictions
approved by Doctors Health;
(xiv) POLICIES. Ensure that the LLC's physicians comply with all
applicable laws, rules and regulations of any and all governmental authorities
and the policies and procedures of Doctors Health and third party payors;
(xv) HOSPITAL PRIVILEGES. Ensure that each of the LLC's physicians
possesses and maintains staff privileges on the medical staff of those hospitals
and institutions set forth on Exhibit 4.3(a)(ii) of each such physician's
Professional Services Employment Agreement, and such other hospitals and
institutions as Doctors Health and the LLC shall agree upon.
(xvi) PATIENT CARE. Ensure that the LLC's physicians providing
professional services to the LLC and Doctors Health shall at all times provide
only those medical services that he or she is qualified to deliver, and shall
provide such services in a manner that is consistent with the patient's best
interests.
(xvii) CREDENTIALLING. Cooperate with Doctors Health and the Quality
Committee in establishing, criteria, policies and procedures for purposes of
credentialling all of the LLC's physicians. Such credentialling criteria,
policies and procedures shall be established in accordance with all community
medical practice standards, all applicable laws, and the minimum participation
criteria developed by Doctors Health and the Quality Committee. All of the LLC's
physicians shall be required to comply with such credentialling criteria. All
decisions with respect to credentialling shall be reached as follows:
(A) LLC MEMBER PHYSICIANS. Doctors Health and the LLC shall
consult with each other regarding the selection of, and negotiations with, LLC
Member Physicians, and
(B) OTHER PHYSICIANS. Doctors Health and the LLC shall consult
with each other regarding the selection of and negotiations with non-Member
Physicians, but the LLC may, subject to minimum participation criteria approved
by Doctors Health, make decisions regarding the selection of non-Member
Physicians.
(xviii) PHYSICIAN AGREEMENTS. The LLC shall enter into and maintain
Professional Services Employment Agreements or other employment agreements
reasonably acceptable to Doctors Health with all the physicians employed by the
LLC. The LLC shall consult with Doctors Health and the Quality Committee
regarding the final terms of all such employment agreements
18
prior to the execution thereof and any amendments, or terminations, of such
agreements. It is understood and agreed that Doctors Health is not and shall not
become a party to any Professional Services Employment Agreements or other
employment agreements between the LLC and its physicians.
(xix) PHYSICIAN OBLIGATIONS. The LLC shall be responsible for ensuring
that each of its physicians comply with the following requirements, all of which
have been incorporated by reference into the Professional Services Employment
Agreements with each physician. The LLC shall confer with Doctors Health
concerning the performance of its employee physicians of and under their
employment contracts generally and prior to taking any action to terminate any
such employment agreement. The LLC, at Doctors Health's request agrees to take
any reasonable action requested to enforce compliance, including, but not
limited to terminating such Physician's employment with the LLC and/or seeking
sanctions against such Physician:
(A) Each LLC physician shall abide by the terms and conditions
of the applicable provisions of this Agreement.
(B) Each LLC physician shall be bound to all components of all
agreements executed between Doctors Health and third party payors. Furthermore,
each physician shall abide by all operating rules and regulations of any managed
care plan for elements pertaining, but not limited to the maintenance of medical
records, the confidentiality of records, the filing of claims, and the
non-discrimination in treatment of its members.
(C) Each LLC physician shall be free to exercise absolute
discretion in the conduct of any and all activities which may reasonably be
considered as constituting the Practice of Medicine. The professional
responsibility to patients for the delivery of health care services under this
Agreement shall at all times remain with each LLC physician. Doctors Health
shall not interfere with the professional judgment of any of the LLC's
physicians in the provision of professional health care services.
(D) Each LLC physician shall be required to participate in and
cooperate with the utilization review programs of third party payors and of
Doctors Health. Any determination under a utilization review program that
services provided or proposed to be provided are not medically necessary or not
otherwise appropriate shall in no case be construed as a substitute for the
professional judgment of each LLC physician; rather, such findings are intended
to be and shall be limited to the determination of reimbursement for services
only, it being understood that all decisions regarding the nature and extent of
services to be provided, as well as the choice of provider, are and will be made
exclusively by each LLC physician and his or her patient.
19
(E) Each LLC physician agrees that his or her practice
patterns will be profiled and will be reviewed by his or her peers, and that
participation in any of Doctors Health`s preferred provider networks will be
dependent upon maintaining satisfactory profiles which are within Doctors
Health's and the Quality Committee's standards of acceptable medical practice.
(F) Each LLC physician shall refer patients to other
physicians only when it is deemed to be medically necessary and in the best
interest of such patients. When referrals are required, each LLC physician shall
use his or her best efforts to refer to other physicians who are participating
in any of the Manager's preferred provider networks then in effect, and to
utilize hospitals and other health care providers that are participating in any
such preferred provider network; provided, however, that no LLC physician shall
be required to refer a particular patient to any specific physician or to admit
such patient requiring hospitalization to any specific hospital if such LLC
Physician, in the good faith exercise of his or her professional judgment,
believes that the medical needs of such patient would be better served
elsewhere.
(G) Each LLC physician shall accept Managed Care Members as
new patients and treat current patients should they become Managed Care Members,
provided that no LLC physician shall be required to accept additional patients
if he is already working at full capacity, as determined by such physician and
the LLC jointly in the reasonable exercise of their discretion.
(H) Each LLC physician shall abide by decisions resulting from
utilization review programs of Doctors Health, the Quality Committee and/or
third party payors, subject to any applicable rights of reconsideration or
review. Each LLC physician shall pursue all appropriate opportunities for
reconsideration and appeal of denials of payment by third party payors.
(I) Each LLC physician shall provide to any designated
utilization review programs(s) any medical or other information necessary to
conduct preadmission certification and continued stay review for all covered
services to be rendered to Managed Care Members.
(J) Each LLC physician shall allow each third party payor or
its designee to review and duplicate any data or other records maintained
regarding services provided under this Agreement as may be necessary to conduct
the utilization review program. Such review and duplication shall be allowed
upon reasonable notice during regular business hours and shall be subject to all
applicable laws, regulations and Doctors Health's policies concerning the
confidentiality of such data or records.
(K) Each LLC physician shall use his or her best efforts to
obtain precertification for those services designated by any utilization review
20
program(s) as requiring precertification, and shall use his or her best efforts
to notify the designated utilization review program of emergency or urgent
inpatient admissions within forty-eight (48) hours after admission.
(L) Each LLC physician shall cooperate as reasonably required
to verify that Managed Care Members are eligible for covered services.
(M) Each LLC physician shall prepare and maintain appropriate
records concerning health care services provided under this Agreement. All such
records shall be maintained in accordance with prudent record keeping
procedures, and as otherwise required by law.
(N) Notwithstanding anything provided herein to the contrary,
ownership of and access to all patient records shall be controlled by the
applicable state and federal law. All medical, financial, and personal
information about patients reviewed and collected in connection with this
Agreement shall be held in confidence and shall not be released, disclosed, or
published by the parties, their agents or employees without the written consent
of the patient, unless otherwise permitted by law. Each LLC physician shall be
responsible for supplying any consent necessary to the release of medical
records of patients for purposes of claims management, including specific
consent to the release of any records pertaining to any patient's alcohol or
drug addiction or treatment, or mental health commitment or treatment.
(xx) FULL TIME. Except in cases of emergency, or as otherwise expressly
waived by Doctors Health, the LLC shall ensure that each LLC physician devotes
his or her full-time practice of medicine to the LLC's group practice, and shall
not provide professional services to persons other than Doctors Health and the
patients treated by LLC Physicians. For purposes of this Agreement, "full-time"
shall mean at a minimum the target number of Encounters per year per physician
agreed to by the LLC and each physician but shall also include any time devoted
to the charity care and education activities of Doctors Health and the Quality
Committee, and all time directly or indirectly pertaining to medical treatment
and care of patients, such as working on patient medical charts, making patient
rounds, and assisting with Doctors Health's or the LLC's administrative duties.
All patients treated by an LLC physician shall be deemed to be Doctors Health's
patients and Doctors Health shall be the owner of the medical records for all of
Doctors Health's patients.
(xxi) NON-CONTRACT SPECIALISTS. When referrals to a specialist or other
physician is required, each LLC physician shall use his or her best efforts to
refer to physicians with whom Doctors Health has a provider contract in effect,
and, where applicable, to other physicians who are participating in any of the
Manager's preferred provider networks then in effect. In all other cases, each
21
LLC physician may select non-contract specialists to whom patients are referred,
based upon the such physician's best professional judgment of patient needs.
22
5. MANAGED CARE INCENTIVE PAYMENT.
a. CREATION OF MANAGED CARE INCENTIVE PAYMENT. The parties acknowledge
that both the Manager's Business Plan and the business plan developed by the
Manager for the LLC contemplate that the LLC and its physician employees will
shift the emphasis of their Practice of Medicine from a traditional
fee-for-service model to a managed care model, and that the Manager must
successfully manage the migration of the LLC's practice to a capitated model if
it is to meet its business goals and objectives. To provide an incentive for the
LLC and the physician employees of the LLC to engage in a managed care
environment in the most efficient and profitable manner possible, beginning with
the calendar year 1995, the Manager shall pay to the LLC, an amount, if any,
calculated as described herein (the "Managed Care Incentive Payment" or "MCIP")
with respect to each calendar year, or portion thereof, that occurs during the
term of this Agreement (each an "MCIP Year"). The Manager and the LLC shall
consult with each other as to the amount of the MCIP for each MCIP Year, subject
to the limitations established in Section 5.b hereof, and the Manager will
negotiate in good faith with the LLC in order to assure that all physician
employees are adequately compensated in light of the market in existence from
time to time.
b. CALCULATION OF MANAGED CARE INCENTIVE PAYMENT. The Manager and the
LLC shall by December 15th of each year agree upon an MCIP payment to be made
out of the Manager's income before provision for income taxes or bonus (as
reflected on the Manager's financial statements) for the following year. There
shall be no MCIP payment in any year in which the Manager does not have income
before provision for income taxes or bonus reflected on its financial
statements. The Manager and the LLC shall agree upon an MCIP payment for each
year that is fair to the Manager and the LLC. If the Manager and the LLC are
unable to agree upon an MCIP, then the MCIP, if any, with respect to such MCIP
Year shall be equal to the lesser of either (i) twenty-five percent (25%) of the
amount of the excess, if any, of (A) those operating revenues of the Manager for
the MCIP Year that are properly attributable to the provision of medical care to
patients of the LLC, over (B) expenses of the Manager and the LLC for the MCIP
Year that are properly attributable or otherwise allocable to the LLC for the
MCIP year, or (ii) twenty-five percent (25%) of the Aggregate Base Salaries of
all primary care physicians employed by the LLC during such MCIP year. The
Manager shall have no obligation to negotiate for an MCIP in excess of either of
such amounts. The Manager shall have the right in its discretion to make
appropriate year to year and period adjustments to accurately reflect income and
expenses, and to allocate expenses among the LLC and any other Additional
Primary Care Entities, independent practice association or other person or
entity for which it serves as manager, and to set off against the amount of any
MCIP payment all or any portion of the amount of its costs and expenses
resulting from a breach by any
23
Physician or any Physician's PC of any representation, warranty or covenant made
by such Physician or PC in the Practice Participation Agreement."
c. PAYMENT OF MANAGED CARE INCENTIVE PAYMENT. The Manager shall pay the
MCIP, if any, with respect to each MCIP Year to the LLC on or before February 15
of the calendar year following each such MCIP Year, beginning on February 15,
1996. If, pursuant to SECTION 4.A hereof, an adjustment is made in a succeeding
calendar year with respect to any Management Fee paid to the Manager in a prior
MCIP Year, no adjustment shall be made in the MCIP for the MCIP Year in which
the Management Fee which was subsequently adjusted was actually paid and such
adjustments shall be given effect in the MCIP for the MCIP Year in which they
were actually made.
6. TERM AND TERMINATION.
a. TERM. This agreement shall commence as of the date first above
written, and shall continue in force until December 31, 2025, unless sooner
modified or terminated as provided herein. This Agreement shall automatically be
renewed thereafter for additional terms (each an "Additional Term") for ten
years each in the sole discretion of Doctors Health so long as there is no event
of default with respect to Doctors Health performance of its duties hereunder as
set forth in SECTION 6.B of this Agreement.
b. TERMINATION. This Agreement may be terminated by the non-defaulting
party upon the occurrence of any of the following events of default:
i. The commencement of any voluntary or involuntary case under
the Federal bankruptcy laws or any state insolvency or similar laws seeking the
liquidation or reorganization either party hereto, or the appointment of a
receiver, liquidator, assignee, custodian, trustee or similar official for
either party or the property of either party or the making by either party of an
assignment for the benefit of its creditors (except that in the case of any
involuntary action against either party, such party shall have sixty (60) days
to have such case dismissed), or the failure by either party generally to pay
its debts as they mature.
ii. Either party hereto is indicted upon a charge of
committing any felony or committing a misdemeanor which involves allegations of
fraud, embezzlement, conversion or other similar act or admits engaging in, or
is found in a duly convened arbitral proceeding or a court of competent
jurisdiction to have engaged in, illegal or other wrongful conduct substantially
detrimental to the business or reputation of the other party.
iii. The continued refusal by, or manifest inability of,
either party to perform any of the material duties, or to discharge any of the
material
24
obligations, of such party pursuant to this Agreement in a professional
and reasonably competent manner (consistent with applicable professional or
business standards) for a period of at least ninety (90) days after receipt of
written notice from the other party to such party providing reasonable detail as
to the specific material duties or obligations that are not being, or have not
been, performed or discharged by such party in a professional and reasonably
competent manner and providing a reasonable opportunity to such party to address
such failures or omissions and in good faith to attempt to cure or otherwise
begin to effect a remedy of such failures or omissions within such ninety (90)
day period; PROVIDED, HOWEVER, that the LLC may not terminate this Agreement so
long as Doctors Health is in good faith attempting to address any such failure
or omission and it appears reasonably possible that such failure or omission may
(or will) be cured before irreparable material harm or other significant injury
occurs to the LLC and, provided further, that the LLC may not terminate this
Agreement if any lender to, or holder of a senior security of, Doctors Health
arranges, or is arranging for, an assignment or transfer of such of Doctors
Health's duties hereunder as to which Doctors Health is in actual or potential
default to another management entity with experience in managing health care
providers that is reasonably acceptable to the LLC.
c. EFFECT OF TERMINATION.
i. Upon the occurrence of an event of default by the LLC,
Doctors Health shall have the right without further notice to reenter and take
possession of the Demised Premises, or any part thereof, and to repossess the
same as Doctors Health's former estate, and expel the LLC and those claiming
through or under the LLC, and remove the effects of either or both without being
deemed guilty of any manner of trespass and without prejudice to any remedies
for arrears of fees due or preceding breaches of this Agreement.
ii. Upon the occurrence of an event of default by Doctors
Health, the LLC shall have the right to continue in full possession and use of
all of the assets, facilities and goods provided to it by Doctors Health,
including without limitation the Office Space and the Equipment, and to purchase
from Doctors Health for their appraised fair market value all of the assets of
Doctors Health constituting the Demised Premises and any other of Doctors
Health's assets which the LLC, in its sole discretion, deems necessary or
desirable to permit the LLC to continue its Practice of Medicine without
interruption, it being the intent of the parties to permit the LLC in such event
to continue its Practice of Medicine with as little disruption as possible. The
LLC shall be entitled to set off against the purchase price it pays for Doctors
Health's assets the amount of any damages incurred by the LLC as a result of
Doctors Health's breach of this Agreement.
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7. MODIFICATIONS; QUALITY COMMITTEE; ARBITRATION.
a. MODIFICATION FOR PROSPECTIVE LEGAL EVENTS. If, in the good faith
opinion of either party, as supported by the written opinion of counsel to such
party, any Federal or state laws or regulations now existing or hereafter
promulgated or enacted, including specifically without limitation Medicare, are
interpreted by judicial decision, a regulatory agency or legal counsel in any
manner as to indicate that the structure of this Agreement, or any portion
thereof, may be in violation of such laws or regulations, such party may require
the parties hereto to use their respective best efforts to amend this Agreement,
or such portions hereof, to the extent necessary to avoid further violation. To
the maximum extent possible, any such amendment shall preserve the underlying
economic and financial risks, rewards and other arrangements set forth herein. A
party requesting such an amendment shall give written notice thereof to the
other party which shall set out in sufficient detail the basis for the amendment
request and specifically identify the specific provisions of this Agreement for
which renegotiation is sought. Within thirty (30) days of its receipt of the
requesting party's notice, the other party shall give notice to the requesting
party of any additional provisions of this Agreement as to which the other party
requests renegotiation and the reasons therefor. No provisions of this Agreement
other than those specifically designated by the parties for renegotiation shall
be affected by the renegotiations. Should the parties be unable to agree upon
mutually acceptable revisions to this Agreement within ninety (90) days after
receipt by the other party of the initial request for renegotiation, then the
matters that remain unresolved through renegotiation pursuant to this SECTION
7.A shall be submitted to binding arbitration pursuant to the provisions of
SECTION 7.C hereof. Each of the foregoing time periods shall be shortened if and
to the extent necessary to avoid a violation of applicable law in a timely
manner.
B. QUALITY COMMITTEE. Doctors Health and the LLC hereby create the
Quality Committee referred to in this SECTION 7.B for the purpose of (i)
developing cooperative developmental, management and administrative policies to
guide each of the LLC and Doctors Health in fulfilling its obligations
hereunder, (ii) providing to Doctors Health and the LLC a forum in which policy
and implementation matters affecting the LLC and its physicians may be discussed
on a regular basis, and (iii) establishing an expedited process through which
any disagreement or dispute between the parties to this Agreement relating to or
concerning (A) the quality, adequacy or appropriateness of the assets,
facilities or services provided by Doctors Health to the LLC, (B) the quality
and timeliness of the services provided by the LLC and its physicians to
patients pursuant to this Agreement, (C) the appropriateness of any expense
which Doctors Health treats as a Business Cost of the LLC, may be submitted for
review and resolution prior to any informal or formal adjudication. The Quality
Committee shall consist of six members, three appointed by the LLC and three
26
appointed by Doctors Health. Of the three members appointed by Doctors Health,
one shall be the Chief Executive Officer of DHS and one shall be the Executive
Vice President and Director of Medical Services if DHS. Of the three members
appointed by the LLC, one shall be the President of the LLC or his designee.
Either party may change the designation of any of its Quality Committee members
who is not serving EX-OFFICIO by written notice delivered to the other party
pursuant to the provisions of SECTION 10.P of this Agreement.
Doctors Health and the LLC agree to cause the Quality
Committee to meet regularly, but not less often than monthly. Where possible,
such meetings shall be scheduled to coincide with the dates of the regularly
scheduled meetings of DHS' Board of Directors. The Quality Committee shall adopt
such rules and regulations regarding the conduct of its business as it deems
appropriate.
If the LLC believes that any asset, facility or service
provided by Doctors Health to the LLC pursuant to this Agreement, including any
item of Equipment, any aspect of the Office Space, any goods, materials or
supplies or any administrative or other service, including any aspect of any
budget, business plan, policy or procedure, or any of the professional or
non-professional personnel provided to the LLC, is inadequate, inappropriate or
otherwise insufficient, then the LLC shall give written notice thereof to
Doctors Health, setting out in sufficient detail the basis for the LLC's
position. If Doctors Health believes that the quality or timeliness of the care
provided to any patient does not meet the standards established herein and in
each physician's Professional Services Employment Agreement, or that the LLC is
not cooperating in such reasonable efforts of Doctors Health to create a fully
integrated efficient health care delivery system as herein contemplated, then
Doctors Health shall give written notice thereof to the LLC which shall set
forth in sufficient detail the basis for Doctors Health's position. The Quality
Committee shall, within ten (10) days of the date of any such notice, convene a
special meeting and shall, in good faith endeavor to resolve the issues raised
in such notice by agreeing upon a unanimous recommendation with respect to such
issues, which shall be reported back to Doctors Health and the LLC. If within
thirty (30) days of the date of such notice there has been no joint
recommendation, or both parties have not accepted in writing a joint
recommendation of the Quality Committee as a basis for resolving all such
issues, the unresolved issues may be referred by either party to arbitration
pursuant to the provisions of SECTION 7.C hereof. Any joint recommendation of
the Quality Committee members which is accepted by both the LLC and Doctors
Health shall be promptly implemented.
c. ARBITRATION. Any dispute between the parties of this Agreement
arising under or with respect to this Agreement, or any matters referred to
arbitration pursuant to the terms of SECTIONS 7.A OR 7.B hereof, shall be
submitted to binding arbitration according to the procedures set out on
27
SCHEDULE 13.1 of the Practice Participation Agreement of even date herewith,
among the LLC, Doctors Health and other Parties, the provisions of the said
SCHEDULE 13.1 being hereby incorporated into and as a part of this Agreement by
express reference. Each Party agrees to abide by the time periods and other
rules said forth in the said SCHEDULE 13.1. The resolution of any disputes
through such procedures, including without limitation through arbitral award,
shall be binding upon the Parties for all purposes and may be enforced in any
court of competent jurisdiction.
8. CONFIDENTIALITY AND EXCLUSIVITY.
a. DOCTORS HEALTH'S OBLIGATIONS.
i. Doctors Health shall, and shall use its best efforts to
cause its employees and Affiliates to, maintain all patient records and
financial information concerning the LLC in confidence, and shall not disclose
such information to any third party without the LLC's prior written consent or
as it may be required by law.
ii. Doctors Health may contract with other providers of
medical services to provide, and may provide, to such other providers of medical
services the kinds of assets, facilities and services Doctors Health provides to
the LLC hereunder, provided, however, that Doctors Health shall not, without the
prior written consent of the Management Committee, contract for the provision of
such services or provide such services to any provider of medical services that
is a competitor of or with the LLC in the provision of such medical services in
the Service Area (as defined in SECTION 9.2(D) of the Practice Participation
Agreement) and, provided further, that Doctors Health shall at all times
preserve the confidentiality of the LLC's financial, professional and other
information.
b. THE LLC'S OBLIGATIONS.
i. The LLC shall, and shall use its best efforts to cause its
employees and Affiliates to, maintain all management memoranda, handbooks,
manuals, trade secrets, know-how, techniques and procedures used by Doctors
Health in the provision of assets, facilities and services to the LLC hereunder
in confidence, and shall not disclose such information to any third party
without Doctors Health's prior written consent or as it may be required by law.
ii. The LLC agrees that Doctors Health shall be its sole and
exclusive contractor, provider, agent and attorney-in-fact for the provision of
the assets, facilities and services contemplated in this Agreement to the LLC
and that during the term of this Agreement the LLC will not, directly or
indirectly, seek or enter into any agreement with another Person for the
provision of, or receive from another Person, assets, facilities or services
that are the same as or
28
substantially similar to any of those provided by
Doctors Health to the LLC hereunder. In addition, the LLC will keep in full
force and effect the non-competition (and other) provisions of each Professional
Services Employment Agreement, will not, without the prior written consent of
Doctors Health, enter into employment agreements or other contracts with primary
care physicians that do not contain substantially similar provisions, and will
take any and all steps requested or required by Doctors Health to enforce any
and all such provisions as drafted. To this end. the LLC hereby appoints Doctors
Health as its attorney-in-fact for purposes of enforcing, on behalf of the LLC,
all such provisions as drafted.
c. EFFECT OF TERMINATION. Upon expiration or termination of this
Agreement for any reason whatsoever, each party shall immediately turn over all
confidential information of the other party in its possession and control to the
other party, and shall refrain from thereafter using, appropriating or
reproducing such information in any form whatsoever.
d. ENFORCEMENT. Each party agrees that the other party shall be
entitled to seek equitable relief to enjoin the actual or threatened breach of
the confidentiality and exclusivity obligations of this ARTICLE 8 including,
without limitation, temporary or preliminary injunctive relief either from or
pursuant to the arbitration provisions of SECTION 7.C hereof or pre-arbitral
injunctive relief from a court of competent jurisdiction prior to the selection
of an arbitral panel.
9. SOLICITATION OF PERSONNEL. The LLC agrees that during the term of this
Agreement, and for a period of three (3) years following its expiration or
termination, the LLC shall neither interfere with, solicit the services or
employment of, nor hire any of Doctors Health's employees, either on behalf of
the LLC or in connection with any partnership, corporation, joint venture or
other Person, without the prior written consent of Doctors Health.
10. MISCELLANEOUS.
a. AUTHORIZING ACTIONS. Each party agrees promptly to do all things and
take all actions necessary to authorize and facilitate the performance of this
Agreement and the other Practice Closing Documents, and all obligations
hereunder and thereunder, including, but not limited to, the execution of any
necessary documents, and the filing of any forms, deeds or memoranda of leases
with applicable governmental agencies or offices.
b. NO PERFORMANCE GUARANTEES. The LLC acknowledges that Doctors Health
has made no warranties or representations other than those contained herein and
that no financial projection shall be construed as a guarantee of the
profitability or success of the LLC's operations.
29
c. RECORDS.
i. The LLC shall keep all records relating to this Agreement
and its Medical Practice open and available for inspection by Doctors Health or
other authorized Person in connection with any audit related to patient
services, and shall maintain all books, records, documents and other evidence
necessary to certify the nature and extent of the services provided under this
Agreement and pursuant to its Medical Practice in accordance with accepted
business practice, appropriate accounting procedures and applicable Federal,
State or local law and regulations.
ii. The LLC agrees to maintain books, records, documents, and
other evidence as necessary to certify the nature and extent of the services
provided under this Agreement and as part of the LLC's Medical Practice in
accordance with accepted business and professional practices, appropriate
accounting procedures and practices, and Federal, State and local laws and
regulations. The LLC agrees to maintain the data described above during the term
of this Agreement and for a period of four (4) years after its expiration or
termination. Doctors Health or any other duly authorized Person shall have
reasonable access during normal business hours to such books, records,
documents, and other evidence for the purpose of inspection, audit, and copying.
If the LLC carries out any of the duties required under this Agreement through a
subcontract with a value or cost of Ten Thousand Dollars ($10,000) or more, over
a twelve (12) month period, the LLC shall incorporate in any such subcontract
the provisions regarding access to books and records as set forth herein.
iii. Each party hereto agrees to cooperate with the other
party in the event it is the subject of a tax audit or inquiry and to make
available to such other party or other authorized Person in connection with any
such inquiry or audit all of the business, financial and other records
reasonably relating thereto on reasonable terms during normal business hours for
the purpose of inspection, audit and, subject to payment of reasonable fees,
copying.
d. GOVERNING LAW.The validity of this Agreement, its interpretation and
construction shall be governed by the laws of the State of Maryland, without
regard to principles of conflict of laws.
e. EQUAL EMPLOYMENT OPPORTUNITY. Each party expressly agrees to abide
by any and all applicable Federal and/or state equal employment opportunity
statutes, rules and regulations including, without limitation, Title VII of the
Civil Rights Act of 1964, the Equal Employment Opportunity Act of 1972, the Age
Discrimination in Employment Act of 1967, the Equal Pay Act of 1963, the
National Labor Relations Act, the Fair Labor Standards Act, the Rehabilitation
Act of 1973, the Occupational Safety and Health Act of 1970, and
30
the Americans with Disabilities Act of 1990, as all may be from time to time
modified or amended.
f. FORCE MAJEURE. Neither party shall be liable nor deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service resulting, directly or indirectly, from Acts of God,
civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's service providers, employees or agents, or
any similar or dissimilar cause beyond the reasonable control of either party.
g. WAIVER. A waiver by either party of a breach or failure to perfor
any provision of this Agreement shall not constitute a waiver of any
subsequent breach of the same or a different provision hereof.
h. SEVERABILITY. If any provision of this Agreement is found to be
void or unenforceable, then such provision shall be treated as severable,
leaving valid and enforceable the remainder of this Agreement.
i. BINDING EFFECT AND ASSIGNMENT. This Agreement may not be assigned by
the LLC without the prior written consent of Doctors Health. BMG Limited
Partnership, as the initial Manager hereunder, may, for purposes of planning and
achieving internal management and staffing efficiencies, assign all of its
rights, title and interests in and to, and rights and obligations under, this
Agreement to any Subsidiary or Affiliate of BMG Limited Partnership, (as those
terms are defined in SECTION 9.2(E) AND (F) of the Practice Participation
Agreement), including, without limitation, DHS in its discretion and without the
prior written consent of the LLC and, upon such assignment by BMG Limited
Partnership, its assignee Subsidiary or Affiliate shall be and become Doctors
Health hereunder entitled to all of the rights and subject to all of the duties
and obligations of Doctors Health hereunder, without any other or further act by
any Person. Upon assignment by BMG Limited Partnership to a Subsidiary or
Affiliate pursuant to the preceding sentence, this Agreement shall not be
further assignable by any Manager without the prior written consent of the LLC.
j. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one Agreement.
k. TAX LIABILITIES. The LLC shall have the sole responsibility for
paying any and all applicable Federal, state and local income taxes, gross
receipt taxes, FICA taxes, and all other withholding taxes, unemployment and
disability benefits, and workers' compensation obligations, and any and all
license and permit fees of whatever nature which may be applicable to it and for
filing all information and other tax returns and other returns or reports as may
be required of it. Doctors Health may act as payment agent for some or all of
these
31
taxes, without assuming responsibility for such payment. The LLC shall
indemnify and hold Doctors Health harmless against any and all claims against
the LLC, any physician employed by the LLC or Doctors Health, and related
attorneys' fees, for the failure to pay or file any of the foregoing payments,
withholding, contributions, taxes, fees, and documents, reports and returns,
including but not limited to, Federal, state, and local taxes, FICA taxes, gross
receipt taxes, unemployment and disability benefits, and workers' compensation
obligations, and any and all license and permit fees.
l. INDEPENDENT RELATIONSHIP. The LLC and Doctors Health intend to act
and perform as independent contractors. Only the LLC shall practice medicine and
shall do so utilizing licensed physicians with no employment relationship to the
Manager. Notwithstanding the authority granted to Doctors Health herein, Doctors
Health and the LLC agree that the LLC shall retain the authority to direct the
medical, professional, and ethical aspects of its medical practice. Each party
shall be solely responsible for and shall comply with all state and federal laws
pertaining to employment taxes, income withholding, unemployment compensation
contributions and other employment related statutes applicable to that party. As
more specifically set forth herein, Doctors Health shall provide the LLC with
offices and facilities, equipment, supplies, support personnel, and management
and financial advisory services. As more specifically set forth in, and subject
to the provisions of, this Agreement and the LLC Operating Agreement, the LLC
shall be responsible for the recruitment and hiring of physicians and all issues
related to medical practice patterns and documentation thereof. Doctors Health
shall neither exercise control over nor interfere with the physician-patient
relationship, which shall be maintained strictly between the physicians of the
LLC and their patients. Matters involving the internal agreements and finances
of the LLC, including the distribution of professional fee income or
distributions of Managed Care Incentive Payments, if any, among the individual
Members and other physicians of the LLC, tax planning, and pension and
investment planning (and expenses relating solely to these internal business
matters) shall remain the sole responsibility of the LLC and/or the individual
physicians. The parties agree that the benefits to the LLC hereunder do not
require, are not payment for, and are not in any way contingent upon the
admission, referral or any other arrangement for the provision of any item or
service offered by Doctors Health or any of its Affiliates to any of the LLC's
patients in any facility or laboratory controlled, managed or operated by
Doctors Health.
m. EXCHANGE OF INFORMATION. Each party shall cooperate in sharing
with and providing to the other party all information reasonably required or
desirable pursuant to the terms of this Agreement.
n. FURTHER COOPERATION. The LLC shall cooperate and execute such
agreements and cause such of its physician employees as may be necessary to
32
become participating providers in such third-party reimbursement programs as
Doctors Health may from time to time direct. As used in this Agreement, the term
"third-party reimbursement program" shall include, but not be limited to, health
maintenance organizations, preferred provider organizations, private health
insurance companies, Blue Cross/Blue Shield, the Federal and State Medicare
and/or Medicaid programs, and any other managed care plan. The LLC shall also
cooperate with Doctors Health in promotional programs developed or selected by
Doctors Health.
o. ENTIRE AGREEMENT. This Agreement and the other Practice Purchase
Closing Documents constitute the complete understanding of the parties and
supersede any and all other agreements, written or oral, between the parties
with respect to the subject matter hereof and thereon. No other agreement,
statement or promise not contained herein or therein shall be valid or binding.
p. NOTICES. All notices required hereunder shall be in writing,
delivered personally, by overnight delivery service or by registered or
certified mail, postage prepaid and return receipt requested, and shall be
deemed made when delivered and shall be properly addressed to the parties as
follows or as otherwise designated from time to time:
To Doctors Health:
Doctors Health System, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a required copy to:
Corporate Counsel
Doctors Health System, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To the LLC:
Chairman
Cumberland Valley Medical Group, LLC
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
q. AMENDMENT. This Agreement may be modified or amended at any time by
a written amendment, signed by both parties hereto.
33
r. APPOINTMENTS. By its execution of this Agreement, the LLC hereby
constitutes and appoints Doctors Health, acting in its corporate capacity or
through any of its duly authorized officers or employees, the LLC's true and
lawful attorney-in-fact and also constitutes and appoints Doctors Health as the
LLC's agent, and hereby empowers and authorizes Doctors Health, as its attorney
and agent, for the LLC and in its name, place and stead, and on its behalf, from
time to time, to do and to execute any and all acts, deeds, instruments and
things, which are necessary or desirable to enable Doctors Health to do any and
all things relating to the organization, management, business, or
non-professional activities of the LLC, as fully and completely as the LLC might
or could do if it, itself, undertook to do or execute any or all of such acts,
deeds, instruments or things. The appointment of Doctors Health as the LLC's
agent and attorney-in-fact hereunder is and shall be irrevocable during the term
of this Agreement and is expressly agreed and acknowledged by both parties to be
coupled with an interest.
IN WITNESS WHEREOF, the parties hereto have caused their
authorized representatives to execute this Amended and Restated Physician
Services Organization Agreement as an instrument under seal effective as of the
day and date first above written.
WITNESS/ATTEST: CUMBERLAND VALLEY MEDICAL
GROUP, LLC
__________________________ By:______________________(SEAL)
▇▇▇▇▇▇▇ ▇▇▇▇, M.D.,
Chairman
WITNESS/ATTEST: DOCTORS HEALTH SYSTEM, INC.
__________________________ By:______________________(SEAL)
Stewart B. Gold, President
34
EXHIBIT 2B
FORM OF SUBLEASE
THIS SUBLEASE ("THIS SUBLEASE"), ____day of___________, 199_, by and
between DOCTORS HEALTH SYSTEM, INC., a Maryland Corporation, ("TENANT")
CUMBERLAND VALLEY MEDICAL GROUP, LLC, a Maryland limited liability company
("SUBTENANT").
EXPLANATORY STATEMENT
A. By Lease Agreement dated_______________, 19___, a copy of which is
attached hereto as Exhibit A (the "LEASE"), [Add appropriate recitals regarding
leases from Physicians and/or PCs, to the LP, to DHS] ___________, Maryland
known as ___________________ (the "PREMISES").
B. Subtenant desires to sublease the Premises from Tenant and Tenant
desires to sublease the Premises to Subtenant, on the terms and subject to the
conditions which are hereinafter set forth.
[C. Landlord joins in the execution of this Sublease to evidence its
consent to the within Sublease, as required by Section ______ of the Lease.
Where appropriate.]
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual entry into this
Sublease by the parties hereto and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by each party
hereto, Tenant hereby subleases to Subtenant and Subtenant hereby subleases from
Tenant all of the Premises in its "as is" physical condition (Subtenant having
heretofore examined and being familiar in all respects with the Premises), on
the terms and subject to the conditions which are hereinafter set forth:
1. Term; Extension and Expiration of Term. The term of this Sublease
(the "INITIAL TERM") shall be for a period of ______ (___) months [WHICH PERIOD
SHALL BE EQUAL TO THE TERM OF THE LEASE LESS ONE (1) DAY], beginning on
________, 19___ and expiring on ___________, 19____ (the "EXPIRATION DATE"). If
the term of the Lease is renewed, Subtenant may extend the Initial Term for a
period coterminous with the extended period less one (1) day on the same terms
and conditions as set forth in this Sublease by providing Tenant with at least
_________ (___) days' notice in advance of the Expiration Date. If
35
Subtenant provides such notice, this Sublease shall continue and extend until
the expiration date of the renewal term less one (1) day (the "EXTENDED TERM")
(both the Initial Term and the Extended Term shall be collectively referred to
as the "TERM"). Tenant shall use reasonable efforts to notify Subtenant of the
Expiration Date of this Sublease at least thirty (30) days before the Expiration
Date.
2. Rental. Subtenant shall pay to Tenant, without prior notice or
demand and without set-off or reduction, as rental for the Premises (the
"RENT"), the amount of ________ Dollars ($__________) per month during the
Term.. Rent shall be prorated on a daily basis for any partial calendar month
during the Term. This Sublease is on an absolute gross lease basis and Landlord
shall maintain the Premises (including repair or replacement of any part
thereof, unless such replacement is due to Subtenant's negligence or willful
misconduct), pay taxes, insurance, and operating expenses, and any and all other
charges due and payable in connection with the occupancy and use of the
Premises, including, but not limited to, those payable to Landlord under the
Lease. Tenant and subtenant agree (A) that no actual payments are required to be
made by Subtenant to Tenant of Rent hereunder, all such Rent due herewith being
part of the Tenants Management Fee charged to Subtenant under that Certain
Professional Services Organization Agreement between Tenant and Subtenant dated
___________, 199_ (the "PSO Agreement"); (B) Tenants' payment of rent to the
landlord from time to time shall be deemed the payment of an "LLC Business Cost"
under the PSO Agreement, and a "Direct Medical Facilities Cost" under the
Professional Services Employment Agreement for each of the Subtenant's physician
employees.
3. Obligations of Tenant and Subtenant Under the Lease.
3.1. In addition to any other obligations that are imposed
upon Subtenant under the provisions of this Sublease, Subtenant shall abide by
any restriction placed on Tenant pursuant to the terms of the Lease.
3.2. In addition to any other rights that are held by
Subtenant under the provisions of this Sublease, Subtenant shall have all of the
same rights hereunder against Tenant as Tenant has against Landlord under the
provisions of the Lease, and, except for the services to be provided by Landlord
to Tenant under the Lease, Tenant shall have all of the same obligations
hereunder to Subtenant as Landlord to Tenant under the Lease, all as if
provisions identical to such provisions were set forth at length in this
Sublease.
3.3. Without limiting the generality of the foregoing
provisions of this Section, 3.3.1. Subtenant covenants and agrees not to commit
any act that shall cause Tenant to be in breach of any term, covenant, or
condition under the
36
Lease or interfere with Tenant's performance of its obligations or duties under
the Lease;
3.3.2. in any instance in which Tenant has any right under the
provisions of the Lease to give or withhold its approval of any action,
omission, or other matter, or has any other discretionary right under the
provisions of the Lease, Tenant shall exercise such right in each instance in a
manner that is consistent with Subtenant's rights and Tenant's obligations
hereunder, and
3.3.3. in any such instance in which Tenant may exercise any
such right in two (2) or more ways, neither or none of which would be
inconsistent with Subtenant's rights and Tenant's obligations, Tenant shall
notify Subtenant thereof in writing, and shall exercise any right in accordance
with Subtenant's written instructions to Tenant; provided, however, that Tenant
must receive such instructions within such period, if any, during which Tenant
may be required by the provisions of the Lease to exercise or waive such right.
4. Amendment and Termination of Lease.
4.1. Tenant shall not amend, or consent to any amendment of,
the Lease in any respect that materially and adversely affects Subtenant's right
to use and enjoy the Premises on the terms and subject to the conditions that
are contained in this Sublease. No amendment of the Lease shall operate to alter
or impair Subtenant's rights hereunder.
4.2. If the Lease terminates for any reason this Sublease
shall thereupon automatically terminate simultaneously with such termination of
the Lease, and no party hereto shall have any right hereunder against any other
party hereto on account thereof; provided, however, that nothing in the
foregoing provisions of this sentence shall be deemed in any way to alter or
impair any liability that any party hereto may have to any other accruing before
such termination.
4.3. If the Lease terminates as a result of a default by
Tenant in performing its obligations thereunder, the parties hereto shall have
such rights and liabilities to each other hereunder on account of such default
as exist under applicable law.
4.4. On the expiration or earlier termination of this
Sublease, the rights and obligations of Landlord and Tenant shall be governed by
the Termination of Lease Agreement by and between Landlord and Tenant of even
date herewith.
5. Notices. Any notice, demand, consent, approval, request, or other
communication or document to be provided hereunder to a party hereto shall be
37
(a) in writing, and (b) deemed to have been provided (i) twenty-four (24) hours
after being sent as certified or registered mail in the United States mails,
postage prepaid, return receipt requested, to the address of such party set
forth below or to such other address in the United States of America as such
party may designate from time to time by notice to each other party hereto, or
(ii) (if such party's receipt thereof is acknowledged in writing) upon being
given by hand or other actual delivery to such party. The addresses for the
parties are as follows:
If to Tenant: Doctors Health System, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Subtenant: Cumberland Valley Medical Group, LLC
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
6. General.
6.1. Effectiveness. This Sublease shall become effective on
and only on its execution and delivery by the parties hereto.
6.2. Complete Understanding. This Sublease, together with the
Physician Services Organization Agreement and other documents executed between
Tenant and Subtenant in connection therewith, represent the complete
understanding among the parties hereto as to the subject matter hereof, and
supersedes all prior negotiations, representations, guaranties, warranties,
promises, statements, or agreements, either written or oral, among the parties
hereto as to the same.
6.3. Amendment. This Sublease may be amended by and only by an
instrument executed and delivered by the parties hereto.
6.4. Waiver. No party hereto shall be deemed to have waived
the exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing (and, without limiting the generality of the foregoing,
no delay or omission by any party hereto in exercising any such right shall be
deemed a waiver of its future exercise). No such waiver made in any instance
involving the exercise of any such right shall be deemed a waiver as to any
other such instance or right.
6.5. Applicable Law. This Sublease shall be given effect and
construed by application of the law of Maryland, and any action or proceeding
arising hereunder shall be brought in the courts of Maryland.
38
6.6. Time of Essence. Time shall be of the essence of this
Sublease.
6.7. Headings. The headings of the Sections, subsections,
paragraphs, and subparagraphs hereof are provided herein for and only for
convenience of reference, and shall not be considered in construing their
contents.
6.8. Construction. As used herein, all references made (a) in
the neuter, masculine, or feminine gender shall be deemed to have been made in
all such genders, (b) in the singular or plural number shall be deemed to have
been made, respectively, in the plural or singular number as well, and (c) to
any Section, subsection, paragraph, or subparagraph shall, unless therein
expressly indicated to the contrary, be deemed to have been made to such
Section, subsection, paragraph, or subparagraph of this Sublease.
6.9. Exhibits. Each writing or plat referred to herein as
being attached hereto as an exhibit or otherwise designated herein as an
exhibit hereto is hereby made a part hereof.
6.10. Assignment. This Sublease shall be binding on and shall
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors, and assigns hereunder.
6.11. Severability. No determination by any court,
governmental body, or otherwise that any provision of this Sublease or any
amendment hereof is invalid or unenforceable in any instance shall affect the
validity or enforceability of (a) any other provision thereof, or (b) such
provision in any circumstance not controlled by such determination. Each such
provision shall be valid and enforceable to the fullest extent allowed by, and
shall be construed wherever possible as being consistent with, applicable law.
6.12. Disclaimer of Partnership Status. Nothing in the
provisions of this Sublease shall be deemed in any way to create among the
parties hereto any relationship of partnership, joint venture, or association,
and the parties hereto hereby disclaim the existence of any such relationship.
39
IN WITNESS WHEREOF, the parties hereto have executed and ensealed this
Sublease or caused it to be executed and ensealed on its behalf by their duly
authorized representatives, the day and year first above written.
WITNESS or ATTEST: [TENANT]
___________________________ By:___________________
(SEAL)
___________________________ Name:_____________
___________________________ Title:______________
CUMBERLAND VALLEY MEDICAL GROUP, LLC:
___________________________ By:___________________
(SEAL)
___________________________ Name:_____________
___________________________ Title:______________
[JOINDER] (WHERE APPLICABLE)
In accordance with Section ____ of the Lease, Landlord joins in the execution of
this Sublease for the purpose of evidencing its consent to the sublease herein.
WITNESS OR ATTEST: LANDLORD:
_________________________ By:____________________
(SEAL)
_________________________ Name:______________
_________________________ Title:_______________]
40
EXHIBIT A
True Copy of Lease
SCHEDULE 2B
BUILDING OFFICE SPACE
41
EQUIPMENT ADDENDUM
TO
SCHEDULE 2B
BUILDING:
EQUIPMENT:
42