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EXHIBIT 8.3
ASSET PURCHASE
AND MEDICAL PRACTICE
MANAGEMENT AGREEMENT
BETWEEN
The OB-GYN Associates, P.C.
A Professional Corporation,
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D. An Individual,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D., An Individual,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D., An Individual,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, M.D., An Individual,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., An Individual,
AND
MEDICAL ASSET MANAGEMENT, INC.
-----------------------------
December 31, 1995
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TABLE OF CONTENTS
1.0 PURCHASE AND SALE OF ASSETS.............................
2.0 PURCHASE PRICE..........................................
3.0 SHAREHOLDER'S, AND/OR (WHERE INDICATED) THE PRACTICE'S
REPRESENTATIONS, WARRANTIES AND COVENANTS...............
4.0 MAM'S REPRESENTATION, WARRANTIES AND COVENANTS..........
5.0 INDEMNIFICATION OF MAM..................................
6.0 INDEMNIFICATION OF THE PRACTICE.........................
7.0 MANAGEMENT SERVICES TO BE PROVIDED BY MAM...............
8.0 COMPENSATION TO MAM AND.................................
9.0 OWNERSHIP OF LICENSES...................................
10.0 TERM OF MANAGEMENT AGREEMENT............................
11.0 DEATH OR DISABILITY OF SHAREHOLDERS.....................
12.0 TERMINATION OF AGREEMENT DURING FIRST FOUR YEARS........
13.0 TERMINATION OF AGREEMENT AFTER FOURTH ANNIVERSARY.......
14.0 TERMINATION GENERALLY...................................
15.0 COVENANT NOT TO COMPETE.................................
16.0 GENERAL PROVISIONS......................................
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LIST OF EXHIBITS
EXHIBIT "A" ▇▇▇▇ OF SALE
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LIST OF SCHEDULES
SCHEDULE "1" ASSETS TO BE PURCHASED BY MAM
SCHEDULE "2" ALL LIENS, ENCUMBRANCES AND CLAIMS AGAINST THE ASSETS
SCHEDULE "3" ALL PENDING OR THREATENED CLAIMS, CAUSES OF ACTIONS AND
PENDING LAWSUITS
SCHEDULE "4" MANAGEMENT SERVICES TO BE PROVIDED BY MAM
SCHEDULE "5" WORKSHEET TO DETERMINE PROFESSIONAL COMPENSATION AND MAM MINIMUM
CASH FEE
SCHEDULE "6" THE DOCUMENTATION OF DETERMINATION OF NET BOOK VALUE OF TANGIBLE
ASSETS PURCHASED BY MAM
SCHEDULE "7" SCHEDULE OF LIABILITIES NOT ASSUMED BY MAM BUT SERVICED ACCORDING
TO SECTION 8.
SCHEDULE "8" SCHEDULE OF ASSETS NOT PURCHASED BY MAM
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ASSET PURCHASE
AND MEDICAL PRACTICE MANAGEMENT AGREEMENT
This agreement (hereinafter "Agreement") is made as of December 31, 1995 at
Aurora, CO between:
The OB-GYN Associates, P.C. (hereinafter "The Practice") a Professional
Corporation,
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D. An Individual,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D., An Individual,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D., An Individual,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, M.D., An Individual,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., An Individual,
(hereinafter collectively referred to as "Shareholders" and individually
referred to as "Shareholder"), and Medical Asset Management, Inc. (hereinafter
"MAM") a Delaware corporation.
Shareholder physicians and other employee physicians carry on the practice of
medicine through The Practice at the following clinic locations: a.)8300 ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, b.) ▇▇▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, c.) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and
d.) ▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with corporate offices at ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Whereas, The Practice desires to sell to MAM and MAM desires to purchase from
The Practice (on the terms and subject to conditions of this Agreement), all
assets owned by the Practice and used in The Practice wherever located, with
specific exclusions as listed on Schedule "8"; and
Whereas, the Shareholders desire to continue to practice medicine through The
Practice and they and The Practice desire to contract with MAM to manage and
administer all non-medical aspects of The Practice and MAM desires to manage
and administer all non-medical aspects of The Practice for a term and upon
terms and conditions hereinafter set forth,
then, in consideration of the covenants agreements, representations and
warranties contained in this Agreement, the parties agree as follows:
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1.0 PURCHASE AND SALE OF ASSETS
1.1 As of the earlier of April 1, 1996 or the date on which the cash purchase
price is delivered to The Practice pursuant to Section 2.1 below (the
"Transfer Date"), and subject to the exceptions noted below, The Practice
hereby sells, conveys, transfers and assigns all the assets and properties
which The Practice owns in connection with the conduct of The Practice
(the "Assets"), including each location at which the business of The
Practice may be conducted during the term of this Agreement, subject to
the exclusion of specific assets not purchased as listed on Schedule 8,
attached hereto.
The Assets shall be deemed to include without limitation (i) all of The
Practice's accounts receivable (whether or not deemed collectible) as
currently reflected on The Practice's books and records, on the Transfer
Date of this Agreement and at all times during the term of this Agreement,
(ii) all administrative (i.e., non-medical) aspects of every kind and
character pertaining to the running of The Practice (the "Medical Practice
Management Business"), and (iii) all of those assets, rights and properties
described in Schedule "1" attached hereto, the provisions of which are by
this reference incorporated herein.
Notwithstanding the foregoing, MAM is specifically not purchasing (i) the
portion of The Practice which involves the examination, diagnosis,
treatment, surgery or therapy of patients by any Shareholder or by any
other licensed medical practitioner or health care professional providing
services on behalf of The Practice, or any other aspect of The Practice
which by law requires a license to practice medicine or provide health care
services, (ii) all medical records relating solely to the provisions of
professional medical services, subject to MAM's right of limited access to
and to make copies of, those portions of patient records relating solely to
the amount of fees and charges due and owing for professional services
rendered, (iii) all assets listed on Schedule 8.
1.2 The Practice assigns to MAM effective December 31, 1995 (the "Effective
Date") the right to perform all administrative and non-medical aspects of
The Practice's business, "The Medical Practice Management Business" for a
period of years, and upon terms and conditions set forth herein which MAM
agrees to perform for a term of years and upon the terms and conditions set
forth. The specific services to be performed by MAM are listed on Schedule
4 attached hereto. MAM shall have the right to commence to include the
revenues of The Practice in MAM's financial statements immediately
following the Effective Date of this Agreement; provided, however, that (i)
MAM shall not be entitled to receive any management fees or other
compensation under this Agreement until after the Transfer Date, and (ii)
MAM shall not perform any administrative or other aspects of The Practice's
business until after the Transfer Date (although
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MAM shall have the right to begin to orient The Practice's employees to
MAM's operating procedures and to integrate The Practice's administrative
systems with MAM's systems). MAM and The Practice further acknowledge that
certain obligations under this Agreement (including, for example, MAM's
obligations to make the Cash Payment described below to The Practice, to
issue shares of MAM's common stock to The Practice, etc.) have not been
completed and will not be completed until the Transfer Date, and MAM will
not represent to the contrary in any public offering documents.
1.3 A ▇▇▇▇ of sale (in substantially the form of EXHIBIT "A") shall be executed
and delivered to MAM to effect the within purchase and sale of the Assets
on the Transfer Date. On the Transfer Date, the Shareholder, on behalf of
The Practice, as appropriate, shall forthwith upon MAM's written request
execute and deliver to MAM such further instruments of sale, transfer,
assignment, delivery, consent, assurance, powers of attorney and other
instruments, including without limitation bills of sale, in form and
content provided by MAM's legal counsel, all for the purpose of further
evidencing that MAM is vested with all right, title and interest in and to
the Assets and the Medical Practice Management Business as conducted by The
Practice.
2.0 PURCHASE PRICE
In consideration of the transfer of Assets and the execution of this
Management Agreement, the parties hereby agree that the total purchase
price to be paid The Practice shall be payable as follows:
2.1 Terms of Payment - Cash, Assumption of Certain Liabilities and Stock
2.1.1 On the Transfer Date, MAM shall pay to The Practice, in cash,
certified funds, or cashier's check, a sum of money (the "Cash
Payment") equal to $1,606,202.00. From the Cash Payment, The Practice
will pay off all of its liabilities except for (i) those liabilities
identified on Schedule "2" which are being assumed by MAM, and
(ii) the two liabilities identified in Schedule 7 (also identified
in the first sentence of this Section 2.1.1) which will be serviced
as provided in Section 8.9.
2.1.2 MAM shall assume the specific liabilities of The Practice as
described in Schedule 2 (which is limited to future lease and
contract obligations). The two liabilities of The Practice which are
specifically described on Schedule 7 are not being assumed by MAM but
will be serviced by MAM according to Section 8.9 below. Except for
the liabilities specifically set forth on Schedule 2 hereof, MAM is
not assuming any liabilities, debts or other obligations of any kind
of The Practice.
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2.1.3 (i) MAM will issue to The Practice over the first four years of the
Agreement a number of restricted shares (investment stock) of MAM
common stock equal to 730,000, subject to minimum financial
performance by The Practice. In the event The Practice fails to
achieve minimum financial performance targets over the first four
years of the Agreement, MAM will adjust the amount of shares issued
to The Practice on a pro rata basis as described below.
(ii) The parties agree that the average historical collections of The
Practice are equal to $5,200,000 per year. The parties agree to a
minimum financial performance target of $5,200,000 of Net Revenue
per calendar year for each of the first four years of the Agreement.
(iii) All stock issued in conjunction with this Agreement will bear the
legend "Restricted Stock" in compliance with the Securities Act of
1933 ("The Act") and will be subject to such holding periods as are
in effect from time to time under The Act.
The terms of payment will be made in accordance with the terms and
conditions described below.
(a) 146,000 shares of MAM common stock will be issued and
transferred to The Practice on the Transfer Date. The
Shareholders of The Practice shall determine, in their sole
discretion, whether and the manner in which said shares will be
distributed among the Shareholders of The Practice. Said shares
shall be restricted in accordance with applicable federal and
state securities laws. Said shares shall be delivered to The
Practice after the execution of this Agreement in the names and
manner requested in writing by The Practice within 45 days of
The Practice's written request for delivery of said shares.
(b) On the first anniversary of the Effective Date, if The Practice
achieves minimum financial performance in net revenue equal to
$5,200,000 or greater, 146,000 shares of MAM common stock
will be issued to The Practice. Should net revenues fall
below the minimum financial performance target amount, the
number of shares will be adjusted downward on a pro rata basis.
These shares will be issued and transferred to The Practice.
The Shareholders of The Practice shall determine, in their sole
discretion, the manner in which said shares are to be
distributed among the shareholders of The Practice.
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"Net revenue" is defined as gross ▇▇▇▇▇▇▇▇ less contractual allowances,
discounts, and uncollectible charges.
(c) On the second anniversary of the Effective Date, if The Practice achieves
minimum financial performance in net revenue equal to $5,200,000 or greater,
146,000 shares of MAM common stock will be issued to The Practice. Should
net revenues fall below the minimum financial performance target amount, the
number of shares will be adjusted downward on a pro rata basis. These shares
will be issued and transferred to The Practice. The Shareholders of The
Practice shall determine, in their sole discretion, the manner in which said
shares are to be distributed among the shareholders of The Practice.
(d) On the third anniversary of the Effective Date, if The Practice achieves
minimum financial performance in net revenue equal to $5,200,000 or greater,
146,000 shares of MAM common stock will be issued to The Practice. Should
net revenues fall below the minimum financial performance target amount, the
number of shares will be adjusted downward on a pro rata basis. These shares
will be issued and transferred to the Practice. The Shareholders of The
Practice shall determine, in their sole discretion, the manner in which said
shares are to be distributed among the shareholders of The Practice.
(e) On the fourth anniversary of the Effective Date, if The Practice achieves
minimum financial performance in net revenue equal to $5,200,000 or greater,
146,000 shares of MAM common stock will be issued to The Practice. Should
net revenues fall below the minimum financial performance target amount, the
number of shares will be adjusted downward on a pro rata basis. These shares
will be issued and transferred to The Practice. The Shareholders of The
Practice shall determine, in their sole discretion, the manner in which said
shares are to be distributed among the shareholders of The Practice.
(f) If The Practice generates net revenues during the first four years after the
Effective Date equal to four times the annual revenue Performance Target as
described in section 2.1.3 (ii), which equals $20,800,000.00, then MAM will
issue an amount of shares at the end of the fourth year equal to: 730,000
less the sum of any amounts issued sections 2.1.3
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(a), 2.1.3(b), 2.1.3(c), 2.1.3(d), 2.1.3(e). The Shareholders of The
Practice shall determine, in their sole discretion, the manner in
which said shares are to be distributed among the shareholders of The
Practice.
2.1.4 In the event (i) MAM is sold (as defined below), (ii) the majority of
the Shareholders continue full time employment with The Practice
thereafter, and (iii) the Practice retains its affiliation under this
Agreement with MAM (or MAM's successor), then The Practice shall
receive on an accelerated basis, effective immediately before the
closing of any such sale of MAM, any shares of MAM common stock then
remaining unissued under subsections 2.1.3 (b), (c), (d) and (e)
above, reduced pro rata to account for any prior years in which The
Practice has failed to achieve the annual minimum financial
performance targets. If it is later determined that The Practice
generates net revenues during the first four years of the Agreement
equal to four times the annual revenue Performance Target as described
in section 2.1.3 (ii), which equals $20,800,000.00, then MAM (or its
successor) will issue an amount of shares at the end of the fourth
year equal to: 730,000 less the sum of any amounts issued subsections
2.1.3 (a), (b), (c), (d), and (e). For purposes of this Section 2.1.4,
a sale of MAM shall mean the sale of all or substantially all the
assets of MAM to an unaffiliated third party, or a sale of more than
51% of the common stock of MAM to an unaffiliated third party or
group.
2.1.5 The Practice agrees to give written notice to MAM of any transfers by
The Practice of the shares of MAM stock to be issued to The Practice
under this Agreement as well as the amount of total consideration
received by The Practice for such shares and the value attributed to
any shares distributed to Shareholders. The Practice agrees to
establish agreements with the Shareholders to the effect that in the
event a Shareholder leaves The Practice with the intent not to comply
with the noncompete restrictions contained in Section 15 below (or in
the event a departed Shareholder breaches the noncompete
restrictions), then the Shareholder must return any MAM shares
acquired by him or her to MAM as part of the liquidated damages for
breach of the noncompete restrictions.
3.0 SHAREHOLDER'S, AND/OR (WHERE INDICATED) THE PRACTICE'S REPRESENTATIONS,
WARRANTIES AND COVENANTS
Shareholder(s) and/or (where indicated) The Practice hereby represents,
warrants and covenants to MAM as follows:
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(i) The Practice is a professional corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and
has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This
Agreement and all other agreements referred to herein have been (or upon
execution will have been)duly executed and delivered by The Practice and
the Shareholders, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
have been) duly executed and delivered by The Practice and the
Shareholders, have been effectively authorized by all necessary action,
corporate or otherwise, and constitute (or upon execution will constitute)
legal, valid and binding obligations of The Practice and the Shareholders,
enforceable against The Practice and the Shareholders in accordance with
their respective terms subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and general principles of equity
(regardless of whether such enforceability is considered a law or equity).
(ii) The Practice owns good and marketable title to all of the Assets, and the
Assets will be transferred to MAM, free and clear of any and all liens,
encumbrances, claims, adverse interests, security interests, title
retention Agreements and the like whatsoever, except as set forth in
Schedule "2" attached hereto, the provisions of which are by this
reference incorporated herein. Without limiting the generality of the
foregoing, none of the Assets are subject to any contract, agreement or
understanding (other than in this Agreement), whether oral or written,
except as set forth in Schedule "2" attached hereto.
(iii) The execution and delivery of this Agreement by the Shareholders and the
Practice and the consummation of the transactions contemplated hereby will
not result in a breach of any of the terms and provisions of, or
constitute a default under or be in conflict with any contract, judgment,
decree, order or award of any court, governmental body or arbitrator or
any federal, state, municipal, local or foreign law, statute ordinance or
otherwise ("Laws") which are applicable to any Shareholder, The Practice
or to the provision of medical care as conducted by The Practice. Neither
any Shareholder nor the Practice nor any Agents have violated any laws,
nor received any notice of any such violations. For purposes of this
Agreement, the term "Agents" shall include any and all Shareholder
physicians, other employee physicians and other healthcare providing
employees of The Practice.
(iv) Except for pending actions and claims listed in Schedule "3" attached
hereto, the provisions of which are by this reference
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incorporated herein, there are no claims, disputes, actions, proceedings
or investigations of any nature pending or, to the Shareholders best
knowledge and belief, threatened against or involving any Shareholder or
The Practice or any Agents that relate in any way to any of the Assets, to
The Medical Practice Management Business or to the medical or health care
services rendered at The Practice.
(v) All consents, approvals, authorizations and other requirements prescribed
by an law which must be obtained or satisfied by The Practice or any
Agents, whether or not necessary for the execution and delivery by The
Practice of this Agreement and the documents to be executed and delivered
in connection herewith, have been obtained and satisfied.
(vi) The information provided and to be provided by The Practice to MAM in this
Agreement or in any exhibit or schedule hereto or in any other writing
pursuant hereto does not and will not contain any untrue statement of
material fact or omit to state a material fact required to be stated
herein or therein which is necessary to make the statements and facts
contained herein or therein, in light of the circumstances in which they
are made, not false or misleading. Copies of all documents previously or
hereafter delivered or made available to MAM pursuant hereto were or will
be complete and accurate copies of such documents.
(vii) As to each account receivable existing as of the Transfer Date of this
Agreement and as generated at all times during the term of this Agreement:
(a) each such account is or will be based on actual and bona fide
rendition of professional medical or other health care services to a
third party by The Practice or Agents in the ordinary course and
none of such accounts is fraudulent;
(b) each such account is and will not be subjected to any prior sale,
lien, security interest or financing statement whatsoever except
as described in Schedule 2;
(c) all medical services represented by each such account were
determined as medically necessary in the reasonable opinion of
the physician providing said services, for the patient who
received such services;
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(d) the fees charged for such services were in compliance with
applicable governmental regulations, if any;
(e) each account is payable solely in lawful currency of the United
States of America.
(viii) The balance sheet as of November 30, 1995 (the "Balance Sheet") and the
related statement of income (loss) (the "Income Statement") of The
Practice for the period then ended (the Balance Sheet and Income
Statement are collectively referred to as the "Reviewed Financial
Statements") supplied to MAM by The Practice are true, correct and
complete, and have been prepared from The Practice's books and records in
accordance with generally accepted accounting principles consistently
applied. The Practice's books of account have been kept in ordinary
course of business, the transactions entered therein represent bona fide
transactions, and such books of account fairly reflect all of The
Practice's income, expenses, assets and liabilities with respect to or
emanating from The Practice. Except for the liabilities reflected,
reserved or otherwise disclosed in the Reviewed Financial Statements or
in this Agreement or the Exhibits and Schedules attached hereto, The
Practice, as of the date of such Reviewed Financial Statements, had no
liabilities, whether absolute or contingent, known or unknown, which were
not set forth as liabilities reflected, reserved against or clearly
disclosed therein. No materially adverse changes have occurred in The
Practice or in the Medical Practice Management Business since the date of
such Reviewed Financial Statements through the Transfer Date of the
Agreement.
(ix) Schedule "2" attached hereto consists of a complete and correct list of
all material contracts, obligations and commitments relating to The
Practice and/or to the Assets and/or to the Medical Practice Management
Business (whether written or oral), including without limitation
employment contracts not terminable upon notice of (15) calendar days or
less, collective bargaining agreements, bonus, pension, profit sharing,
annuity, deferred compensation, retirement, stock purchase, stock option,
stock ownership, hospitalization, insurance and all other employee
benefit plans, leases, mortgages, pledges, deeds of trust, loans or
credit agreements, and contracts and agreements not made in the ordinary
course of business which involve more than $2,500.00.
(x) The Practice, and each Shareholder, as appropriate, is acquiring MAM's
Common Stock for its personal account with no intention
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of selling, transferring or otherwise disposing of the Stock or any
interest therein to others, other than to a trust for benefit to The
Practice or a Shareholder's family members, until the expiration of
the any applicable holding period arising under applicable federal
and state securities laws, and that by reason of Shareholder's
business or financial experience Shareholder can protect
Shareholder's own interests in connection with the transactions
contemplated herein, including without limitation the acquisition of
MAM's Common Stock.
The Practice and each Shareholder, as appropriate is an "accredited
investor" as such term is defined in rule 501(a) of the rules and
regulations promulgated under the Securities Act of 1933. The
Practice and each Shareholder, as appropriate will provide MAM with
an investment representation letter relating to the acquisition of
MAM's Common Stock in form and substance satisfactory to MAM's legal
counsel.
Notwithstanding the foregoing, The Practice enters into this
Agreement with the understanding and acknowledgment that risk to The
Practice in accepting MAM's stock as consideration for execution of
This Agreement is limited in scope and amounts because, in addition
to other factors, The Practice maintains the right during the first
four years of The Agreement to terminate MAM and all ongoing
obligations to MAM pursuant to termination provisions stated herein
in Section 12, which among other provisions allow The Practice to
terminate this Agreement with MAM and repossess the tangible assets
purchased by MAM.
(xi) Between the date hereof and the Transfer Date of this Agreement, MAM
and its authorized agents will have reasonable access during normal
business hours to all Assets and The Practice's business records
relating thereto, including without limitation, patient records and
information, subject to patient Confidentiality Rules, The Practice
shall supply or cause to be supplied promptly to MAM all information
with respect thereto which MAM may reasonably request. From and
after the Transfer Date and for the balance of the term of this
Agreement, The Practice will continue to cooperate with MAM in any
and all information regarding collection of the future accounts
receivable of The Practice. The Shareholders and the Practice as
appropriate, shall cooperate fully with MAM in communicating with
and seeking the assistance of patients and relatives or guardians
thereof for the purpose of better enabling MAM to collect upon such
present and future accounts receivable.
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(xii) From and after the Transfer Date, The Practice will not, at any
time, for any reason or under any circumstances, cause or permit any
of the Assets to become subject to any liens, mortgages,
encumbrances, rights or security interests imposed or suffered by
The Practice. The Practice will not, at any time or for any reason
or under any circumstances, ▇▇▇▇ any person or entity, including
without limitation any governmental agency in connection with the
collection of accounts generated by The Practice, in whole or in
part except pursuant to MAM's written request.
(xiii) Except with respect to Medicare and Medicaid accounts receivable,
The Practice shall from and after the Transfer Date of this
Agreement advise every third party account debtor regarding medical
and/or other health care services provided by The Practice that such
accounts receivable have been sold to MAM and are payable directly
to MAM or to its assignee. with respect to all present and future
accounts receivable sold and transferred to MAM herein, MAM shall
have the unilateral right to direct receipt of payment and all right
to demand or otherwise make any claim under Medicare or Medicaid
programs. From and after the Transfer Date of this Agreement, should
The Practice come into possession or control of any payment(s) in
trust for MAM, The Practice will forthwith deliver the check or
other form of payment to MAM, or to MAM's order, and will not
commingle such check or other form of payment with The Practice's
own funds or other assets. Accordingly, all checks, cash, notes or
other instruments or property received by or on behalf of The
Practice from each third party account debtor shall be deemed to
have been received by The Practice on behalf of MAM, as assignee and
owner of all such accounts receivable, and shall be turned over by
The Practice forthwith, without deduction or offset. MAM may use a
deposit stamp (to be provided by The Practice on or forthwith
following the Transfer Date of this Agreement) on any checks or any
other instruments which come into MAM's possession with respect to
such accounts receivable and may negotiate, transfer, deposit, and
otherwise deal with such checks or other instruments as the sole
owner thereof.
(xiv) Each Shareholder and The Practice, as appropriate, represents
(He/His is gender neutral):
(a) He had made available to him the opportunity to obtain such
information as he deemed necessary or appropriate to evaluate
the merits and risks of this investment. He has had
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the opportunity to ask questions of and has received
satisfactory answers from MAM concerning the terms and
conditions of the transaction and the information provided by
MAM, and has relied on no other information. No oral
representations have been made or representations made to The
Practice's or any Shareholder's advisors in connection with the
transaction relative to the securities inconsistent with the
information provided by MAM.
(b) He understands and acknowledges since such matters have been
brought to his attention that no federal or state agency has
recommended or endorsed purchase of the securities or passed on
the adequacy or accuracy of the information provided by MAM.
(c) He is capable of evaluating an investment in the securities of
MAM by reason of his own investment acumen or business
experience.
(d) He understands and acknowledges that it has been brought to his
attention that there may be no public market for the securities
of MAM, that there will be restrictions on the transferability
of the stock and that it is likely that he will not be able to
readily liquidate his investment.
(e) The Practice, if a partnership, joint venture, corporation,
trust or other entity, represents and warrants that it, or each
of its equity owners, was not formed or organized for the
specific purpose of acquiring the securities of MAM. If seller
is an individual, he represents and warrants that he is not
acquiring the stock as nominee, trustee, agent or
representative for any other person.
(f) In relation to his income and net worth, he is able to bear the
economic risks of an investment in the securities in MAM,
including, without limitations, the risk of the loss of part or
all his investment and the probable inability to sell or
transfer his securities for an indefinite period of time. He
does not have an overall commitment to investments that are not
readily marketable that is disproportionate to his net worth,
and his investment in the securities will not cause such
overall commitment to become excessive.
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(g) The purchase of the securities by the Practice, if an entity
investor, is a permissible investment in accordance with the
Practice's Articles of Incorporation, By-Laws, Declaration of
Trust or other similar charter documents and the purchase of
the securities has been duly approved by all requisite action
by the entity's owners, directors, officers or other authorized
persons or fiduciaries.
(h) The person (s) signing this document and all documents
necessary to consummate the purchase of the securities has
all requisite authority to sign such documents on behalf of
each Shareholder or The Practice as appropriate.
(i) He (they) understand (s) and acknowledges that investment in
the securities involves significant risks.
(xiv) The leases between The Practice and the owners of the leased
premises wherein the clinics and business office of The Practice are
located are current and in good standing, without any changes in the
terms and conditions thereof, except as are set forth in any written
amendments which have been delivered to MAM.
(xv) The Practice has provided MAM a true and complete copy of the
current shareholders' agreements among the Shareholders and The
Practice and the current form of employment agreement in use between
The Practice and the Shareholders, and the Shareholders and The
Practice agree that they will not amend or rescind the provisions in
such agreements concerning either (a) vesting or distribution of
shares of stock in The Practice (or MAM common stock, if applicable)
or (b) any covenant not to compete, without the prior written
consent of MAM (which will not be unreasonably withheld).
All representations and warranties herein are made as of the date hereof and as
of the Transfer Date of this Agreement and shall survive the Transfer Date of
this Agreement.
4.0 MAM'S REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------
MAM hereby represents, warrants and covenants to Shareholders and The
Practice as follows:
(i) MAM is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into the Agreement
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and to consummate the transactions contemplated hereby. This
Agreement and all other agreements referred to herein have been (or
upon execution will have been) duly executed and delivered by MAM,
have been effectively authorized by all necessary action, corporate
or otherwise, and constitute (or upon execution will constitute)
legal, valid and binding obligations of MAM, enforceable against MAM
in accordance with their respective terms subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium and
general principles of equity (regardless of whether such
enforceability is considered at law or equity).
(ii) The execution and delivery of the Agreement and this consummation of
the transactions contemplated hereby and the fulfillment of the
terms hereof will not result in a breach of any of the terms or
provisions of or constitute a default under the conflict with, any
material agreements, indenture or other instrument to which MAM is a
party or by which it is bound, or any Law applicable to MAM.
(iii) If and to the extent required by Section x(v)1 of title 42 of the
United States Code, until the expiration of (4) years after the
termination of this Agreement, MAM will make available, upon written
request to the Secretary of the United States General Department of
Health and Human Services or upon request of the Comptroller General
of duly authorized representatives, a copy of this Agreement and
such books, documents and records as are necessary to certify the
nature and extent of the costs and services provided for under this
Agreement. MAM further agrees that in the event it carries out any
of its duties under this Agreement through a subcontract, with a
value or cost of TEN THOUSAND DOLLARS ($10,000.00) or more over a
twelve (12) month period, with a related organization, such a
contract will contain a clause to the effect that until expiration
of four (4) years after the furnishing of such services pursuant of
such subcontract, the related organization will make available, upon
written request of the Secretary of the United States Department of
Health and Human Services, or upon request of the Comptroller
General of the United States General Accounting Office, a true and
correct copy of such books, documents and records of such
organizations as are necessary to verify the nature and extent of
such costs.
(iv) MAM covenants that none of the materials concerning MAM or its
business operations which were delivered to The Practice in
connection with the sale of MAM's shares to The Practice
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contained an untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements made by
MAM in light of the circumstances under which they were made, not
misleading. In the event that MAM's disclosures are inaccurate or
misleading or incomplete, in material manner, The Practice shall
have the right to seek remedy in Court of Law of appropriate
jurisdiction to recover damages, if incurred by The Practice, by any
amount of such damages, which may be more valuable than a claim
based solely on applicable securities law.
(v) All consents, approvals, authorizations and other requirements
prescribed by any law which must be obtained or satisfied by MAM,
whether or not necessary for the execution and delivery by MAM of
this Agreement and the documents to be executed and delivered in
connection herewith, have been obtained and satisfied.
(vi) MAM has had access to the books, assets and records of The Practice,
has examined the same and, based upon such access and examination,
is acquiring the Assets; provided that this representation and
acknowledgement by MAM shall not reduce, limit or waive in any
manner MAM's right to rely upon the representations and warranties
of The Practice and the Shareholders contained in this Agreement.
(vii) Prior to the Transfer Date, MAM will have reviewed the leases and
contracts to be assumed by MAM under this Agreement.
(viii) MAM further represents as follows:
(a) MAM had made available to it the opportunity to obtain such
information as it deemed necessary or appropriate to evaluate
the merits and risks of this investment. It has had the
opportunity to ask questions of and has received satisfactory
answers from The Practice and the Shareholders concerning the
terms and conditions of the transaction and the information
provided by The Practice and the Shareholders, and has relied
on no other information. No oral representations have been made
or representations made to MAM's advisors in connection with
the transaction inconsistent with the information provided by
The Practice and the Shareholders.
(b) The purchase of the Assets by MAM is a permissible investment
in accordance with MAM's Articles of
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Incorporation and By-Laws, and the purchase of the Assets has
been duly approved by all requisite action by MAM's board of
directors.
(c) The person(s) signing this document and all documents necessary
to consummate the purchase of the Assets has all requisite
authority to sign such documents on behalf of MAM.
(ix) MAM is not aware of any actual, pending or threatened litigation,
arbitration, tax investigation, tax lien, proceeding or other
investigation by any person or by any governmental authority against
MAM which would adversely affect in any manner MAM's performance
hereunder or other related documents involving the parties.
(x) Prior to the Transfer Date, MAM will not disclose the terms and
conditions of this Agreement to any third party or parties in a
public or private placement memorandum or otherwise without the
prior written consent of The Practice, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, The Practice
hereby consents to MAM disclosing the terms and conditions of this
Agreement to entities with whom MAM is and will be negotiating to
obtain financing for this transaction and for MAM generally, and The
Practice consents to MAM making any disclosure required by
applicable securities and other laws.
All representations and warranties herein are made as of the date hereof and as
of the Transfer Date of this Agreement and shall survive the Transfer Date of
this Agreement.
5.0 INDEMNIFICATION OF MAM
----------------------
MAM shall not be deemed by anything set forth in this Agreement to have
assumed the liability for payment of, and The Practice and the Shareholders
agree to indemnify, hold harmless and defend MAM and its officers,
directors, employees, agents, and shareholders from any and all
liabilities, costs and expenses, including reasonable attorneys' fees in
addition to other costs incurred, arising from any and all of the
following:
(i) Any liability or undertaking of The Practice of any Shareholder to
any person or entity whomsoever as of the Effective Date of this
Agreement or at anytime hereafter created, except only to the
limited extent, if at all, herein expressly assumed by MAM;
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(ii) Any liability of The Practice or any Shareholder for any federal,
state or local tax, interest, penalties, deficiencies, duties, fees
or governmental charges or impositions of each and every kind or
description, whether measured by properties, assets, wages, payroll,
purchases, value added, payment, sales, use, business, capital stock
surplus or income with respect to ownership of the Assets;
(iii) Any liabilities or obligation (contingent or otherwise) of The
Practice or any Shareholder arising out of any litigation or
administrative proceeding threatened or pending;
(iv) Any and all acts or omissions of The Practice or any Agents,
including without limitation claims of professional malpractice;
(v) Any liabilities or obligations (contingent or otherwise) of The
Practice arising out of defects or errors in packaging, labeling or
dispensing any prescription or other drugs, chemicals or diagnostic
or therapeutic devices or any other products (including without
limitation prescription medications) manufactured, sold prescribed
or otherwise distributed by The Practice or any Agents;
(vi) Any liability or obligation (contingent or otherwise) of The
Practice to compensate any person or entity, including without
limitation any Agent, licenser, supplier, distributor, landlord,
patient, or customer of The Practice in respect to any services
rendered or products manufactured, sold, prescribed or otherwise
distributed in connection with the Assets or The Practice; provided,
however, that MAM will assume, and hereby agrees to pay, perform and
discharge, in accordance with the terms hereof, the contractual
obligations, and liabilities of The Practice at and as of the
Transfer Date of this Agreement relating only to the contracts or
Agreements set forth in Schedule "2" attached hereto, provided
further that The Practice hereby agrees also to remain liable under
all such obligations;
(vii) Any breach of any representation, warranty or undertaking by The
Practice of any Shareholder set forth in this Agreement or in any
Exhibit or Schedule attached hereto;
(viii) Any retained liabilities or other claims against, or liabilities or
obligations of The Practice or any Shareholder which are not
specifically assumed by MAM pursuant to this Agreement;
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(ix) Any real estate lease associated with the properties at ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and
corporate offices at ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇ ▇▇▇, or
future leases associated with practice expansion or practice
relocation efforts. Notwithstanding the foregoing, MAM shall
specifically assume responsibility for payment of said leases
throughout the term of this Agreement. In the event of termination
of this Agreement, The Practice shall indemnify MAM for payments
under said leases after the date of termination.
5.1 In consideration for the above indemnities, MAM agrees to reimburse The
Practice on a pro rata basis from and after the Transfer Date of this
Agreement for rent, telephone, and other normal business expenses related
to the operation of the Medical Practice Management Business paid by The
Practice for any period of time after the Transfer Date of this Agreement.
MAM shall be responsible for paying all sales and transfer taxes, together
with all other transfer or filing fees and expenses arising out of the
transfer of the Assets to MAM pursuant to the provisions of this Agreement.
All other fees, costs and expenses incurred by either party hereto shall be
borne by the party incurring the same.
6.0 INDEMNIFICATION OF THE PRACTICE
-------------------------------
MAM hereby agrees to indemnify, hold harmless and defend The Practice
against, including without limitation payment of The Practice's reasonable
attorney's fees in addition to other costs as may be incurred, any and all
of the following;
(i) Any breach of any representation, warranty or covenant made by MAM
in this Agreement;
(ii) All federal, state withholding or other taxes as may be due from
MAM;
(iii) Any claim resulting from any misstatement or omission of a
material fact in any public or private offering statement or any
statements to MAM's lenders or other credit sources, except to
the extent the misstatement or omission is based upon information
provided to MAM by The Practice or the Shareholders; and
(iv) Any liability or undertaking of MAM unrelated to MAM's actions and
services under this Agreement, to any person or entity
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whomsoever as of the Effective Date of this Agreement or at
anytime hereafter created.
7.0 MANAGEMENT SERVICES TO BE PROVIDED BY MAM
-----------------------------------------
7.1 From and after the Effective Date of this Agreement and for a term of
twenty five (25) years (unless terminated sooner in accordance with the
terms hereof), The Practice hereby engages MAM to perform, and MAM hereby
agrees to perform in a competent, efficient and satisfactory manner, as the
Practice's exclusive manager and administrator of all non-medical functions
and all non-professional services relating to the operation of The
Practice. MAM will, at MAM's expense and as part of the Medical Practice
Management Business, provide all necessary advisory, consulting, management
and administrative services to The Practice for the operation of The
Practice (other than that related to the actual dispensation of medical and
other health care services to be provided by duly licensed professionals
practicing at The Practice). Notwithstanding the foregoing, the parties
hereby agree that (i) MAM shall not be entitled to receive any management
fees or other compensation under this Agreement until after the Transfer
Date, and (ii) MAM shall not perform any administrative or other aspects of
The Practice's business until after the Transfer Date (although MAM shall
have the right to begin to orient The Practice's employees to MAM's
operating procedures and to integrate The Practice's administrative systems
with MAM's systems).
7.2 Subject to the limitations set forth in Section 7.1, MAM will from and
after the Effective Date of this Agreement and for the balance of the term
of this Agreement provide to The Practice at MAM's sole expense all the
management and administrative services as set forth in Schedule "4"
attached hereto, the provisions of which are by this reference incorporated
herein.
7.3 Anything set forth above to the contrary notwithstanding, The Practice and
the Shareholders, will be solely and exclusively in control of all aspects
of the practice of medicine with The Practice and the provision of medical
services, including but not limited to all patient diagnosis, treatment,
surgery, therapy and prescription of drugs. In addition, The Practice shall
be solely responsible for the rendition of all medical reports and for the
maintenance of medical (as opposed to financial) records. The Practice
shall have the sole right and authority to hire, employ, train, supervise
and terminate and agrees to compensate all physician-contractors and
physician-employees ("Professionals"), excluding only physician assistants
and nurse practitioners not required by Colorado Law to be licensed for
the provision of health care services in their role within The Practice.
7.4 It is The Practice's sole responsibility to provide all medical care and
treatment provided to patients of The Practice, and The Practice will
assure that all such
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professional medical services are provided under the supervision of a
licensed physician, and MAM shall not interfere in any way therewith.
7.5 MAM will not provide or otherwise engage in any services or activities that
constitute the practice of medicine as defined by the laws of the State of
Colorado or under Federal, local or other applicable Laws. Under no
circumstances will medical services be made available to or for The
Practice by MAM. MAM will not assign or refer patients to The Practice in
expectation of any fee for such referral and any such fee for referral of
patient is expressly prohibited and shall constitute a material breach by
MAM of its obligations and undertakings under this Agreement. MAM shall not
interfere with, control, direct or supervise any Professional or any
individual whom any Professional may employ or contract with in connection
with the care and treatment of the Professional's patients. MAM will have
no authority whatsoever with respect to the establishment of fees for the
rendition of such services, provided, however, that MAM will provide The
Practice with periodic assessments of services provided by The Practice
other than professional medical services.
7.6 The Practice and the Shareholders agree to provide medical services on
behalf of The Practice as a result of MAM's marketing efforts described
above at The Practice's usual and customary rates for such services. Each
Shareholder agrees to devote his or her entire professional time and
attention to the practice of medicine and/or medical management of other
physicians of The Practice, consistent with present practice excluding
periods of disability, illness, vacations and continuing education.
Notwithstanding the foregoing, the following activities shall not be deemed
to be in violation of this Section: (i) a Shareholder's participation as a
passive investor in health care related investments that require no
professional or management services of the Shareholder, and (ii) a
Shareholder performing medical services of the kind described in Section
8.11 below.
In no event will Shareholder's activity relating to any medical group
development or any marketing or development activity concerning his
relationship with MAM be deemed to violate this clause of the Agreement.
7.7 In addition to Shareholder's personal professional medical services, The
Practice agrees to maintain at all times an adequate staff with such
medical personnel as may be necessary to efficiently carry out the practice
of medicine on behalf of The Practice. All such medical personnel will be
duly licensed by the State of Colorado or under Federal, local or other
applicable Laws. The Practice will at all times operate The Practice in
conformity with the custom and practice of the community in which The
Practice is located. The cost of locating and retaining the services of
additional Professionals reasonably necessary for the proper operation of
The Practice shall be borne by the Practice out of Professional
Compensation, and The Practice shall maintain a minimum financial
performance
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target of $5,200,000 per calendar year of Net Revenues. MAM will negotiate
in good faith with the Practice to pay for the recruitment of professionals
necessary to achieve financial performance levels that are in excess of
minimum financial performance targets as defined in section 2.1.3 (ii).
7.8 All patient records, reports and information obtained, generated or
encountered relating to The Practice, after the Effective Date of this
Agreement, will at all times be and remain the property of the Practice,
provided that in the event this Agreement is terminated as provided for
below, copies of all billing records and supporting information (subject to
patient confidentiality rules) will be given to MAM.
8.0 COMPENSATION TO MAM AND THE PRACTICE
------------------------------------
8.1 MAM and the Practice have exercised care and diligence in determining their
respective best estimates of expenses, investment and reasonable rate of
return, of MAM in providing the non-medical management, administrative and
marketing services, personnel, office space, equipment and supplies
required by this Agreement, and based thereon, have determined that the
compensation to be paid MAM is commensurate with the reasonable value of
such services, personnel, office space, equipment, and supplies to be
provided by MAM to the Practice. As full and complete compensation for such
services, The Practice hereby agrees to pay MAM a management fee (the
"Management Fee") equal to amounts in no event less than five percent (5%)
of the cash collected by The Practice or more than thirty percent (30%) of
the Net Revenues of the Practice as conducted by The Practice.
MAM shall be entitled to receive a minimum of 5% of the cash collected per
month as payment toward MAM's minimum management fee.
8.2 On or before the fifth (5th) day of each month, with the first payment due
no sooner than 30 days after the Effective Date (provided that until the
Transfer Date the actual payments will be made by The Practice), MAM will
allocate funds as follows:
(i) First, repay to MAM any amounts loaned by MAM to the Practice
under the line of credit provided for under Section 8.3 below
(with interest accrued thereon).
(ii) Second, pay to The Practice an amount equal to 54% of the prior
month's collections; provided that this percentage shall be
reduced
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to 53% when the two liabilities identified in Schedule 7 have
been paid in full.
The determination of the amount of Professional Compensation is
attached to this Agreement in Schedule "5". The total compensation
due The Practice will equal the rate (percentage) of Professional
Compensation above, as applied against the collections of the
practice, subject to adjustment as provided below.
In the event The Practice is unable to maintain minimum production
levels of Net Revenues or cash flow as required by this Agreement,
then the rate of Professional Compensation shall be adjusted
downward by an amount sufficient to allow MAM to pay overhead
expenses of The Practice and MAM's minimum management fee of 5% of
the cash collected per month, all as provided in Section 8.3
below.
(iii) Third, reimburse MAM for operating expenses and any necessary
capital expenditures of The Practice for the preceding month;
(iv) Fourth, pay to MAM cash equal to 5% of cash collected (as
described in Schedule 5), as MAM's minimum management fee and any
cash for any deferred payment obligations; and
(v) Fifth, retain the balance, to be held on behalf of The Practice,
for future capital expenditures.
8.3 During the first calendar year of this Agreement, if the Practice has
maintained an average monthly level of production of Net Revenues equal to
1/12th of $5,200,000, and monthly cash flows fluctuate to such a level
that The Practice is unable to meet it's historical levels (1995 calendar
levels) of salary and benefit obligations to The Shareholders of the
Practice, professionally related expenditures, salaries of employed
physicians and related benefits, form the amount advanced by MAM pursuant
to Section 8.2, then, MAM shall be responsible for advancing cash to The
Practice in the form of a line of credit not to exceed $200,000 in
aggregate principal outstanding at any time. The money advanced shall bear
an interest rate of 2% per annum above the prime rate charged from time to
time by Aurora National Bank South, until fully reimbursed by The Practice.
MAM shall be repaid the principal and interest from the next available cash
flows of The Practice, as provided in section 8.2(i) above.
In the event either (i) the level of monthly cash collections decreases
below 1/12th of $5,200,000 for a period of more than six consecutive
months, or (ii) the level of The Practice's production of Net Revenues
decreases below ninety
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percent (90%) of $2,600,000 over any six month period, than the rate of
Professional Compensation shall be adjusted downward at a level to pay
overhead obligations of The Practice, MAM's minimum cash fee of 5% of
collections and payments to MAM to fully amortize the principal and
interest advanced by MAM, in the form of the line of credit, over 48 equal
monthly installment payments. Notwithstanding the foregoing, MAM shall not
be entitled to make any adjustment in the rate of Professional
Compensation as a result of occurrences under clause (i) above until the
first anniversary hereof.
8.4 The percentage of Net Revenue to be retained as Professional Compensation
by The Practice is to be determined in the following manner: The Practice
and MAM will jointly determine a percentage to be allocated to the
Professional Compensation components to insure MAM a five (5%) minimum cash
management fee is available for payment to MAM monthly on a cash basis,
from the practice after payment of the Professional Compensation component
and operating expenses. Determination of the rate of Professional
Compensation agreed upon by the Parties as of the Effective Date is
attached to this Agreement in Schedule "5". The Rate of Professional
Compensation shall only be adjusted in the event MAM is unable to receive
it's minimum cash payments equal to 5% of collections.
8.5 In the event The Practice experiences an increase in the total collections
of the practice as a result of any of the following: an increase in the
production of the Shareholders or physician/professional providers
employed by The Practice, as increase in the reimbursement per unit of
service obtained as a result of improved contracting efforts with managed
care providers, new physician recruitment and corresponding increases in
production, new satellite Medical Practice openings, practice mergers or
acquisitions on behalf of MAM and the Practice, or office relocation's,
then disbursements of excess cash flows generated from such efforts shall
be available for distribution to The Practice and to MAM as follows:
a.) All cash invested by MAM for expansion or other purposes agreed to by
The Practice and MAM (excluding amounts comprising the Cash Payment being
made by MAM to The Practice pursuant to Section 2.1.1 above) shall require
a financial return to MAM in an amount equal to the principal amount
invested plus interest calculated as a rate equal to 2% above prime rate
per annum interest as charged from time to time by Aurora National Bank
South (calculated on a variable rate, with adjustments made semi-annually)
on any outstanding principal balances, to be repaid to fully amortize
principal and interest over a ten year period from the date of said
investment. MAM shall be entitled to repayment of money invested per the
monthly payment calculation above prior to calculation of the money due The
Practice.
If termination is made by The Practice within the first four years of the
Agreement, The Practice shall be obligated to fully repay MAM 100% of the
money invested in The Practice, and not repaid to MAM through the excess
cash flows of the Practice, as of the date of termination by The Practice.
Should The
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Practice elect to repay any money invested by MAM on any term shorter than
the ten year term as described herein, The Practice shall have no
prepayment penalty.
b.) All stock invested by MAM on behalf of any proposed expansion
opportunity (excluding shares issued to The Practice) to the benefit of The
Practice or the Shareholders, shall require a cash payment of MAM equal to
50% of the market value of the stock, at the date of the issuance of the
stock. This amount shall be repaid over a 10 year period in equal monthly
installments. MAM shall be entitled to this payment prior to calculation of
the money due The Practice.
c.) All expenses associated with any expansion opportunity shall be
considered at a net cost basis for the purposes of determining distribution
of excess cash flow to be paid to The Practice.
d.) Fifth percent (50%) of all excess cash available, as a result of the
increase in cash flow generated by any expansion opportunity as listed
above, after repayment to MAM for expenses incurred as described above in
Section 8.5 a., b., c., shall be distributed to The Practice.
e). In the event any shareholder elects to leave the practice for any
reason, any excess cash flow created by this event shall be distributed in
accordance with the formula listed above.
For example only, in the event a shareholder elects to retire from
practicing medicine on behalf of The Practice and the Shareholder is
replaced with a physician who is able to practice at a lower rate of
compensation than the retiring Shareholder, then the excess cash, if any,
available to The Practice as a result of the lower compensation level of
the replacement physician shall be distributed to The Practice at a rate of
50% of the excess cash flow.
f.) Upon such time as MAM receives a 30% of total collections management
fee, then, all remaining excess cash flow shall be paid to The Practice.
8.6 In the event cash collections are inadequate to pay all of the Management
Fe due, over MAM's minimum management fee of 5%, such deficiency shall be
treated as a deferral of the portion of the Management Fee not paid. In
addition, MAM may elect to defer receipt of payment of the Management Fee
in its sole discretion. any such deferred payment will be accrued as an
obligation of the Practice to MAM and may be paid at any time funds for
such payment become available. MAM has made no representations or
warranties to the Practice that cash flows will improve over their present
levels. In no event will individual providers or shareholders of the
Practice group be held liable for MAM management fees earned but not paid.
8.7 If after payment of any monthly Management Fee it is determined, in
connection with preparation of a management report, annual report or
otherwise that any such payment was made in error, such error will be
corrected and all accounts of the parties settled by payment within five
(5) business days of such
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determination. For purpose of this Agreement, the annual report will be
conclusive and binding upon the parties, unless within sixty (60) calendar
days after receipt of such report a party notifies the other party that it
disputes one or more items included therein.
8.8 In no event shall MAM assume responsibility for negative cash flow
associated with the operation of The Practice at any time during the entire
term of this Agreement. In the event capital expenditures are required by
MAM, including but not limited to, practice expansion or capital equipment
purchases, MAM shall budget for and plan for such expenditures at least 60
days prior to such expenditures being incurred. Such expenditures shall be
documented in writing by the parties prior to incurring expenditures. MAM
shall be under no obligation to invest in the expansion of The Practice.
Notwithstanding the foregoing, The Management Committee as established in
Section 16.16, and MAM shall negotiate in good faith and a spirit of
cooperation to determine financial feasibility for said expansion efforts.
MAM acknowledges the inherent financial interests of The Practice of said
expansion opportunities and shall make a best efforts attempt to assist in
the expansion of The Practice to the mutual financial benefit of the
Parties.
8.9 MAM shall allocate needed funds to The Practice by way of a temporary
increase in the rate of Professional Compensation (from 53% to 54% as
provided in Section 8.2(ii) above) to allow the Practice to adequately
service certain specific liabilities not assumed by MAM as listed in
Schedule 7, until such time as the liabilities are paid in full. Further,
MAM shall process and make payments on behalf of The Practice for said
liabilities from the receipts of The Practice. Once the liabilities
identified in Schedule 7 have been paid in full, the rate of Professional
Compensation to be paid under Section 8.2(ii) above shall be reduced to
53%.
8.10 MAM shall accrue it's management fee from the Effective Date hereof, but no
payment of the management fee shall be made until after the Transfer Date,
assuming that MAM makes the Cash Payment required under Section 2.1.1
hereof, and then only in accordance with the provisions hereof. Between the
Effective Date and the Transfer Date, The Practice shall continue to employ
the management company with whom The Practice had contracted prior to the
Effective Date and upon the same terms and conditions as existed prior to
the Effective Date. To the extent that The Practice pays a management fee
to the existing management company, such payments shall be deducted from
the management fees accrued to MAM prior to the Transfer Date
(""Pre-Transfer Management Fees"). Notwithstanding the foregoing, MAM shall
only be paid such Pre-Transfer Management Fees to the extent that there are
excess funds available after the payment of: (i) obligations owed to MAM
for sums loaned by MAM pursuant to Section 8.3 hereof, (ii) Professional
Compensation. (iii)
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operating expenses, (iv) MAM's accrued but unpaid Management Fee, other
than the Pre-Transfer Management Fees, and (v) 50% of the funds thereafter
paid to The Practice pursuant to Section 8.5. In the event that this
Agreement is terminated under the provisions of Sections 12 or 13, The
Practice shall not be required to pay any unpaid Pre-Transfer Management
Fees and the same shall be deemed forfeited by MAM.
8.11 Certain Shareholders of The Practice may from time to time generate
revenues from consulting services, teaching and other activities
(including, for example, serving as a paid in-house physician providing
emergency coverage on behalf of a hospital at a hospital at night, on
holidays and on weekends for which the physician is paid directly by the
hospital), other business ventures, or from the production of publications,
which are not harmful to, or in conflict with the success of MAM or The
Practice. The revenues received from these activities shall be separate
from the revenues included in this Agreement or from revenues of The
Practice.
8.12 In the event that MAM and The Practice shall desire to expand The Practice
(as defined below), then the Management Committee (including MAM and The
Practice representatives) shall determine the appropriate levels of
Professional Compensation to be allocated to such expansion efforts as well
as the amounts and terms of repayment to MAM of any expenses incurred in
connection with such expansion. For purposes of this Agreement, "expansion"
of The Practice shall include the happening of one or more of the following
events: (i) increasing the number of physicians from its full time
equivalent of 10 physicians, either as additional Shareholder physicians or
as employee physicians, (ii) adding other practice locations, and (iii)
physically expanding an existing practice site.
9.0 OWNERSHIP OF LICENSES
---------------------
It is understood and agreed by the parties that the Practice will be the
holder and owner of all licenses, accreditation certification and contracts
for the provision of medical services by the Practice, and the Practice
will be the "provider" within the meaning of all agreements with third
party payers.
10.0 TERM OF MANAGEMENT AGREEMENT
----------------------------
Unless sooner terminated as herein provided, this Management Agreement will
remain in effect for a period of twenty-five (25) years, commencing on the
Effective Date of this Agreement.
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11.0 DEATH OR DISABILITY OF SHAREHOLDERS
-----------------------------------
In the event of the death of all Shareholders or the total and permanent
disability of all Shareholders (within the meaning of the largest
disability policy on the Shareholders then in effect) during the first (4)
years of this Agreement.
(i) All amounts due to the Practice as of the date of such death or
disability, shall be paid to the estates of Shareholders.
(ii) MAM shall exert its best efforts to transfer ownership of the
Practice or its assets to a new provider subject to the terms of
this Agreement, and Shareholder(s) and their heirs and successors
shall cooperate to effect such transfer. MAM shall have the
flexibility to negotiate an appropriate rate of compensation for
such new owner/provider, effective as of the date of the last
Shareholder's death or disability, and any payment received by MAM
from the new owner/provider for the practice shall belong to MAM
alone. If MAM is unable to effect such a transfer within twelve
months, this Agreement shall be deemed terminated.
(iii) If MAM is able to transfer ownership of The Practice to a new
provider as provided above, MAM shall remain obligated to pay the
Shareholders' estates the balance of the cash and stock provided
for pursuant to Section 2.1, adjusted to the extent provided
therein if the Practice and such successor provider fail to
achieve target performance levels during such four year period.
(iv) In the event that any Shareholder is unable to perform full
duties for a period of thirty (30) calendar days or longer, The
Practice shall take such actions as are necessary to maintain the
level of services to patients and the minimum production levels
required under this Agreement (without any increase in
Professional Compensation to cover the costs of taking such
actions).
12.0 TERMINATION OF AGREEMENT DURING FIRST FOUR YEARS
------------------------------------------------
This Agreement may be terminated by either MAM or The Practice at any time
up to and including the fourth anniversary date of the Effective Date for
any reason. In the event this Agreement is terminated by either MAM or
the Practice at any time during said initial four-year period, the
following actions shall be taken effective the date of such termination:
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(i) MAM will retain the accounts receivable of the Practice existing
on the date of termination, whether billed or not, on account of
services rendered by the physicians of The Practice through the
date of termination.
(ii) MAM will pay normal operating expenses and transfer moneys due The
Practice under the Professional Compensation arrangement up to and
including the date of termination.
(iii) The Practice will reacquire from MAM all tangible assets purchased
by MAM from The Practice, with the specific exclusion of all
accounts receivable, at the net book value price of the assets as
agreed to by the parties as of the Effective Date of this
Agreement, and The Practice will pay MAM cash thereafter.
(iv) The Practice will repay MAM in cash any amounts paid by MAM for
goodwill attributable to The Practice (i.e., any amounts by which
the Cash Payment made on the Transfer Date exceeds the value of
net receivables and book value of tangible assets purchased by MAM
as of the Transfer Date) up to a maximum amount of $19,076.00.
(v) The Practice will repay MAM in cash any amounts owed to MAM on
account of: (a) advances made under the line of credit described
in Section 8.3 (including both principal and interest), (b) sums
advanced by MAM for expansion and any other capital invested by
MAM in The Practice (the payment of the same being accelerated by
any such termination), and (c) any of the minimum 5% Management
Fee earned but not yet received by MAM through the date of the
termination.
(vi) The Practice will reassume all of the obligations owed under The
Practice's leases and other contracts.
(vii) The Practice will transfer back to MAM all of the original stock
certificates issued by MAM to The Practice or, in the event any of
the shares of stock have been sold or otherwise transferred by The
Practice to others prior to the termination, The Practice shall
pay MAM an amount equal to the net amount of cash received by The
Practice from any such sale, provided said sale was made in a
market transaction through a broker-dealer, or, if any prior sale
was not made through a broker-dealer then the fair value of the
shares transferred in the prior private transaction or other
transfer, at the date of such prior transfer.
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13.0 TERMINATION OF AGREEMENT AFTER FOURTH ANNIVERSARY
-------------------------------------------------
13.1 This Agreement may be terminated by either MAM or The Practice at any
time after the fourth anniversary of the Effective Date for cause (as
defined below). In the event this Agreement is terminated by either MAM or
The Practice for cause at any time after the fourth anniversary hereof,
the parties shall take all of the same actions required to be taken by
them respectively in connection with a termination under Section 12.0
above, except as is provided in Section 13.4, effective the date of such
termination.
In the event of termination under this Section 13.0 and the full payment
and performance by The Practice and the Shareholders of all of their
obligations to MAM under Sections 12(i) through (vii) above (as modified
by Section 13.4), the covenant not to compete contained in Section 15
below shall cease to be applicable.
The Practice will retain all payments from MAM to the Practice for the
purchase of any account receivable in existence as of the execution of
this Agreement and any moneys paid under Section 8.3 as advances for
Professional Compensation.
13.2 For purposes of this Section 13, The Practice may terminate this Agreement
"for cause" for any of the following reasons, provided The Practice shall
first provide written notice of the default to MAM and MAM shall have
failed to cure the default within 30 days after the giving of such notice
by The Practice (except in connection with subsections (vii) and (viii)
below for which no notice shall be required):
(i) MAM's failure to provide professional management services meeting
in all material respects the level of professional management
services provided by other medical practice management companies;
(ii) MAM's failure to provide adequate support to enable physicians
of The Practice to perform competent medical services;
(iii) MAM's repeated failure to timely make payments to The Practice
required thereunder;
(iv) MAM's violation of rules, statutes or regulations causing MAM to
lose any licenses necessary for it to operate or otherwise
causing MAM to lose the ability to operate;
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(v) MAM's conduct which results in substantial damage to the
reputation of The Practice or the physicians employed by
The Practice;
(vi) MAM's engaging in activities in violation of any statutes, rules
or regulations or any governmental or quasi-governmental agency
having jurisdiction over the stock of MAM;
(vii) The institution of MAM of proceedings of any nature under any
laws of the United States or any state, whether now existing or
subsequently enacted or amended, for the relief of debtors
wherein MAM is seeking relief as a debtor, including without
limitation a general assignment made by MAM for the benefit of
creditors, the institution by or against MAM of a proceeding
under any section or chapter of the Federal Bankruptcy Code as
now existing or hereafter amended or becoming effective, the
appointment of a receiver, trustee or like officer to take
possession of assets having a value in excess of ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) (unless such appointment has no
adverse effect upon the performance by MAM of its obligations
under this Agreement), which receivership remains undischarged
for a period of thirty (30) calendar days from the date of this
imposition; or
(viii) The issuance of a final order of any governmental agency or
court having competent jurisdiction over the parties, which order
requires such termination under this clause.
13.3 For purposes of this Section 13, MAM may terminate this Agreement "for
cause" for any of the following reasons, provided MAM shall first provide
written notice of the default to The Practice and The Practice shall have
failed to cure the default within 30 days after the giving of such
notice by MAM (except in connection with subsections (vii) or (viii)
below for which no notice shall be required);
(i) The Practice failure to provide adequate professional medical
staff or services;
(ii) The failure of the Shareholder physicians, or any one or more of
them, or the replacements, (approved by MAM) of any departing
Shareholder physician, to retain ownership of at least 51% of the
issued and outstanding stock of The Practice;
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(iii) The Practice's repeated failure to meet the annual minimum
performance targets set forth in this Agreement (as adjusted
pursuant to this Agreement);
(iv) The Practice's or the Shareholder's violation of rules, statutes
or regulations causing The Practice to lose any licenses
necessary for it to operate or otherwise causing The Practice to
lose the ability to operate;
(v) The Practice's or the Shareholder's conduct which results in
substantial damage to the reputation of MAM;
(vi) The Practice's or the Shareholder's engaging in activities
in violation of any statutes, rules or regulations of any
governmental or quasi-governmental agency having jurisdiction
over the stock of MAM;
(vii) The institution by The Practice (or its controlling
Shareholders) of proceedings of any nature under any laws of the
United States or any state, whether now existing or subsequently
enacted or amended, for the relief of debtors wherein The
Practice (or its controlling Shareholders) is/are seeking relief
as debtor(s), including without limitation a general assignment
made by The Practice (or its controlling Shareholders) for the
benefit of creditors, the institution by or against The Practice
(or its controlling Shareholders) of a proceeding under any
section or chapter of the Federal Bankruptcy Code as now existing
or hereafter amended or becoming effective, the appointment of a
receiver, trustee or like officer to take possession of assets
having a value in excess of ONE HUNDRED THOUSAND DOLLARS
($100,000.00) (unless such appointment has no adverse effect upon
the performance by The Practice (or its controlling Shareholders)
of its/their obligations under this Agreement, which receivership
remains undischarged for a period of thirty (30) calendar days
from the date of this imposition;
(viii) The issuance of a final order of any governmental agency or
court having competent jurisdiction over the parties, which order
requires such termination under this clause;
(ix) The Practice's failure for any reason to maintain in effect
adequate medical errors and omissions insurance; or
(x) Expenses associated with the management of The Practice's
medical practice exceed the budget guidelines established by The
Practice and MAM by more than ten percent (10%) for two (2)
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consecutive quarters, unless such excess expenses are due to
MAM's actions or lack of action, or MAM is unable to receive
payment of its minimum management fees under this Agreement in
cash for more than six consecutive months.
13.4 In the event of termination under this Section 13.0, the application of
Section 12.0(vii) shall be modified as follows:
(i) In the event of termination under this Section 13.0 after the
fifth anniversary of the Effective Date but on or before the
sixth anniversary of the Effective Date, The Practice shall be
obligated to transfer back to MAM eighty-seven and one-half
percent (87.5%) of the shares of stock issued by MAM to The
Practice during the first four years of this Agreement. To the
extent that The Practice has sold or otherwise transferred a
number of shares greater than 12.5% of the shares issued by MAM
to The Practice during the first four years, The Practice shall
pay MAM an amount equal to the per share price received by The
Practice from any such sale or transfer, provided said sale was
made through a broker-dealer, times the number of shares which
when added to the shares owned by The Practice at the time of
termination will equal 87.5% of the shares issued by MAM to The
Practice during the first four years. If any such sale or
transfer was not made through a broker-dealer, then the per share
fair value of the shares transferred in the private transaction
or other transfer (at the time of such transfer) shall be
applicable.
(ii) Each year thereafter, the percentage of MAM shares that The
Practice shall be obligated to return to MAM in the event of a
termination under this Section 13.0 shall be reduced by an
additional 12.5%. Thus by way of example, in the event of a
termination under this Section 13.0 after the sixth anniversary
of the Effective Date but on or before the seventh anniversary,
The Practice shall be obligate to transfer back to MAM
seventy-five percent (75%) of the shares of stock issued by MAM
to The Practice during the first four years of this Agreement;
and, in the event of a termination under this Section 13.0 after
the seventh anniversary of the Effective Date but on or before
the eighth anniversary, The Practice shall be obligated to
transfer back to MAM sixty-two and one-half percent (62.5%) of
the shares of stock issued by MAM to The Practice during the
first four years of this Agreement. In each case of a termination
under this Section 13.0 after the sixth anniversary of the
Effective Date through the twelfth anniversary of the Effective
Date, the other provisions of subsection
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(i) above shall apply as adjusted to the percentage of shares of
MAM stock that are required during the given year to be returned
to MAM. Again, by way of example, in the event of a termination
under this Section 13.0 after the seventh anniversary but on or
before the eighth anniversary of the Effective Date, to the
extent that The Practice has sold or otherwise transferred a
number of shares greater than 37.5% of the shares issued by MAM
to The Practice during the first four years, The Practice shall
pay MAM an amount equal to the per share price received by The
Practice from any such sale or transfer, provided said sale was
made through a broker-dealer, times the number of share which
when added to the shares owned by The Practice at the time of
termination will equal 62.5% of the shares issued by MAM to The
Practice during the first four years.
(iii) In the event of termination under this Section 13.0 after the
twelfth anniversary of the Effective Date, The Practice shall
have no obligation to transfer any shares of MAM stock back
to MAM.
(iv) Because of his length of vesting and proximity to retirement, as
a single exception to the foregoing, in the event of J. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, M.D. retires from The Practice at any time after the
fourth anniversary of the Effective Date and complies with the
Covenant Not to Compete set forth in Section 15.0, The Practice
shall be entitled to distribute to ▇▇. ▇▇▇▇▇▇▇▇ up to 148,000 of
the shares of MAM common stock being delivered by MAM under this
Agreement, and (except as provided in subsection (v) below), in
the event of a subsequent termination under this Section 13.0,
The Practice shall not be required to transfer such shares or the
fair value of such shares back to MAM under the terms of
subsections (i) or (ii) above; provided, however, that the number
of shares distributed to ▇▇. ▇▇▇▇▇▇▇▇ shall be counted first
against the number of shares that The Practice is entitled to
retain (and not return to MAM) in accordance with subsections (i)
and (ii) above. Thus, for example, if ▇▇. ▇▇▇▇▇▇▇▇ retires six
months after the fourth anniversary of the Effective Date and
receives 148,000 shares of MAM common stock from The Practice
upon his retirement, and this Agreement is terminated by The
Practice for cause under this Section 13.0 six months after the
fifth anniversary of the Effective Date, then, although
subsection (i) would otherwise require The Practice to return to
MAM 87.5% of the MAM shares received by The Practice during the
first four years, this exception would permit The Practice to
return only that number of MAM shares that it had received in
the first four years less the 148,000 shares distributed to
▇▇. ▇▇▇▇▇▇▇▇ (regardless of the fact that the
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percentage of total shares so returned to MAM might be less than
87.5%). On the other hand, if ▇▇. ▇▇▇▇▇▇▇▇ retires six months
after the fourth anniversary of the Effective Date and receives
148,000 shares of MAM common stock from The Practice upon his
retirement, and this Agreement is terminated by The Practice for
cause under this Section 13.0 six months after the eighth
anniversary of the Effective Date, then, subsection (ii) would
require The Practice to return to MAM 50% of the MAM shares
received by The Practice during the first four years, and this
exception would not permit The Practice to return less than 50%
(assuming The Practice had received at least 296,000 shares of
MAM stock during the first four years).
(v) Notwithstanding the foregoing limitations contained in
subsections 13.4 (i) through (iv) above, in the event of a
termination by The Practice under this Section 13.0 which is
determined to have been wrongful (i.e., without cause, as defined
in Section 13.2), the foregoing limitations shall not be
applicable and MAM shall not be precluded from pursuing any or
all available remedies, whether at law, in equity or otherwise,
including without limitation, actions to recover all of the
shares of stock issued by MAM to The Practice during the first
four years of this Agreement (or the fair value thereof), other
actions for damages, and other rights and remedies, all of which
shall be cumulative and none of which shall be exclusive of any
other right or remedy.
14.0 TERMINATION GENERALLY
---------------------
14.1 Upon any termination of this Agreement, all obligations of each party
toward the other under the management and administrative provisions of
this Agreement will cease except that termination of this Agreement will
not relieve either party or any obligation to the other in accordance with
the terms of this Agreement with respect to services performed prior to
termination, The Practice will continue to assign to MAM all accounts
receivable for medical services rendered up to and including the
termination date of this Agreement and MAM will continue to collect upon
claims according to all of the provisions of this Agreement. The Practice
will remain obligated to pay MAM any earned but uncollected amounts of
MAM's minimum 5% Management Fees. The parties agree to the cessation of
MAM's involvement with the non-medical administrative aspects of The
Practice effective as of the date of termination. The various rights and
remedies herein provided for will be cumulative and in addition to any
other rights and remedies and will not impair the right of either party to
exercise any right or remedy at law or in equity.
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14.2 After the fourth anniversary of this Agreement, any Shareholder(s) may,
in his/her sole discretion, with 180 days written notice to MAM,
discontinue providing professional services in The Practice, subject to
the covenant not to compete provisions in Section 15.0 below. In the event
of such a notice, The Practice will assist MAM in a reasonable fashion, to
transfer departing physician's practice, including any and all
professional obligations to the patients of The Practice, to a new
physician provider designated by MAM. Shareholders shall not withhold
approval of MAM's designated physician(s).
The Practice shall cooperate with MAM to facilitate the long term survival
of The Practice and at all times during the term of this Agreement work
diligently with MAM, to replace any departing Shareholder with a qualified
medical provider to maintain the financial performance of The Practice.
15.0 COVENANT NOT TO COMPETE
-----------------------
So long as this Agreement has not been terminated pursuant to a breach by
MAM, and subject to a court of competent jurisdiction determining that
such breach by MAM has occurred, each Shareholder and The Practice hereby
agrees, during the term of this Agreement and for a period of two (2)
years after any termination hereof (or after any individual Shareholder
ceases to be employed by The Practice, in the case of individual
Shareholder departures):
(i) not to solicit or employ any employees of MAM without the
express written advance permission of MAM;
(ii) not directly or indirectly to work for, own, manage, operate,
control, finance, organize or take preparatory steps for the
organization of, invest in, or in any manner whatsoever
participate in the ownership of or be affiliated with any
business or enterprise, or permit Shareholder's or The Practice's
name to be used or employed in connection with any business or
enterprise, engage in, or otherwise engage in, the practice of
medicine in the specialties of obstetrics, gynecology or any
other specialty or subspecialty area that would be in competition
with The Practice, within the primary service area of The
Practice, which area the parties agree is a ten (10) mile radius
around each of the offices of The Practice (the "Covenant Not To
Compete"); and
(iii) not to enter into any Agreement or understanding with any other
person or entity to retain such other person or entity to perform
any of the services to be rendered by MAM as described herein.
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Notwithstanding the foregoing, the parties agree that the
performance by a Shareholder of the activities described in
Section 8.11 above shall not constitute a breach or violation of
this Covenant Not To Compete.
15.1 The parties hereby agree that the nature, duration and area for which the
Covenant Not To Compete is to apply is reasonable and fair to the parties.
In the event that any court of competent jurisdiction should render a
final judgment to the effect that the industry covered, time period or
area, or any of them, are unreasonable and that such covenant is to the
extent unenforceable, the parties hereto agree that the Covenant Not To
Compete will remain in full force and effect for the broadest industry
description, the greatest time period and in the greatest areas that would
not be rendered unenforceable. The parties further agree that damages are
an inadequate remedy for any breach of this covenant, and that MAM will be
entitled to seek and obtain equitable relief in the form of preliminary
and permanent injunction without bonds or other security being posted upon
any actual or threatened breach of the Covenant Not To Compete and without
the necessity or proving actual damages.
15.2 In addition to the remedy provided for in Section 15.1, and recognizing
MAM's legitimate and material concerns, each Shareholder agrees that if he
or she violates the terms of this Covenant Not To Compete during the term
of this Agreement or within two (2) years after termination of that
Shareholder's employment with The Practice, MAM shall be entitled to the
following from the Shareholder (in addition to any amounts the Shareholder
may be obligated to pay to The Practice under separate agreements): (i)
liquidated damages in an amount equal to one year's salary calculated as
the average of the Shareholder's W-2 income from The Practice for the most
recent two full years (provided that in no event shall this liquidated
damages sum be less than $175,000), and (ii) a return to The Practice of
any and all shares of MAM common stock that might have been transferred by
MAM or The Practice to the Shareholder (without compensation or any kind
by The Practice or MAM to the Shareholder for such return to The
Practice). The parties mutually acknowledge and agree that the foregoing
reasonably reflects MAM's liquidated damages resulting from a
Shareholder's violation of this Covenant Not To Compete inasmuch as it
takes approximately twelve months to recruit a replacement for such
Shareholder and to replace such Shareholder's profitability and a
breaching Shareholder should not be permitted to enrich himself or herself
through the ownership of MAM common stock received in connection with his
or her relationship with MAM and/or The Practice. The Shareholder shall
pay such amount of liquidated damages to MAM in cash within thirty (30)
days after commencement of the violation. Nothing in this Agreement,
however, shall be construed as to prohibit MAM from also pursuing any
other remedy, the parties having agreed that all remedies shall be
cumulative.
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A Shareholder may be released from this Covenant Not To Compete by paying
MAM the liquidated damages amount set forth in this Section 15.2 and by
returning the aforedescribed shares of MAM common stock to The Practice
within thirty (30) days after the commencement of a violation of this
Covenant Not To Compete.
In the event the Shareholder fails to return the aforedescribed shares of
MAM common stock to The Practice as provided herein, following a violation
of this Covenant Not To Compete, MAM shall have the right (but not the
obligation), without further notice to or demand on the Shareholder, to
rescind and cancel any such shares or MAM common stock then held by the
Shareholder and reissued replacement shares to The Practice.
15.3 The Practice and each Shareholder hereby consent to MAM's use of
Shareholder's, or The Practice's name, or such name as The Practice uses
as fictitious name(s), to manage and administer the non-medical aspects of
The Practice pursuant to this Agreement.
15.4 The Practice hereby acknowledges and agrees that MAM is free to enter into
service agreements, subject to the limitations as described below, with
other physicians and facilities to provide management and administrative
services similar to those contemplated herein, even where such entities
may be in direct or indirect competition with The Practice.
MAM agrees that MAM shall not enter into agreements with other physicians
in the practice of obstetrics and gynecology in the "competitive region"
defined as the immediate service area of Aurora Regional Medical Center,
Aurora Presbyterian Hospital, St. Anthony's North Hospital, North Suburban
Medical Center, Rose Medical Center and Summit Medical Center without the
express written approval of The Practice. Notwithstanding this
understanding, however, in the event The Practice is unable to assist MAM
in completing agreements with other obstetrics and gynecology practices in
these "competitive region" service areas, over the first six months of
execution of this Agreement, then The Practice must allow MAM to continue
to further the development of the MAM Network to include these
"competitive region" service areas. MAM will, however, work on a best
effort's basis with The Practice to enhance the business of The Practice
and allow for a combining of mutual interests concerning a network
development strategy.
Further, MAM has notified The Practice of certain other practices that
have negotiated with MAM and desire to continue to negotiate and may as a
result of negotiations, consummate a transaction with MAM. These
practices represent no material threat of competition to The Practice
based upon open discussion with the shareholders of The Practice, or
negative impact to MAM's goal to increase the profitability of The
Practice, or threat of injury to the goal of building
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and promoting an OB-GYN network in the "competitive region" service area.
Further, these transactions will in no event impede or hinder relations
with The Practice and MAM.
16.0 GENERAL PROVISIONS
------------------
16.1 All notices, requests, demands and other communications relating to this
Agreement shall be in writing and shall be deemed given if delivered
personally or three (3) days after mailed by certified or registered mail,
postage prepaid, return receipt requested, to the party intended to
receive the same at such party's address as set forth herein or at such
other address as the parties may designate by written notice in said
manner. The initial addresses of the parties shall be as follows:
If to MAM; Medical Asset Management, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to The Practice
or any Shareholder: The OB-GYN Associates, P.C.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
16.2 The rights, obligations and undertakings of the respective parties hereto
shall not be assigned, by operation of law or otherwise, without the prior
written consent or the other party hereto, except that MAM shall have the
ongoing right to assign any and all accounts receivable purchased herein,
after payment of money due on the Transfer Date.
16.3 This Agreement shall be governed by and construed and enforced in
accordance with the laws and procedures of the State of Colorado without
regard to choice or conflicts of law principles. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, and all of which shall be construed together to constitute one
and the same Agreement.
16.4 This Agreement, the Exhibits and Schedules hereto and the documents
delivered or to be delivered pursuant to this Agreement contain or will
contain the entire Agreement between the parties hereto with respect to
all matters referred to herein and there are no Agreements, undertakings,
covenants or conditions concerning the subject matter hereof, whether oral
or written, express or implied, that are not merged herein and superseded
hereby. This Agreement supersedes in its entirety and is in lieu of all
prior negotiations among the parties hereto.
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16.5 Any provision of this Agreement which is determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable for any
reason shall be ineffective only to the extent by such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof which shall remain in full force and effect.
16.6 Time is of the essence of this Agreement. No recourse of dealings between
the parties nor any failure, neglect or delay by either party in
exercising any of the rights described herein shall operate as a waiver,
forfeiture or abandonment of any such rights, except only to the extent
expressly waived in writing.
16.7 Each party hereto agrees to perform any and all further acts and to
execute and deliver any and all documents and instruments that reasonably
may be necessary to carry out the provisions of this Agreement.
16.8 Any controversy, dispute or claim arising out of, in connection with or in
relation to the interpretation, performance or breach of this Agreement
including any claim based on contract, tort or statute, shall be
conclusively resolved, at the request of either party, by arbitration
conducted in the Denver Metropolitan Area by and in accordance with the
then-existing Rules for Commercial Arbitration of the American Arbitration
Association, except there shall be only one (1) arbitrator and the rules
applicable to discovery in civil actions generally shall be available to
both parties up to but not exceeding that date which is one hundred twenty
(120) calendar days next following the filing of the petition for
arbitration by either party hereto. A judgment based upon the
determination made in such arbitration may be entered by any state or
federal court having jurisdiction thereof. As part of the award, the
arbitrator shall allocate in his or her discretion all costs of the
arbitration, including the fees of the arbitrator and reasonable
attorney's fees and costs incurred by the prevailing party. The arbitrator
shall be entitled, if appropriate, to award any remedy in such proceedings
permitted in a civil proceeding under the laws of the State of Colorado
including, if appropriate, monetary damages, specific performance and all
other forms of legal and equitable relief.
16.9 Each party hereby agrees to fully cooperate with the other in the defense
or prosecution or any action or proceeding already instituted or which may
hereafter be instituted by such party relating to or arising out of the
handling of the Assets and/or Medical Practice Management Business prior
to or after the Effective Date of this Agreement (other than litigation's
arising out of the transactions contemplated by this Agreement). The party
requesting such cooperation shall pay to or reimburse the other party for
such other party's out-of-pocket expenses incurred (including reasonable
attorney's fees and disbursements) in providing such cooperation but will
not be responsible for
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reimbursing a party providing such cooperation while assisting in such
party's defense against any action or proceeding brought against such
party.
16.10 MAM is an independent contractor with respect to the provision of
personnel, supplies, office space, as described herein, equipment,
non-medical management and administrative and marketing services described
in this Agreement. Nothing contained herein shall be construed as creating
any other type of relationship between The Practice and MAM other than the
relationship of independent contractors. As such The Practice and
Professionals will have no claim under the Agreement or otherwise against
MAM for Workers' Compensation, unemployment compensation, sick leave,
vacation pay, retirement benefits, Social Security benefits or any other
employee benefits, all of which shall be the sole responsibility of The
Practice. Because the Practice and Professionals are not employees of MAM,
MAM will not withhold on behalf of the Practice or Professionals any sums
of income tax, unemployment insurance, Social Security or otherwise, and
all such withholdings, if any are required, will be the sole
responsibility of the Practice. The Practice will indemnify and hold
harmless MAM from and defend MAM against any and all losses or
liabilities, costs and expenses (including without limitation MAM's
reasonable attorney's fees and costs) arising with respect to any of the
foregoing benefits or withholding requirements for the Practice and
Professionals. MAM is specifically not in the business of supervising
medical providers or the provision of care or monitoring, or consulting
with physicians as to the provision of medical services.
16.11 The Shareholders of The Practice may elect from time to time, to invite
new physicians to become shareholders of The Practice. The Management
Committee shall establish the amount of shares and the income distribution
available for new shareholders. In no event shall J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
an Individual, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D., an Individual, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
M.D., an Individual, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, M.D., an Individual, and ▇▇▇▇▇
▇▇▇▇▇▇▇▇, M.D., an Individual, collectively being designated as
"Controlling Shareholders" dilute their collective interests in The
Practice to such a level as to lose legal control of The Practice. The
Controlling Shareholders of The Practice specifically agree to maintain
controlling interest in The Practice. Controlling interest in The Practice
shall mean that at all times in the future after the Effective Date of
this Agreement, the Controlling Shareholders or any combination of the
Individuals as listed above shall hold a majority interest in The
Practice. For example only, in the event all of the individuals listed
above, less one, had left the practice for any reason, the remaining
Controlling Shareholder shall own at least 51% of the stock of The
Practice. Upon such time as the last remaining Controlling Shareholder
departs the practice, MAM shall designate a new Controlling Shareholder
and the departing shareholder shall transfer the Controlling Shares of
Stock in The Practice to MAM's designated physician. This section may
require modification during the term of The Agreement in order to allow
for the
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retention of qualified medical providers by The Practice. In the event it
becomes necessary to modify this specific section of The Agreement,
written consent must be obtained by MAM and The Management Committee.
The Shareholders and The Practice hereby represent and warrant to MAM that
nothing in this section is contrary to the By-Laws or Article of
Incorporation of The Practice or any Shareholder or Employment agreement
executed by The Controlling Shareholders, and all the aforementioned
agreements have been modified to accurately reflect the terms of this
Section.
16.13 This Agreement may not be amended except by a writing signed by the
parties hereto. This Agreement shall, in all cases, be construed simply
according to its fair meaning, and not strictly for or against either
party by reason of draftsmanship or otherwise.
16.14 MAM will in good faith consider with The Practice any proposals by The
Practice that MAM finance the acquisition of additional medical practices
identified by The Practice as strategic acquisition targets that offer the
potential of furthering the growth and development of The Practice. The
definite financial arrangements between The Practice and MAM relative to
the acquired practices will be determined at the time of the acquisition.
16.15 Both Parties agree that by executing this Agreement, the records and
filings of The Practice and of MAM and the information contained therein
are confidential and constitute valuable trade secrets of both parties and
specifically, MAM's Asset Purchase and Management Agreement constitute
valuable trade secrets. Therefore, neither party shall disclose or divulge
any of said information it has acquired concerning the business of the
other party to any third parties and shall not utilize said information in
any respect, except as is set forth in this Agreement, without the express
written consent of the other party. The parties agree that the provisions
of this Paragraph shall be enforceable in damages and further agree that
in the event that damages cannot be readily determined, the provisions of
this Paragraph are specifically enforceable in a suit for equitable
relief, including injunctive relief. In any suit for equitable relief, the
prevailing party shall be entitled to an award of reasonable costs and
expenses incurred, including but not limited to court costs, expert
witness fees and reasonable attorney fees.
16.16 A Management Committee shall be established with equal representation of
The Practice and MAM. This committee shall be responsible for establishing
operating guidelines and budgets for:
Staffing Requirements of The Practice
Administrative and management personnel issues
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Employee related benefits and policies
Capital expenditures
Practice acquisitions
Practice expansion issues which shall include facilities improvements,
new office locations, office closures and physician recruitment
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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The Effective Date of this Agreement shall be December 31, 1995.
Medical Asset Management, Inc.,
a Delaware Corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, President,
MAM, Inc.
Individual (s)
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
---------------------------------
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.,
An Individual,
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.,
An Individual,
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.,
An Individual,
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, M.D.,
An Individual,
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.,
An Individual.
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The OB-GYN Associates, P.C.
A Professional Corporation
President
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
THE OB-GYN ASSOCIATES, P.C.
A PROFESSIONAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.,
a shareholder
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
---------------------------------
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.,
a shareholder
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.,
a shareholder
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.,
a shareholder
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, M.D.,
a shareholder
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.,
a shareholder
44
