EXHIBIT 10.7
MANAGEMENT SERVICE AGREEMENT
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THIS MANAGEMENT SERVICE AGREEMENT (this "Agreement") is made and entered
into as of the 1st day of October, 1997, by and between NEPHROLOGY ASSOCIATES OF
NORTHERN ILLINOIS, LTD., an Illinois medical corporation (the "Company"), and
EVEREST HEALTHCARE SERVICES CORPORATION, a Delaware corporation (the "Manager").
WHEREAS, the Company employs physicians and personnel with expertise in
providing dialysis treatment and other dialysis-related services to patients;
WHEREAS, the Manager is experienced in the administration of companies that
provide medical services to patients; and
WHEREAS, the Company and the Manager desire to memorialize their
arrangement regarding the provision of management and administrative services by
the Manager to the Company.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DUTIES OF MANAGER.
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A. The Company hereby engages the services of the Manager and the Manager
agrees to perform services for the Company, subject to the direction, control
and approval of the Board of Directors of the Company, effective as of October
1, 1996 (the "Effective Date"). The management and administrative functions to
be provided by the Manager shall include without limitation, the following:
i. Performance of general executive and administrative services,
including without limitation, periodic advice and consultation
with respect to the Company's strategic affairs;
ii. Performance of all administrative and accounting functions,
including:
(1) hiring and payroll processing,
(2) personnel and benefit administration,
(3) billing and collection of accounts receivable,
(4) contracting and accounts payable,
(5) financial statements and tax return preparation, and
(6) insurance management;
iii. Maintenance of professional liability, general liability and
property insurance for the actions of its employees, in such
reasonable amounts, with such companies and on such terms and
conditions as the parties may agree; and
iv. Undertaking such other corporate, managerial and related
strategic services as the Company may from time to time
reasonably request.
B. Notwithstanding anything to the contrary contained herein, Manager
shall only be required to devote such time to the performance of its duties
hereunder as is reasonably necessary for Manager to perform its duties
hereunder. The Company acknowledges and agrees that the Manager may engage in
other business activities without the consent of the Company.
C. The officers and employees of the Manager shall be experienced in the
business and administration of physician practice management and they shall have
obtained sufficient knowledge to efficiently and effectively administer the
operations of the Company.
2. TERM.
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The initial term of this Agreement shall commence on the Effective Date and
shall continue for a period of five (5) years (the "Initial Term"). Thereafter,
this Agreement shall automatically renew for consecutive one (1) year renewal
terms, unless either party provides the other party with written notice of its
intent to terminate this Agreement upon at least ninety (90) days' prior written
notice. In the event this Agreement shall be extended and renewed as herein
provided, except as expressly modified in writing by the parties, all terms,
conditions and provisions of this Agreement shall continue to apply to any
extension hereof. Notwithstanding the termination of this Agreement, any
provisions that are intended to survive termination of this Agreement, including
the obligation to pay any accrued compensation, shall continue with full force
and effect.
3. COMPENSATION.
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In consideration of the services, covenants and agreements agreed to be
performed by the Manager pursuant to this Agreement, the Company agrees to pay
the Manager the sum of Eight Hundred Twenty-Five Thousand Dollars ($825,000) per
year, payable in twelve equal annual installments, plus $40.52 per each acute
treatment billed and otherwise administered by the Manager. The amounts payable
under this Section 3 shall be adjusted periodically to provide for changes in
services and inflation, as mutually agreed between the parties.
4. EXPENSES.
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In addition to the amounts payable under Section 3 above, the Company shall
reimburse the Manager for reasonable out-of-pocket costs and expenses reasonably
incurred by the Manager in connection with performing its services hereunder.
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5. INDEMNITY.
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The Company agrees to indemnify and hold harmless the Manager, its
controlling persons and each director, officer, shareholder and employee
thereof, from and against any and all losses, claims, liabilities, suits, costs,
damages and expenses (including attorneys' fees) arising as a result of this
Agreement and/or the relationship of the parties hereunder.
6. RESTRICTIVE COVENANTS.
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A. The Company covenants and agrees that during the term of this Agreement
and for a period of two (2) years from and after the termination of this
Agreement for any reason, the Company shall not directly or indirectly: (i)
take any action to divert or disrupt any of the existing business carried on by
the Manager; or (ii) induce, influence, or attempt to influence any of the
Manager's employees to alter or terminate their employment with the Manager.
B. Neither party shall at any time during the term of this Agreement, or
anytime thereafter, use for its own benefit (except as may be required to carry
out its duties under this Agreement) or divulge, furnish, or cause to be
divulged or furnished, or make accessible to any corporation, partnership, joint
venture, person or entity, any confidential knowledge or information, including
without limitation, patient lists, addresses, telephone numbers and other
patient specific information, books, records, financial statements or other
financial information, supplier information, contracts or information relating
to the business and affairs of the other party, which it may have obtained from
the other party during the term of this Agreement. Upon termination of this
Agreement, each party shall promptly deliver to the other party all files,
patient lists and information, memoranda, plans, records or written materials of
any kind of the other party, which are then in its possession or under its
control.
C. The parties agree that damages will not sufficiently compensate for a
breach of this Section 6, and that in the event of such a breach, the non-
breaching party shall have the right to petition a court of competent
jurisdiction for an injunction or for other equitable relief in addition to all
other remedies allowed by law. In the event the non-breaching party is
successful in a lawsuit enforcing the provisions of this Agreement then, in
addition to all other remedies, the non-breaching party shall be entitled to
recover all costs of litigation, including reasonable attorney's fees, from the
other party.
D. In the event of a violation by a party of the covenants contained in
this Section 6, it is mutually agreed that the term of the covenants shall be
automatically extended against the breaching party for a period of two (2) years
from the date on which the party permanently ceases such violation or for a
period of two (2) years from the date of the entry by a court of competent
jurisdiction of a final order or a judgment enforcing the covenants, whichever
period is earlier. The extension of the term of the covenants provided in this
Section 6 shall be in addition to, and not in lieu of, the remedies provided in
Section 6(C) above.
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E. If a court of competent jurisdiction should declare the covenants
contained in this Section 6 unenforceable because of any unreasonable
restriction of duration or scope, then the parties hereby acknowledge and agree
that such court shall have the express authority to reform the covenants to
provide for reasonable restrictions and/or grant such other relief at law or in
equity reasonably necessary to protect the interests of the parties.
F. Each of the parties warrants and represents that it: (i) is familiar
with restrictive covenants; (ii) has concluded that such obligations, including,
without limitation, the right to equitable relief contained herein, are
reasonable; and (iii) is fully aware of the duties, responsibilities,
obligations and liabilities imposed upon the parties by this Agreement. Each of
the parties hereto acknowledges, each to the other, that the restrictive
covenants contained in this Agreement are fair, reasonable and just, under the
circumstances, and not a penalty.
7. MISCELLANEOUS.
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A. Governing Law. The validity, construction, interpretation and
enforceability of this Agreement and the capacity of the parties shall be
determined and governed by the laws of the State of Illinois.
B. Assignment. The Company may not assign this Agreement without the
express written consent of the Manager which shall not be unreasonably withheld;
provided, however the Manager may assign this Agreement without the consent of
the Company.
C. Status of Parties. The parties acknowledge that the Manager is acting
as an independent contractor, retaining control over and responsibility for its
own operations and personnel. Neither the Manager nor its employees shall be
considered employees or agents of the Company as a result of this Agreement or
the services provided hereunder.
D. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered in person or deposited
in the U.S. mail, registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company:
Nephrology Associates of Northern Illinois, Ltd.
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Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
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If to the Manager:
Everest Healthcare Services Corporation
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address as either party may designate in writing to the other
party in accordance with this Section 7(D).
E. Waiver of Breach. The waiver by a party of a breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach of the same or any other provision hereof by
that party.
F. Severability. The provisions of this Agreement shall be severable and
the invalidity of any provision or portion thereof shall not affect the validity
of the other provisions.
G. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same agreement.
H. Limited Renegotiation. This Agreement shall be construed to be in
accordance with any and all applicable federal and state laws, including,
without limitation, Medicare, Medicaid and other federal and state statutes,
rules, regulations, principles and interpretations. In the event there is a
change in Medicare, Medicaid or other federal or state statutes, rules,
regulations, principles or interpretations that renders any of the material
terms of this Agreement unlawful or unenforceable, including any services
rendered or compensation to be paid hereunder, either party shall have the
immediate right to initiate the good faith renegotiation of the affected term or
terms of this Agreement, upon notice to the other party, or remedy such
condition. Should the parties be unable in good faith to renegotiate the term
or terms so affected so as to bring it/them into compliance with the statute,
rule, regulation, principle or interpretation that rendered it/them unlawful or
unenforceable within thirty (30) days of the date on which notice of a desired
renegotiation is given, then either party shall be entitled, after the
expiration of said initial thirty (30) day period, to terminate this Agreement
upon thirty (30) days
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written notice to the other party; provided, that if the Agreement is terminated
by the Manager, the terms of Section 6 hereof shall survive such termination as
provided therein.
I. Force Majeure. If either party is delayed or prevented from fulfilling
any of its obligations under this Agreement by Force Majeure, such party shall
not be liable under this Agreement for the delay or failure. "Force Majeure"
means any cause beyond the reasonable control of a party, including but not
limited to an act of God, act or omission of civil or military authorities of a
state or nation, fire, strike, flood, riot, war, delay of transportation, or
inability due to any of these causes to obtain necessary labor, materials or
facilities.
J. Collateral Agreements. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and there are no
representations, warranties or commitments with respect to the subject matter
hereof, other than as set forth herein. This Agreement may be amended only by
an instrument in writing executed by the parties hereto.
K. No Referrals. Notwithstanding anything contained in this Agreement to
the contrary, in no event shall any provision contained in this Agreement be
construed as requiring or otherwise obligating the Manager or any of its
Affiliates to refer patients to, or otherwise generate business for, the
Company. As used in this Agreement, the term "Affiliate" shall mean a person or
entity that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, such party.
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IN WITNESS WHEREOF, the Company and the Manager have caused this Agreement
to be duly executed and delivered as of the Effective Date.
COMPANY:
NEPHROLOGY ASSOCIATES OF NORTHERN
ILLINOIS, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇
President
MANAGER:
EVEREST HEALTHCARE SERVICES
CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
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