BUSINESS MANAGEMENT AGREEMENT
This Business Management Agreement is made and entered into effective as of
January 1, 1998, by and between Vision Twenty-One, Inc., a Florida corporation
("Business Manager"), and Xxxxxxx X. Xxxxxxx, O.D. and Xxxxxx X. Shack, O.D.,
P.A., a professional association, organized and existing under the laws of the
State of New Jersey (the "Practice").
R E C I T A L S
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A. The Practice is a professional association duly organized and
validly existing under the laws of the State of New Jersey (the "State") which
is engaged in the provision of Professional Eye Care Services (as defined below)
at 19 locations to the general public in the State through individual
Professionals (as defined below) who are licensed to practice optometry in the
State and who are employed or otherwise retained by the Practice.
B. Business Manager is a corporation duly organized and validly
existing under the laws of the State of Florida and is qualified to do business
under the laws of the State.
C. The Practice desires to devote substantially all of its energies,
expertise and time on the delivery of Professional Eye Care Services to
patients.
D. The Practice desires to engage Business Manager to provide
facilities, equipment and such management, administrative and business services
as are necessary and appropriate for the day-to-day administration of the
non-optometric aspects of the Practice's professional eye care practice and
optical retail locations, and Business Manager desires to provide such, upon the
terms and conditions hereinafter set forth, for the purpose of enhancing the
cost-efficiency and quality of services rendered by the Practice to its
patients.
NOW, THEREFORE, for and in consideration of the mutual agreements, terms,
covenants and conditions contained herein and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree as follows:
1. DEFINITIONS. For the purposes of this Business Management
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Agreement, the following terms shall have the following meanings ascribed
thereto, unless otherwise clearly required by the context in which such term is
used:
1.1. Account. The term "Account" shall mean the bank account described
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in Sections 3.9 and 3.10(a) and (c).
1.2. Acquisition Transaction. The term "Acquisition Transaction" shall
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mean the completed transactions described in the Asset Purchase Agreement
entered into by and among the Business Manager, the Practice and Xxxxxx X.
Shack, O.D., P.A.
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1.3. Adjusted Gross Revenue. The term "Adjusted Gross Revenue" shall
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mean all revenues, for Professional Eye Care Services and any other revenues,
calculated on an accrual basis under GAAP, generated by or on behalf of the
Practice and for Xxxxxx X. Shack, O.D., P.A. and Capitation Revenues during the
term of this Business Management Agreement, including, without limitation, all
technical fees from ancillary services, all proceeds from key person life
insurance policies purchased by Business Manager in accordance with Section
3.15, all amounts paid by third parties for contractual liabilities, and all
consultant, teaching and expert witness fees except for those fees set forth in
Exhibit 1.3 (unless the time and efforts of the individuals responsible for such
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excluded revenues are materially greater than the historical time or efforts
expended in obtaining such revenues or if such excluded revenues historically
flowed through the Practice), minus any allowances for bad debts, uncollectible
accounts, Medicare, Medicaid and other payor contractual adjustments, discounts,
workers' compensation adjustments, reasonable professional courtesies, and other
reductions in collectible revenue that result from activities that do not result
in collectible charges.
1.4. Agreement or Business Management Agreement. The term "Agreement"
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or "Business Management Agreement" shall mean this instrument as originally
executed and delivered, or, if amended or supplemented, as so amended or
supplemented.
1.5. Budget. The term "Budget" shall mean an operating budget and
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capital expenditure budget for each fiscal year as prepared in accordance with
Section 3.11(a).
1.6. Business Manager. The term "Business Manager" shall have the
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meaning set forth in the Recitals hereto.
1.7. Business Manager Consent. The term "Business Manager Consent"
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shall mean the consent granted by Business Manager's representatives (or either
representative) to the Practice Advisory Council created pursuant to Article II
herein, which consent shall not be unreasonably withheld or delayed and shall be
binding on the Business Manager.
1.8. Business Manager Expense. The term "Business Manager Expense"
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shall mean an expense or cost incurred by the Business Manager, for which the
Business Manager is financially liable and is not entitled to reimbursement from
the Practice. Business Manager Expense shall specifically include: (a) any
amortization of intangible assets resulting from the Acquisition Transaction,
(b) any income or franchise taxes of the Business Manager, (c) expenses and
costs relating to the acquisition of any other health care companies unless all
or a specific portion of such expenses and costs are approved as an Office
Expense by the Practice Advisory Council, or unless the Practice participates in
the acquisition through the Practice's acquisition of optometric assets of an
acquired optometric practice, and (d) any other expense or cost incurred by
Business Manager that are not reasonable and customary reimbursements based upon
a usual national practice management company's arrangement with a practice.
1.9. Capitation Revenues. The term "Capitation Revenues" shall mean
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all collections from managed care organizations or third-party payors where such
payment is made
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periodically on a per member basis for the partial or total needs of a
subscribing patient, less amounts that are payable to other providers of health
care items and services to capitation patients. Capitation Revenues shall
include any co-payments and incentive bonuses received as a result of a
capitation plan.
1.10. Clinical Personnel. The term "Clinical Personnel" shall mean
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those individuals who are (to the extent permitted by law) employed by or
otherwise under contract or associated with Business Manager as technicians or
similar positions, except for Professionals. In the event that such individuals
are not permitted by the laws of the State to be employed by or otherwise under
contract with Business Manager, such individuals shall instead be employed by or
under contract with the Practice, and all expenses associated with the
employment of or contracting with such individuals shall be Practice Expenses.
1.11. Confidential Information. The term "Confidential Information"
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shall mean any information of Business Manager or the Practice, as appropriate
(whether written or oral), including all business management or economic
studies, patient lists, proprietary forms, proprietary business or management
methods, marketing data, fee schedules, or trade secrets of the Business Manager
or of the Practice, as applicable, whether or not such Confidential Information
is disclosed or otherwise made available to one Party by the other Party
pursuant to this Business Management Agreement. Confidential Information shall
also include the terms and provisions of this Business Management Agreement and
any transaction or document executed by the Parties pursuant to this Business
Management Agreement. Confidential Information does not include any information
that the receiving party can establish (a) is or becomes generally available to
and known by the public or optometric community (other than as a result of an
unpermitted disclosure directly or indirectly by the receiving party or its
affiliates, advisors, or Representatives); (b) is or becomes available to the
receiving party on a nonconfidential basis from a source other than the
furnishing party or its affiliates, advisors or Representatives, provided that
such source is not and was not bound by a confidentiality agreement with or
other obligation of secrecy to the furnishing party of which the receiving party
has knowledge; or (c) has already been or is hereafter independently acquired or
developed by the receiving party without violating any confidentiality agreement
with or other obligation of secrecy to the furnishing party.
1.12. GAAP. The term "GAAP" shall mean generally accepted accounting
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principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity or other practices and procedures as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of the determination. All
financial reporting which is required pursuant to this Agreement to be made in
conformity with GAAP shall also be prepared in a manner acceptable to the
Securities and Exchange Commission for reports made pursuant to the Securities
and Exchange Commission's rules and regulations.
1.13. Local Advisory Council. The term "Local Advisory Council" shall
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have the meaning set forth in Section 2.10 of this Agreement.
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1.14. Management Fee. The term "Management Fee" shall mean the Business
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Manager's compensation established as described in Article V hereof.
1.15. Management Services. The term "Management Services" shall mean
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the business, administrative, and management services to be provided for the
Practice, including, without limitation, the provision of equipment, inventory
and supplies (including the use of all assets owned by Business Manager which
are located at the Office on the effective date hereof), support services,
personnel (including Clinical Personnel but excluding Professionals), office
space leased directly by Vision 21 management, administration, financial record
keeping and reporting, and other business office services, all as reasonably
necessary for the conduct of the Practice's business.
1.16. National Appeals Council. The term "National Appeals Council"
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shall have the meaning set forth in Section 2.11 hereto.
1.17. Office. The term "Office" shall mean any office space, clinic,
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or facility, including satellite facilities, that Business Manager shall own or
lease or otherwise procure in the future for the use of the Practice.
1.18. Office Expense. The term "Office Expense" shall mean all
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operating and non-operating expenses incurred by the Business Manager in the
provision of Management Services to the Practice and shall include all operating
and non-operating expenses incurred by the Practice relating to the items set
forth in this Section. So long as the Practice is in full compliance with the
terms of this Business Management Agreement, the Business Manager shall be
financially liable for all Office Expenses and the Business Manager shall
reimburse the Practice for any Office Expense incurred by the Practice relating
to the items set forth in this Section, upon request by the Practice. Office
Expense shall not include any Business Manager Expense, Practice Expense or
Shareholder Expense or any state, local or federal income or franchise tax.
Without limitation, Office Expense shall include the following expenses:
(a) the salaries, benefits, payroll taxes, and other direct costs of
all employees of Business Manager (including Clinical Personnel) primarily
working at the Office and the salaries, benefits, payroll taxes, and other
direct costs of the non-Professional and non-clinical employees of the Practice,
but not the salaries, benefits, payroll taxes or other direct costs of the
Professionals;
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Office for improved clinic performance,
such as management, billing and collections, business office consultation, and
accounting and legal services, but only when such services are coordinated by
Business Manager, are partially or wholly for the benefit of the Practice and/or
are included in the Budget;
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(c) reasonable recruitment costs and out-of-pocket expenses of Business
Manager or the Practice associated with the recruitment of additional
Professionals, other employees of the Practice and Business Manager's employees
primarily located at the Office;
(d) personal property and intangible property taxes assessed against
Business Manager's assets used in connection with the operation of the Office;
(e) comprehensive and general liability insurance covering the Office
and employees of the Practice and Business Manager at the Office and malpractice
insurance for Shareholder Optometrists;
(f) the expense of using, leasing, purchasing or otherwise procuring
and maintaining the Office and related equipment, including depreciation in the
case of furniture, fixtures and equipment owned by Business Manager and used at
the Office, except for those equipment expenses described in Section 3.2(d),
which are specified therein to be a Shareholder Expense;
(g) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of the Practice or reasonable imputed interest on capital
advanced by Business Manager), which shall be equal to the average cost of
borrowing by Business Manager as reflected on its most recent published
financial statements, or in the absence of either of the foregoing, eight
percent (8%), to finance or refinance obligations of the Practice, purchase
additional (new or used) optometric or non-optometric equipment to be used in
connection with the Office, or to finance new ventures of the Practice; in any
such case only as such cost of capital is set forth in the Budget or otherwise
approved in advance by the Practice Advisory Council;
(h) the reasonable travel expenses associated with attending meetings,
conferences, or seminars to benefit the Practice so long as such expenses are
related to individuals located at the Office and the Practice's pro rata share
for individuals who are consultants of or employed by Business Manager who
provide material services to the Practice;
(i) the cost of office supplies, inventory and utilities (except drugs,
pharmaceuticals and controlled substances; for the purposes of this Agreement
the term "drugs" shall not be deemed to refer to contact lenses);
(j) billing and collection costs and expenses;
(k) the Practice's pro-rata share of reasonable corporate overhead
charges or other reasonable expenses (including computer and data processing
costs) which are incurred by Business Manager or any parent or affiliate of
Business Manager in connection with regional expenses or corporate headquarters
expenses which: (i) relate to the provisions of benefits or services by Business
Manager on behalf of the Practice as reflected in the Budget, or (ii) are a
substitute at the same or less cost as the existing level of expenses
historically incurred by the Practice or set forth in the Budget;
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(l) all other expenses which are set forth in the Budget and which
directly or indirectly benefit the Practice incurred by Business Manager in
carrying out its obligations under this Business Management Agreement;
(m) reasonable costs and expenses (to the extent not covered by
insurance) of lawsuits or claims against the Business Manager, the Practice or
its Professional(s) related to their performance of duties at the Office or
their interest in the leasehold or other assets used in connection with the
Office, provided that if the Business Manager, the Practice or its
Professional(s) does not prevail in the lawsuit or claim or settles the matter
with a material payment by the party (the party at "fault"), such costs and
expenses shall be deemed a Business Manager Expense in the event of Business
Manager's fault, and a Shareholder Expense in the event of fault by the Practice
or Professional, whereupon the Practice and such Professional(s) shall be
jointly responsible for the immediate reimbursement of the sums advanced (which
may at the option of Business Manager be offset by Business Manager against sums
otherwise due the Practice under Section 3.10(b)); provided further that
Business Manager shall not advance such costs and expenses from the account if
the Practice Advisory Council concludes that (i) it is unlikely that the Account
will be reimbursed if the party involved will not prevail in the lawsuit or
claim, or (ii) it is reasonable to believe that obtaining a reimbursement of the
advanced sums will be difficult to achieve; and the Parties acknowledge that
nothing in this Section shall create any liability on the part of a Professional
who would otherwise be shielded from personal liability by the corporate or
limited liability structure of the Practice; and
(n) key person life insurance premiums related to policies which the
Parties agree to acquire on the life of the Practice's Professionals, whereupon
any proceeds shall be paid to the Account as Adjusted Gross Revenues, unless the
Parties agree to a specific split of the proceeds. Should only the Practice
choose to obtain key person life insurance, the Practice shall pay all premiums
as a Shareholder Expense and shall receive all proceeds. Further, if only the
Business Manager chooses to obtain such insurance, Business Manager shall pay
all premiums as a Business Manager Expense and shall receive all proceeds. The
Practice shall cause its Professionals to submit to a medical examination
necessary to obtain such insurance.
In the event that any of the above described individuals described in
Section 1.18(b) devote a substantial amount of time to serving one or more
health care practices other than the Practice, which is not prohibited
hereunder, or the above described equipment or Office are utilized to a
substantial degree by one or more health care practices other than the Practice,
the Office Expenses shall be allocated between the Practice and such other
health care practices to reflect each practice's pro-rata share of any expenses
or costs relating to such individuals, equipment or Office (including the
recruitment costs of such individuals and the comprehensive and general
liability insurance expenses with respect to such individuals). Expenses
contemplated in this paragraph which potentially and primarily relate to
Sections 1.18(b), (c), (d), (e), (f), (g), (h), (k) and (l) shall be in the
Budget or approved by the Practice Advisory Council, and where reasonably
determinable, are intended to be reasonable and customary based upon similar
relationships generally existing between national practice management companies
and practices they manage. The Practice's pro-
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rata portion of expenses related to individuals who are consultants of or
employed by Business Manager and who provide services benefiting more than one
practice shall be based upon the actual time expended by the individuals in
performing such services as compared to the time spent by such individuals with
other practices managed by the Business Manager, or, if not reasonably
calculable, as determined by Business Manager, based upon the estimated
proportionate revenue size of the Practice as compared to the aggregate revenue
size as estimated in all of the Budgets of all other practices managed by the
Business Manager which are benefiting from such individual's services. Likewise,
equipment and other benefits provided by the Business Manager to several
Practices shall be split pro-rata based upon the use or benefit derived by each
Practice, but if not calculable, shall be based upon the estimated proportionate
revenue size as set forth in the preceding sentence. Notwithstanding anything to
the contrary herein, unless an expense is expressly designated as a Business
Manager Expense, a Practice Expense or a Shareholder Expense in this Business
Management Agreement or any exhibit thereto, all expenses incurred by Business
Manager in providing services pursuant to this Business Management Agreement
shall be considered an Office Expense.
1.19. Optometrist. The term "Optometrist" shall mean each individually
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licensed Optometrist, if any, who is employed or otherwise retained by or
associated with the Practice, each of whom shall meet at all times the
qualifications described in Section 4.2 and Section 4.3.
1.20. Parties. The term "Parties" shall mean the Practice and Business
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Manager.
1.21. Practice. The term "Practice" shall have the meaning set forth
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in the Recitals.
1.22. Practice Advisory Council. The term "Practice Advisory Council"
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shall have the meaning set forth in Section 2.6 of this Agreement.
1.23. Practice Consent. The term "Practice Consent" shall mean the
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consent granted by the Practice's representatives (or either representative) to
the Practice Advisory Council created pursuant to Article II herein, which
consent shall not be unreasonably withheld or delayed and shall be binding on
the Practice.
1.24. Practice Expenses. The term "Practice Expenses" shall mean (a)
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all reasonable non-shareholder Professionals' salaries, benefits, payroll taxes
and other direct costs related to their services at the Office (including
reasonable and customary professional dues, subscriptions, continuing education
expenses, severance payments, (b) drugs, pharmaceuticals and controlled
substances, and (c) travel costs for continuing education and necessary business
travel for non-shareholder Professionals, as well as for travel expenses for
local continuing legal education. Notwithstanding the foregoing, the term
Practice Expenses shall specifically exclude (i) business travel requested by
Business Manager, which shall be an Office Expense, (ii) any and all
compensation or expenses attributable to Shareholders, which shall be a
Shareholder Expense (except reasonable and customary expenses for malpractice
insurance which shall be a Practice Expense), (iii) malpractice insurance
coverage for Professionals, which shall be a Shareholder
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Expense, or (iv) such other items agreed to in advance in writing by the Parties
hereto. The Practice shall be financially liable for all Practice Expenses, and
the Practice shall reimburse the Business Manager for any Practice Expenses
incurred by the Business Manager. During this Agreement, for so long as a
current Shareholder of the Practice is an employee of, or contractor to, or
Shareholder of the Practice, such Shareholder shall be deemed to be a
Shareholder for the purposes of this definition. Such expenses are to be
approved annually in the Budget.
1.25. Practice Territory. The term "Practice Territory" shall mean the
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geographic area which is within a ten mile radius of the current locations in
which the Practice renders Professional Eye Care Services.
1.26. Professional. The term "Professional" shall mean any Optometrist
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affiliated with the Practice.
1.27. Professional Eye Care Services. The term "Professional Eye Care
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Services" shall mean professional health care items and services, including, but
not limited to, the practice of optometry, and all related professional health
care services provided by the Practice through the Practice's Optometrists and
other professional health care providers that are retained by or professionally
affiliated with the Practice. The term shall also include any and all business
whatsoever in connection with any optical businesses owned or operated, or to be
owned or operated in the future, in whole or in part, by the Practice or any of
its Professionals during the terms of this Agreement.
1.28. Representatives. The term "Representatives" shall mean a Party's
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officers, directors, managers, employees, or other agents.
1.29. Shareholder. The term "Shareholder" shall mean any current or
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future shareholder of the Practice.
1.30. Shareholder Expense. The term "Shareholder Expense" shall be
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limited to the following expenses: (a) Shareholders' salaries, benefits,
payroll taxes, and other direct costs (including professional dues,
subscriptions, continuing education expenses, severance payments, entertainment,
and travel costs for continuing education or other business travel but excluding
business travel requested by Business Manager, which shall be an Office Expense,
and excluding any other expense of a Shareholder approved as an Office Expense
in advance by the Parties); (b) those portions of any future related party
leasehold obligations which the Business Manager deems in excess of fair market
value, (c) to the extent not covered by insurance and subject to the advance
provisions contained herein, the defense costs of any litigation brought against
the Practice or the Professionals by any third party and any liability judgment
assessed against the Practice or the Professionals; (d) certain equipment
expenses described in Section 3.2(d); (e) interest on any funds advanced to the
Practice by Business Manager to the extent that Business Manager is a net lender
in accordance with the terms of this Agreement; (f) malpractice insurance
expenses for the Professionals other than Shareholder Optometrists; (g) any
income taxes or franchise tax of the Practice; and (h) consulting, accounting,
or legal fees which relate solely to the Shareholders. The Practice shall be
financially liable for all Shareholder Expenses, and the Practice shall
reimburse the
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Business Manager for any Shareholder Expense incurred by the Business Manager.
Unless an expense is expressly designated as a Business Manager Expense, an
Office Expense or a Practice Expense in this Business Management Agreement or in
any exhibit hereto, all expenses incurred by the Practice shall be considered a
Shareholder Expense. Notwithstanding the above, the Practice may require certain
Professionals to pay certain expenses incurred for them specifically. Nothing in
this Section shall create personal liability on the part of the Practice's
Shareholders. Notwithstanding anything contained herein, Shareholders expenses
shall not include salaries and other benefits to Shareholders pursuant to Vision
21 employment agreements.
1.31. State. The term "State" shall have the meaning set forth in the
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Recitals.
1.32. Term. The term "Term" shall mean the initial and any renewal
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periods of duration of this Business Management Agreement as described in
Section 6.1.
2. APPOINTMENT OF BUSINESS MANAGER AND ESTABLISHMENT OF PRACTICE ADVISORY
COUNCIL, LOCAL ADVISORY COUNCIL AND NATIONAL APPEALS COUNCIL.
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2.1. Appointment. The Practice hereby appoints Business Manager as its
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sole and exclusive agent for the management and administration of the business
functions and business affairs of the Practice and Business Manager hereby
accepts such appointment, subject at all times to the provisions of this
Business Management Agreement.
2.2. Authority. Consistent with the provisions of this Business
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Management Agreement, Business Manager shall have the responsibility and
commensurate authority to provide Management Services for the Practice. The
Practice shall give Business Manager ten (10) business days prior notice of the
Practice's intent to execute any material agreement creating a binding legal
obligation on the Practice. The Parties acknowledge and agree that the
Practice, through its Professionals, shall be responsible for and shall have
complete authority, responsibility, supervision, and control over the provision
of all Professional Eye Care Services and other professional health care
services performed for patients, and that all diagnoses, treatments, procedures,
and other professional health care services shall be provided and performed
exclusively by or under the supervision of Professionals as such Professionals,
in their sole discretion, deem appropriate. Business Manager shall have and
exercise absolutely no control, influence, authority or supervision over the
provision of Professional Eye Care Services.
2.3. Patient Referrals. Business Manager and the Practice agree that
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the benefits to the Practice hereunder do not require, are not payment for, and
are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service offered by Business Manager
to patients of the Practice in any facility, laboratory, center, or health care
operation controlled, managed, or operated by Business Manager.
2.4. Internal Decisions of the Practice. Matters involving the
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Practice's allocation of professional income among its Shareholders and the
Professional employees of the
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Practice, tax planning, and investment planning shall remain the responsibility
of the Practice and the Shareholders of the Practice.
2.5. Practice of Optometry. The Parties acknowledge that Business
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Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of optometry. To the extent any
act or service herein required by either party under this Agreement should be
construed by a court of competent jurisdiction or by the State Board of
Optometry to constitute the practice of optometry, the requirement to perform
that act or service shall be deemed waived and unenforceable.
2.6. Formation and Operation of the Practice Advisory Council. The
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Parties hereby establish a Practice Advisory Council which shall be responsible
for advising Business Manager and the Practice with respect to developing and
implementing management and administrative policies for the overall operation of
the Practice's facilities and for providing dispute resolution on certain
matters. The Practice Advisory Council shall consist of four (4) members.
Business Manager shall designate, in its sole discretion, two (2) members of the
Practice Advisory Council or may have one (1) member with two (2) votes. The
Practice shall designate, in its sole discretion, two (2) members of the
Practice Advisory Council or may have one (1) member with two (2) votes. The
Practice Advisory Council members selected by the Practice shall be full-time
Professional employees of the Practice. Each Party's representatives to the
Practice Advisory Council shall have the authority to make decisions on behalf
of the respective Party. Except as may otherwise be provided, the act of a
majority of the members of the Practice Advisory Council shall be the act of the
Practice Advisory Council. The decisions, resolutions, actions, or
recommendations of the Practice Advisory Council shall be implemented by
Business Manager or the Practice, as appropriate.
2.7. Duties and Responsibilities of the Practice Advisory Council. The
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Practice Advisory Council shall review, evaluate, make recommendations, and
where specifically authorized herein and permitted by law, make decisions with
respect to the following matters:
(a) Facility Improvements and Expansion. Any renovation and expansion
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plans and capital equipment expenditures with respect to the Practice's
facilities (including with respect to any optical business) shall be reviewed by
the Practice Advisory Council which shall make recommendations to Business
Manager with respect to proposed changes therein. Such renovation and expansion
plans and capital equipment expenditures shall be based upon economic
feasibility, optometry support, productivity and then current market conditions.
(b) Marketing and Public Relations. The Practice Advisory Council
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shall review and make recommendations to the Practice with respect to all
marketing and public relations services and programs promoting the Practice's
Professional Eye Care Services.
(c) Patient Fees; Collection Policies. As a part of the annual
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operating budget, the Practice Advisory Council shall review and make
recommendations to the Practice
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concerning the fee schedule and collection policies for all Professional Eye
Care Services and ancillary services rendered by the Practice.
(d) Ancillary Services. The Practice Advisory Council must approve any
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new non-professional ancillary services to be rendered by the Practice including
optical business, and concerning the pricing, continuation of, access to, and
quality of such services.
(e) Provider and Payor Relationships. The Practice Advisory Council
-----------------------------------
shall review and make recommendations to Business Manager and the Practice
regarding the establishment or maintenance of relationships between the Practice
and institutional health care providers and third-party payors, and shall review
and approve all agreements with institutional health care providers and
third-party payors which contain terms which are materially different from those
terms set forth in guidelines established by the Local Advisory Council. The
Practice Advisory Council shall also make recommendations to Business Manager
and the Practice concerning discounted fee schedules, including capitated fee
arrangements of which the Practice shall be a party, and shall review and
approve all such capitated fee arrangements.
(f) Strategic Planning. The Practice Advisory Council may make
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recommendations to Business Manager concerning development of long-term
strategic planning objectives for the Practice.
(g) Capital Expenditures. The Practice Advisory Council shall make
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recommendations to Business Manager and the Practice concerning the priority of
major capital expenditures and shall review and approve any commitment to make
any capital expenditures for non-optometric equipment relating to the Office
involving amounts in excess of $15,000 individually, or $50,000 in the
aggregate, in any one fiscal year, which amounts may be increased from
time-to-time by the Local Advisory Council.
(h) Hiring of Professionals. The Practice Advisory Council shall
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recommend to the Practice the number and type of Professionals required for the
efficient operation of the Practice's facilities.
(i) Fee Dispute Resolution. At the request of Business Manager or the
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Practice, the Practice Advisory Council shall make recommendations to Business
Manager with respect to any dispute concerning a set-off or reduction in
Management Fees.
(j) Grievance Referrals. The Practice Advisory Council shall consider
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and make recommendations to Business Manager and the Practice regarding
grievances pertaining to matters not specifically addressed in this Business
Management Agreement as referred to it by Business Manager or the Practice's
Board of Directors.
(k) Termination of Business Manager's Personnel. The Practice Advisory
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Council shall review and approve any decision by the Business Manager to
terminate any
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of Business Manager's personnel primarily located at the Office who occupy
office manager or higher level positions.
(l) Approval of New Office. The Practice Advisory Council shall
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approve any move of the current Office location or the expansion to an
additional Office location. Additionally, the Practice Advisory Council shall
approve: (i) the establishment of any optical business of the Practice, (ii) the
move or expansion of any such business, and (iii) the cessation of any line of
business engaged in by the Practice.
(m) Approval of Budget. The Practice Advisory Council shall have the
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power to adopt, approve and amend the Budget and to approve various expenses as
set forth herein, which shall be subject to change upon submission of any
dispute thereon to Ernst & Young LLP (or its successor or replacement) and
appeal to the National Appeals Council as provided in Section 3.11(a).
Except in those specific instances set forth above in which the Practice
Advisory Council has been granted the authority to make decisions binding upon
the Business Manager and the Practice, it is acknowledged and agreed that
recommendations of the Practice Advisory Council are intended for the advice and
guidance of Business Manager and the Practice and that the Practice Advisory
Council does not have the power to bind Business Manager or the Practice. Where
discretion with respect to any matter is vested in Business Manager or the
Practice under the terms of this Agreement, Business Manager or the Practice, as
the case may be, shall have ultimate responsibility for the exercise of such
discretion, notwithstanding any recommendations of the Practice Advisory
Council. Business Manager and the Practice shall, however, take such
recommendations of the Practice Advisory Council into account in good faith in
the exercise of such discretion.
2.8. Professional Health Care Decisions. Despite the above listing of
-----------------------------------
activities and areas of interest, all decisions required by applicable law to be
made solely by health care professionals will be made solely by the appropriate
Professionals, but non-Professional members of the Practice Advisory Council may
participate in the discussion process. The Professional representatives of the
Practice on the Practice Advisory Council shall have exclusive authority to
review and resolve issues related to:
(a) types and levels of Professional Eye Care Services to be provided
(provided, however, that the Practice Advisory Council shall have the authority
set forth in Section 2.7(d) with respect to new optical business);
(b) recruitment of Professionals to the Practice, including the
specific qualifications and specialties of recruited Professionals;
(c) any optometric related functions;
(d) fee schedules; and
12
(e) any other decisions required by applicable law to be made solely by
Professionals and not by non-Professionals.
2.9. Meetings of the Practice Advisory Council. The Practice Advisory
------------------------------------------
Council shall meet on a regular basis as mutually agreed by the Parties. A
special meeting of the Practice Advisory Council may be called by either
Business Manager or the Practice upon two (2) weeks' prior notice, except in the
event of an emergency, in which case a special meeting may be called by either
Business Manager or the Practice upon three (3) business days' prior notice.
Meetings may be held telephonically or by any other means agreeable to the
Parties.
2.10. Formation and Operation of Local Advisory Council. Business
------------------------------------------------------
Manager has established a Local Advisory Council (or, if Business Manager has
not yet established a Local Advisory Council, Business Manager shall, within
three (3) months of the effective date of this Business Management Agreement
establish a Local Advisory Council) composed of delegates from health care
practices for which Business Manager is then providing management services
similar to those services contemplated in this Business Management Agreement.
All of such health care practices shall be located within the State, unless
expanded from time-to-time by the Local Advisory Council. For six (6) years
from the date hereof, the Practice shall be entitled to appoint one delegate to
the Local Advisory Council, of which the initial delegate shall serve an initial
two (2) year term. Thereafter, for the two (2) subsequent two (2) year terms,
the Practice may appoint the same or a different delegate to the Local Advisory
Council. After the six (6) year period, the Practice shall have the right to
vote, along with other Practices managed in the market by the Business Manager,
for the delegates to the Local Advisory Council in accordance with the by-laws,
as modified from time-to-time as described below. Business Manager shall be
entitled to appoint two delegates to the Local Advisory Council who may be
replaced from time-to-time at the Business Manager's discretion, and who
together shall have a voting power equal to the combined voting power of all
delegates appointed by the health care practices. If any market contains only
one health care practice, such practice shall appoint one (1) individual to the
Local Advisory Council who shall have two (2) votes. Any matter to be
determined by the Local Advisory Council must receive the affirmative vote of a
majority of the votes cast of the delegates appointed to the Local Advisory
Council. The Local Advisory Council shall make recommendations to Business
Manager and such health care practices as to regional policy and strategy issues
within the market area and as to the following:
(a) the establishment of private pay fee schedules where permitted by
law;
(b) the establishment of guidelines for agreements with institutional
health care providers and third-party payors; and
(c) any agreement with an institutional health care provider or
third-party payor which materially differs from guidelines established by the
Local Advisory Council.
13
The Local Advisory Council may, from time-to-time, select commercial
carriers for professional, casualty and comprehensive general liability coverage
for health care practices in the market area and such selection shall be binding
upon such health care practices.
The Local Advisory Council shall consider and determine any issue upon
which the Practice Advisory Council is deadlocked (except for the determination
of the Budget). In determining such disputes, the Local Advisory Council shall
make findings of fact relating to evidence presented by the Parties to the
dispute. Decisions by the Local Advisory Council may be appealed by any party
adversely affected to the National Appeals Council, which shall have the option
of hearing the appeal. The Local Advisory Council's rules of operation and
procedure shall be governed by by-laws to be adopted by the delegates, and such
by-laws may be amended or restated from time-to-time. Such by-laws shall be
reasonable and in accord with the terms and spirit of this Agreement. The
Practice and Business Manager covenant and agree to abide by the Local Advisory
Council's by-laws, as such by-laws may be amended from time-to-time.
2.11. Formation and Operation of the National Appeals Council.
--------------------------------------------------------------
Business Manager has established a National Appeals Council composed of one (1)
delegate appointed by each of the initial Local Advisory Councils to be
established by Business Manager, and two (2) delegates appointed by the Business
Manager. The initial delegates of the Local Advisory Councils shall serve an
initial two (2) year term, and thereafter, if the local advisory council
qualifies under the then current by-laws of the National Appeals Council with
respect to the eligibility of Local Advisory Councils to appoint delegates to
the National Appeals Council, the local advisory council may appoint the same or
a different delegate to the National Appeals Council. Business Manager's
delegates to the National Appeals Council shall together have a voting power
equal to the combined voting power of all delegates appointed by the Local
Advisory Councils. Any matter to be determined by the National Appeals Council
must receive the affirmative vote of a majority of the votes cast of the
delegates appointed to the National Appeals Council. The National Appeals
Council shall serve as a forum of appeal of any determinations of the Local
Advisory Councils over which it chooses to have jurisdiction. In resolving such
appeals it determines to hear, the National Appeals Council shall review
findings of fact made by the applicable local advisory council and shall only
reverse a decision of the local advisory council if the local advisory council's
decision was based upon manifest error. The National Appeals Council shall also
determine disputes which it chooses to have jurisdiction over and which cannot
be decided because of a deadlock among the delegates of any Local Advisory
Council. In the event of a deadlock among the delegates of the National Appeals
Council, the dispute may be submitted by either party to the dispute to
arbitration in accordance with Section 8.7 of this Agreement. In all other
instances, the determination of a dispute by the National Appeals Council shall
be final. The National Appeals Council's rules of operation and procedure shall
be governed by by-laws to be adopted by the Local Advisory Councils' and
Business Manager's delegates, and such by-laws may be amended or restated from
time-to-time. Such by-laws shall be reasonable and reflect the terms and spirit
of this Agreement. The National Appeals Council's decisions shall be binding
upon the parties. The Practice and Business Manager covenant and agree to abide
by the National Appeal Council's by-laws, as such by-laws may be amended from
time-to-time.
14
3. OBLIGATIONS AND RESPONSIBILITIES OF BUSINESS MANAGER.
---------------------------------------------------------
3.1. Management Services. Business Manager shall provide all
--------------------
Management Services as are necessary and appropriate for the day-to-day
administration of the business aspects of the Practice's operations, pursuant to
the terms of this Business Management Agreement. Business Manager shall operate
in a reasonable and customary manner with due consideration to the Practice's
past business practices and shall operate in accordance with all applicable
laws, rules and regulations which are necessary and material to the Business
Manager's performance of the Management Services. Business Manager will provide
in good faith and with due diligence its services consistent with management
services generally provided in operations of an optometric practice similar in
size, type and operations in the State to the Practice. All costs and expenses
related to Business Manager's duties contained in this Section 3 shall be Office
Expenses unless limited or excluded as an Office Expense pursuant to the terms
of this Agreement.
3.2. Office and Equipment.
----------------------
(a) Business Manager shall lease, sublease, acquire or otherwise
procure one or more Offices that are deemed by the Parties to be reasonably
necessary and appropriate, and the expenses associated with such lease,
sublease, acquisition, or procurement shall be Office Expenses. Any Office
procured by Business Manager for the use by the Practice shall be procured at
commercially reasonable rates. Any relocation from the Practice's present
Office location or expansion of the Practice's Office into an additional Office
shall be done only after Business Manager has received Practice Consent, which
shall not be unreasonably withheld or delayed.
(b) In the event the Practice is the lessee of an Office under a lease
with an unrelated and nonaffiliated lessor, Business Manager may require the
Practice to assign such lease to Business Manager upon receipt of consent from
the lessor. The Practice shall use its best efforts to assist in obtaining the
lessor's consent to the assignment. Any expenses incurred in the assignment
shall be Office Expenses, except for real estate leases described on Exhibit 3.2
-----------
existing at the time of execution of this Agreement, such expenses related
thereto shall be paid by the Business Manager.
(c) Business Manager shall provide all non-health care equipment,
fixtures, office supplies, furniture and furnishings as are reasonable and
approved in the Budget for the operation of the Office and the provision of
Professional Eye Care Services. If the Practice wishes to choose additional
equipment, which the Business Manager determines not to acquire or lease, the
Practice may acquire or lease such equipment, and the expense related thereto
shall be deemed a Shareholder Expense.
(d) Business Manager shall provide, finance, or cause to be provided or
financed health care related equipment as reasonably required by the Practice.
The Practice shall have final authority in all health care equipment selections;
provided, however, that if the Practice chooses to acquire health care equipment
which is not in the Budget and which Business Manager
15
reasonably chooses not to acquire, expenses related thereto shall be treated as
a Shareholder Expense and such equipment shall be owned by the Practice;
provided further that following such acquisition or lease by the Practice, if
the Practice Advisory Council determines that after a period of six months of
use such equipment is reasonably certain to result in material profit to
Business Manager (taking into account the cost or expense and anticipated
revenues associated with such equipment), then Business Manager shall acquire
such equipment from the Practice by either (at Business Manager's option),
paying cash or by assuming the liability associated with such equipment, or if
such equipment is then being leased by the Practice, by assuming such lease. In
the event of such an acquisition by Business Manager, it shall reimburse the
Practice for previous expenses applied thereto. Except for equipment which
Business Manager elects not to acquire or lease which are acquired or leased by
the Practice pursuant to Section 3.2(c) or (d), all health care and non-health
care equipment, other than Professional-owned automobiles, acquired for the use
of the Practice shall be owned by Business Manager and the depreciation and
related capital charge shall be an Office Expense. Business Manager may make
recommendations to the Practice on the relationship between its health care
equipment decisions and the overall administrative and financial operations of
the practice.
(e) Business Manager shall be responsible for the repair and
maintenance of the Office, consistent with either the Practice or Business
Manager's responsibilities under the terms of any lease or other use
arrangement, and for the prompt repair, maintenance, and replacement of all
equipment other than such repairs, maintenance and replacement necessitated by
the gross negligence or willful misconduct of the Practice, its Professionals or
other personnel employed by the Practice, the repair or replacement of which
shall be a Shareholder Expense and not an Office Expense. Replacement equipment
shall be acquired where Business Manager in good faith determines that such
replacement is necessary or where the Budget has made allowances for such
replacement.
(f) Any portion of the foregoing lease payments in excess of fair
market value relating to related party leases of equipment or an Office shall be
treated as a Shareholder Expense.
3.3. Health Care Supplies. Business Manager shall order, procure,
----------------------
purchase and provide on behalf of and as agent for the Practice all reasonable
health care supplies unless otherwise prohibited by federal and/or state law.
Furthermore, Business Manager shall ensure that the Office is at all times
adequately stocked with the health care supplies that are necessary and
appropriate for the operation of the Practice and required for the provision of
Professional Eye Care Services. The ultimate oversight, supervision and
ownership for all health care supplies is and shall remain the sole
responsibility of the Practice and all costs and expenses relating to such
supplies shall be a Practice Expense. As used in this provision, the term
"health care supplies" shall mean all drugs, pharmaceuticals, or controlled
substances, of which requires the authorization or order of a licensed health
care provider or requires a permit, registration, certification or other
governmental authorization held by a licensed health care provider as specified
under any federal and/or state law.
16
3.4. Support Services. Business Manager shall provide or arrange for
-----------------
all printing, stationery, forms, postage, duplication or photocopying services,
and other support services as are reasonably necessary and appropriate for the
operation of the Office and the provision of Professional Eye Care Services
therein.
3.5. Quality Assurance, Risk Management, and Utilization Review.
----------------------------------------------------------------
Business Manager shall assist the Practice in the Practice's establishment and
implementation of procedures to ensure the consistency, quality,
appropriateness, and necessity of Professional Eye Care Services provided by the
Practice, and shall provide administrative support for the Practice's overall
quality assurance, risk management, and utilization review programs. Business
Manager shall perform these tasks in a manner to ensure the confidentiality and
non-discoverability of these program actions to the fullest extent allowable
under state and federal law.
3.6. Licenses and Permits. Business Manager shall, on behalf of and in
--------------------
the name of the Practice, coordinate all development and planning processes, and
apply for and use reasonable efforts to obtain and maintain all federal, state
and local licenses and regulatory permits required for or in connection with the
operation of the Practice and the equipment (existing and future) located at the
Office, other than those relating to the practice of optometry or the
administration of drugs by Professionals retained by or associated with the
Practice. The expenses and costs associated with obtaining and maintaining
permits with respect to the Office and licenses for professional practice by the
non-shareholder Professionals shall be deemed an Office Expense.
3.7. Personnel. Except as specifically provided in Section 4.2 of this
---------
Business Management Agreement, Business Manager shall employ or otherwise retain
and shall be responsible for selecting, hiring, training, supervising, and
terminating, all management, administrative, clerical, secretarial, bookkeeping,
accounting, payroll, billing and collection and other personnel (including
Clinical Personnel but excluding Professionals) as Business Manager deems
reasonably necessary and appropriate for Business Manager's performance of its
duties and obligations under this Business Management Agreement.
Notwithstanding the foregoing sentence, if any Clinical Personnel are retained
to assist the Practice's Professionals in performing medical services for
patients, such Clinical Personnel shall be employed by the Business Manager, but
shall perform such services under the supervision of the Practice, and the
Practice shall have the same responsibility to supervise and exercise control
over the actions taken by such Clinical Personnel in performing Professional Eye
Care Services for patients as the Practice would have if such Clinical Personnel
were common law employees directly employed by the Practice. Consistent with
reasonably prudent personnel management policies, Business Manager shall seek
and consider the advice, input, and requests of the Practice in regard to
personnel matters. Business Manager shall have sole responsibility for
determining the salaries and providing fringe benefits, and for withholding, as
required by law, any sums for income tax, unemployment insurance, social
security, or any other withholding required by applicable law or governmental
requirement. Business Manager does not currently intend to change the existing
composition or employment terms of any of Business Manager's personnel which
have employment arrangements with the Practice on the effective date of this
Agreement (unless there are unsettled issues regarding such arrangements as
described in Exhibit 3.7). Business Manager reserves the right, however, to
-------------
change the number,
17
composition or employment terms of such personnel in the future at Business
Manager's discretion; provided, however, that the termination of any of Business
Manager's personnel who are Clinical Personnel or occupy office manager or
higher level positions, and are primarily located at the Office must receive the
approval of the Practice Advisory Council. Business Manager and the Practice
recognize and acknowledge that Business Manager and personnel retained by
Business Manager may from time-to-time perform services for persons other than
the Practice. This Business Management Agreement shall not be construed to
prevent or prohibit Business Manager from performing such services for others or
restrict Business Manager from using its personnel to provide services to
others. Business Manager hereby disclaims any liability relating to the effect
of its employees on the qualification of the Practice's retirement plans under
the Internal Revenue Code, and all liabilities for such classification shall be
solely the responsibility of the Practice.
3.8. Contract Negotiations. Business Manager shall evaluate, assist in
---------------------
negotiations and administer on behalf of the Practice contracts that do not
relate to the provision of Professional Eye Care Services as set forth in this
Agreement and/or as approved in the Budget. To the extent permitted by law,
Business Manager shall evaluate, assist in negotiations, administer and execute
on the Practice's behalf, all contractual arrangements with third parties as are
reasonably necessary and appropriate for the Practice's provision of
Professional Eye Care Services, including, without limitation, negotiated price
agreements with third-party payors, alternative delivery systems, or other
purchasers of group health care services. However, the Practice shall have the
final authority with regard to the entry into all of such contractual
arrangements relating to the provision of Professional Eye Care Services.
3.9. Billing and Collection. As an agent on behalf of and for the
------------------------
account of the Practice, Business Manager shall establish and maintain credit
and billing and collection services, policies and procedures, and shall use
reasonable efforts to timely xxxx and collect all Professional and other fees
for all billable Professional Eye Care Services provided by the Practice, or
Professionals employed or otherwise retained by the Practice. The Practice
Advisory Council shall make recommendations to and consult with Business Manager
and the Practice regarding the fees for Professional Eye Care Services provided
by the Practice. In connection with the billing and collection services to be
provided hereunder, and throughout the Term (and thereafter as provided in
Section 6.3), the Practice hereby grants to Business Manager an exclusive
special power of attorney and appoints Business Manager as the Practice's
exclusive true and lawful agent and attorney-in-fact (which shall be deemed
revoked in the event of termination for cause by the Practice), and Business
Manager hereby accepts such special power of attorney and appointment, for the
following purposes:
(a) To xxxx the Practice's patients, in the Practice's name using the
Practice's tax identification number and on the Practice's behalf, for all
billable Professional Eye Care Services provided by the Practice to patients.
(b) To xxxx, in the Practice's name using the Practice's tax
identification number and on the Practice's behalf, all claims for reimbursement
or indemnification from health maintenance organizations, self-insured
employers, insurance companies, Medicare, Medicaid, and
18
all other third-party payors or fiscal intermediaries for all covered billable
Professional Eye Care Services provided by the Practice to patients.
(c) To collect and receive, in the Practice's name and on the
Practice's behalf, all accounts receivable generated by such xxxxxxxx and claims
for reimbursement, to administer such accounts including, but not limited to,
extending the time of payment of any such accounts; suing, assigning or selling
at a discount such accounts to collection agencies; or taking other measures to
require the payment of any such accounts; provided, however, that the Practice
shall review and approve (which approval shall not be unreasonably withheld) any
decision by Business Manager to undertake extraordinary collection measures,
such as filing lawsuits, discharging or releasing obligors, or assigning or
selling accounts at a discount to collection agencies. Business Manager shall
act in a professional manner and in compliance with all federal and State fair
debt collection practices laws in rendering billing and collection services.
(d) To deposit all amounts collected into the Account which shall be a
cash collateral account held in the name of Business Manager and shall be opened
at a financial institution chosen by Business Manager. All amounts received or
collected are hereby pledged to the Business Manager and shall be held or
deposited in the Account to secure the performance of the Practice's obligations
under this Agreement. The Account shall be held under Business Manager's tax
identification number. The Practice covenants to transfer and deliver to the
Account all funds received by the Practice from patients or third-party payors
for Professional Eye Care Services. Upon receipt by Business Manager of any
funds from patients or third-party payors or from the Practice pursuant hereto
for Professional Eye Care Services, Business Manager shall immediately deposit
the same into the Account. So long as the Practice is in full compliance with
the terms of this Business Management Agreement, the Business Manager shall
administer, be responsible for, and be obligated to pay for all Office Expenses.
Business Manager shall disburse such deposited funds to creditors and other
persons on behalf of the Practice, maintaining records of such receipt and
disbursement of funds. Business Manager may borrow amounts from the Account in
excess of amounts due Business Manager pursuant to this Agreement and to the
full extent of funds in the Account. Such borrowed amounts shall bear interest
to the Account in the amount of six percent (6%) per annum, and any of such
borrowed amounts outstanding shall be repaid by Business Manager to the Account
when needed to cover all expenses and obligations under this Agreement and shall
be repaid within thirty (30) days of the termination of this Agreement.
(e) To take possession of, endorse in the name of the Practice, and
deposit into the Account any notes, checks, money orders, insurance payments,
and any other instruments received in payment of accounts receivable for
Professional Eye Care Services.
(f) To sign checks on behalf of the Practice, and to make withdrawals
from the Account for payments specified in this Business Management Agreement.
Upon request of Business Manager, the Practice shall execute and deliver to the
financial institution wherein the Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
power of attorney granted to Business Manager by the Practice pursuant to this
Section 3.9. The special power of attorney granted herein shall be coupled with
an interest and shall
19
be irrevocable except with Business Manager's written consent. The irrevocable
power of attorney shall expire when this Business Management Agreement has been
terminated, all accounts receivable payable to Business Manager pursuant to this
Business Management Agreement have been collected and all Management Fees due to
Business Manager have been paid. If Business Manager assigns this Business
Management Agreement in accordance with its terms, the Practice shall execute a
power of attorney in favor of the assignee in a form acceptable to Business
Manager.
(g) Notwithstanding the foregoing, to the extent that the above power
of attorney is inconsistent with Medicare or state Medicaid rules prohibiting
payment to a party other than the Practice under a power of attorney, the
following shall apply:
(i) the Practice shall create a separate bank account over which the
Practice shall have sole signatory authority (the "Practice Medicare Account");
(ii) the Business Manager shall deposit all Medicare and state Medicaid
program payments that are subject to these rules in the Practice Medicare
Account upon receipt; and
(iii) the Practice shall instruct the applicable bank to sweep all
funds from the Practice Medicare Account into the Account on a daily basis.
Any revocation of the instruction to the bank concerning transferring funds
from the Practice Medicare Account to the Account shall constitute a breach of
this Agreement by the Practice.
(h) The Practice shall have the right to terminate any power of
attorney set forth herein should there be a material breach of this Agreement by
Business Manager, which is not cured within the time periods set forth herein.
3.10. Maintenance of Account. During the term of this Business
------------------------
Management Agreement, all Adjusted Gross Revenues collected resulting from the
rendering of Professional Eye Care Services by the Practice shall be deposited
directly into the Account in which Business Manager shall have the sole signing
capacity.
(a) Payments from the Account. Each month Business Manager shall pay
---------------------------
(to the extent that funds are available) from funds that are in the Account or
in the Practice's accounts described in Section 3.10(b) hereof, all sums due and
payable as Practice Expenses. Additionally, on or before the 15th day of the
following month, (i) Business Manager shall pay from funds that are in the
Account to the Practice Adjusted Gross Revenue less the accrued Management Fee,
accrued Practice Expense and (at the discretion of Business Manager) all or a
portion of the sums advanced by the Business Manager to the Practice, and (ii)
the accrued Management Fee for the previous month shall be paid. The Practice
Adjusted Gross Revenue less accrued Office Expense, accrued Practice Expense and
accrued Management Fee shall be referred to in this
20
Section 3.10(a) as the "Practice Distribution." The payment of the Management
Fee and Practice Distribution shall be of equal priority.
(b) Payments to the Practice's Account. To the extent funds are
--------------------------------------
available, the Business Manager shall be responsible for remitting from the
Account to an account to be owned by and held in the Practice's name, separate
from the Account, the amounts which the Practice is entitled to receive under
Section 3.10(a) and amounts used for the payment of Practice Expenses. Within
sixty (60) days of the end of each of the first three (3) fiscal quarters in
each fiscal year and within one hundred twenty (120) days of the end of each
fiscal year, a settlement process shall be undertaken pursuant to which
adjustments, if necessary, shall be made in the total payments to the Practice
based upon the financial statements prepared in accordance with Section 3.11(b).
Any additional payment due to the Practice will be made within thirty (30) days
of the completion of the settlement process. Any reduction in payments to the
Practice as the result of such settlement process shall be made by reducing
future payments to the Practice, commencing with the month following completion
of the settlement process, until such adjustments are made in full.
Business Manager and the Practice shall each have signing capacity to
withdraw funds from the Practice's account; provided however that Business
Manager shall only be entitled to withdraw funds relating to such account in
connection with the payment of Practice Expenses and Shareholders' salaries,
benefits and payroll taxes. Subject to the foregoing, the Practice hereby
grants to Business Manager a special power of attorney and appoints Business
Manager as the Practice's true and lawful agent and attorney-in-fact, and
Business Manager hereby accepts such special power of attorney and appointment,
to sign checks on behalf of the Practice for payments of the Practice Expenses
and Shareholders' salaries, benefits and payroll taxes in accordance with this
Business Management Agreement. Upon request of Business Manager, the Practice
shall execute and deliver to the financial institution wherein the Practice's
account is maintained, such additional documents or instruments as may be
necessary to evidence or effect the special power of attorney granted to
Business Manager by the Practice pursuant to this Section 3.10(b). The special
power of attorney granted herein shall be coupled with an interest and shall be
irrevocable except with Business Manager's written consent. The irrevocable
power of attorney shall expire when this Business Management Agreement has been
terminated. If Business Manager assigns this Business Management Agreement in
accordance with its terms, the Practice shall execute a power of attorney in
favor of the assignee in a form acceptable to Business Manager. Business
Manager shall not make any withdrawal from the Practice's account unless
expressly authorized in this Agreement.
A Practice payroll account shall be established on behalf of the practice
for payroll to non-shareholder Professionals of the Practice. Funds for this
account shall be received as Practice Expenses. Business Manager and the
Practice shall each have signing capacity to access the account for payroll.
c. Insufficient Funds in Account. During the Term of this Agreement,
-------------------------------
Business Manager shall advance sufficient funds to cover all Practice Expenses
and Shareholder Expenses only if, and to the extent that, the amount of such
advances, plus accrued interest thereon,
21
does not exceed the reasonably collectable value of the Practice's accounts
receivable as determined by Business Manager in its reasonable discretion plus
any amounts borrowed by Business Manager pursuant to Section 5.4 and minus the
accrued Management Fee. Business Manager may, however, elect from time to time
to advance additional funds to the Practice at its discretion. Any of such
advances shall be deemed loans to the Practice to be repaid by the Practice
along with interest at six percent (6%) per annum. Any of such advanced amounts
which have not been paid to Business Manager pursuant to Section 3.10(a)(i) on
the date of termination of this Agreement shall become due and payable on the
date of such termination.
d. Payment of Office Expenses. During the Term of this Business
-----------------------------
Management Agreement and so long as the Practice is in full compliance with the
terms of this Business Management Agreement, Business Manager shall pay all sums
due and payable as Office Expenses from one or more accounts owned and
controlled exclusively by Business Manager.
3.11. Fiscal Matters.
---------------
(a) Annual Budget. Annually and at least thirty (30) days prior to the
-------------
commencement of each fiscal year of the Practice, the Practice Advisory Council
shall prepare and deliver to the Practice a proposed budget, setting forth an
estimate of the Practice's revenues and expenses for the upcoming fiscal year
(including, without limitation, the Management Fee associated with the
Management Services provided by Business Manager hereunder, and the salaries and
benefits of all non-shareholder Professionals employed by the Practice, other
Practice Expenses and Office Expenses). The Budget may be amended by the
Practice Advisory Council from time-to-time during any applicable fiscal year to
reflect changing circumstances affecting the Practice. Disputes concerning the
Budget will, at the request of either Party hereto, be submitted to the
accounting firm of Ernst & Young LLP, any successor thereof, or such other big
six accounting firm agreed to by the Parties, which shall determine an
appropriate resolution of the dispute. Such determination shall be binding upon
the Practice and the Business Manager, subject to either Party's right to
petition the National Appeals Council to consider the determination of Ernst &
Young LLP (or its successor or replacement), which petition may be granted at
the discretion of the National Appeals Council. In all situations described in
this Agreement in which Ernst & Young LLP or its successor or replacement is to
act as an arbitrator of any matter relating to this Agreement, Ernst & Young LLP
(or its successor or replacement) shall act as an impartial and independent
arbitrator. The Parties hereby waive and release and agree to indemnify and
hold harmless Ernst & Young LLP (and its successor or replacement) from and for
any and all claims, demands, liabilities, losses, damages, costs and expenses
relating to its determinations made in good faith pursuant to this Agreement and
agree to execute any documents reasonably requested by Ernst & Young LLP (or its
successor or replacement) to effectuate the same. Any final decision of Ernst &
Young LLP or its successor or replacement, or the National Appeals Council
concerning the Budget shall be retroactive to the first day of the Budget period
in question. Notwithstanding the above, should Business Manager be in material
default hereunder, the Practice shall have the exclusive right to establish the
Budget. Additionally, notwithstanding the above, no change in an adopted Budget
shall be contrary to the terms and spirit of this Agreement nor shall it have
any effect on the
22
Management Fee expressly agreed to herein, unless approved in advance in writing
by the Parties hereto.
(b) Accounting and Financial Records. Business Manager shall establish
--------------------------------
and administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business and financial affairs of the Practice and the
provision of Professional Eye Care Services, all of which shall be prepared and
maintained in accordance with GAAP. Business Manager shall prepare and deliver
to the Practice (i) within sixty (60) days of the end of each of the first three
(3) fiscal quarters in each fiscal year, and (ii) within one hundred twenty
(120) days of the end of each fiscal year, a balance sheet and a profit and loss
statement reflecting the financial status of the Practice in regard to the
provision of Professional Eye Care Services as of the end of such period, all of
which shall be prepared in accordance with GAAP consistently applied. In
addition, Business Manager shall prepare or assist in the preparation of any
other financial statements or records as the Practice may reasonably request.
(c) Sales and Use Taxes. Business Manager and the Practice acknowledge
-------------------
and agree that to the extent that any of the services to be provided by Business
Manager hereunder may be subject to any state sales and use taxes, Business
Manager may have a legal obligation to collect such taxes from the Practice and
to remit the same to the appropriate tax collection authorities. The Practice
agrees to have applicable state sales and use taxes attributable to the services
to be provided by Business Manager hereunder treated as an Office Expense.
3.12. Reports and Records.
---------------------
(a) Health Care Records. To the extent permitted by applicable law,
---------------------
Business Manager shall establish, monitor, and maintain procedures and policies
for the timely creation, preparation, filing and retrieval of all health care
records generated by the Practice in connection with the Practice's provision of
Professional Eye Care Services; and, subject to applicable law, shall ensure
that health care records are promptly available to Professionals and any other
appropriate persons. All such health care records shall be retained and
maintained by the Practice, and the Business Manager as agent for the Practice,
in accordance with all applicable State and federal laws relating to the
confidentiality and retention thereof. All health care records shall be and
remain the property of the Practice. The Practice shall at all times during the
term of this Agreement grant Business Manager unrestricted access to such health
care records and shall in the course of the Practice's business obtain the
written consent of the Practice's patients to Business Manager's access to, and
review and use of such records.
(b) Other Reports and Records. Business Manager shall timely create,
---------------------------
prepare, and file such additional reports and records as are reasonably
necessary and appropriate for the Practice's provision of Professional Eye Care
Services, and shall be prepared to analyze and interpret such reports and
records upon the request of the Practice.
23
3.13. Recruitment of the Practice's Professionals. Upon the Practice's
-------------------------------------------
request, Business Manager shall perform all administrative services reasonably
necessary and appropriate to recruit potential Professionals to become employees
of the Practice. Business Manager shall provide the Practice with model
agreements to document the Practice's employment, retention or other service
arrangements with such individuals. It will be and remain the sole and complete
responsibility of the Practice to interview, select, contract with, supervise,
control and terminate all Professionals performing Professional Eye Care
Services or other professional services.
3.14. Confidential and Proprietary Information.
-------------------------------------------
(a) Business Manager agrees and acknowledges that all materials
provided by the Practice to the Business Manager constitute Confidential
Information disclosed in confidence and with the understanding that it
constitutes valuable business information developed by the Practice at great
expenditures of time, effort, and money. Business Manager further agrees that
it shall not, directly or indirectly, disclose any Confidential Information of
the Practice to other persons without the Practice's express written
authorization, such Confidential Information shall not be used in any way
directly or indirectly detrimental to the Practice, and Business Manager will
keep such Confidential Information confidential and will ensure that its
affiliates and advisors who have access to such Confidential Information comply
with these nondisclosure obligations; provided, however, that Business Manager
may disclose Confidential Information to those of its Representatives who need
to know Confidential Information for the purposes of this Business Management
Agreement, it being understood and agreed to by Business Manager that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by
Business Manager not to disclose to any other person any Confidential
Information. Business Manager agrees to be responsible for any breach of this
Section by its affiliates, advisors, or Representatives. If Business Manager is
requested or required (by oral questions, interrogatories, requests for
information or documents, subpoenas, civil investigative demands, or similar
processes) to disclose or produce any Confidential Information furnished in the
course of its dealings with the Practice or its affiliates, advisors, or
Representatives, Business Manager will (i) provide the Practice with prompt
notice thereof and copies, if possible, and, if not, a description, of the
Confidential Information requested or required to be produced so that the
Practice may seek an appropriate protective order or waive compliance with the
provisions of this Section and (ii) consult with the Practice as to the
advisability of the Practice's taking of legally available steps to resist or
narrow such request. Business Manager further agrees that, if in the absence of
a protective order or the receipt of a waiver hereunder Business Manager is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning the Practice to any tribunal
legally authorized to request and entitled to receive such Confidential
Information or to stand liable for contempt or suffer other censure or penalty,
Business Manager may disclose or produce such Confidential Information to such
tribunal without liability hereunder; provided, however, that Business Manager
shall give the Practice written notice of the Confidential Information to be so
disclosed
24
or produced as far in advance of its disclosure or production as is practicable
and shall use its best efforts to obtain, to the greatest extent possible, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced. Upon
expiration or termination of this Business Management Agreement by either Party
for any reason whatsoever, Business Manager shall immediately return and shall
cause its Representatives, affiliates, and independent contractors to
immediately return to the Practice all Confidential Information, and Business
Manager shall not, and will cause its Representatives, affiliates, and
independent contractors not to, thereafter use, appropriate or reproduce such
Confidential Information. Business Manager further expressly acknowledges and
agrees that any such use, appropriation, or reproduction of any such
Confidential Information by any of the foregoing after the expiration or
termination of this Agreement will result in irreparable injury to the Practice,
that the remedy at law for the foregoing would be inadequate, and that in the
event of any such use, appropriation, or reproduction of any such Confidential
Information after the termination or expiration of this Agreement, the Practice,
in addition to any other remedies or damages available to it, shall be entitled
to injunctive or other equitable relief without the necessity of posting a bond,
cash, or otherwise, and without the necessity of proving actual damages. Such
rights to relief shall not preclude the Practice from other remedies which may
be available to it hereunder.
(b) Notwithstanding clause (a) above, Business Manager may share,
subject to the restrictions of this Section, with other professional
corporations, associations, ophthalmology and optometry practices, or health
care delivery entities the practice statistics of the Practice, including
utilizing review data, quality assurance data, cost data, outcomes data, or
other practice data. In addition, Business Manager may disclose all
practice-related information necessary or desirable in connection with any
public or private offering of any debt or equity security. No such data will
disclose or divulge patient identifying information or, to the extent possible,
Professional identifying information.
3.15. Business Manager's Insurance. Throughout the Term, Business
------------------------------
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof, appropriate
workers' compensation coverage for Business Manager's employed personnel
provided pursuant to this Business Management Agreement, and professional,
casualty and comprehensive general liability insurance covering Business
Manager, Business Manager's personnel, and all of Business Manager's equipment
in such amounts, on such basis and upon such terms and conditions as Business
Manager deems appropriate. Such insurance policies shall be issued by a carrier
or carriers having a current rating of not less than "A" as rated by A.M. Best
Company, unless the Practice agrees in writing to the purchase of a policy or
policies from a carrier having a lesser rating than "A". Business Manager shall
cause the Practice to be named as an additional insured on Business Manager's
casualty and comprehensive general liability policy. Business Manager hereby
releases the Practice from any and all liability for losses or damages caused by
any act or neglect of the Practice occurring after the effective date hereof to
the extent that such losses or damages are covered by insurance; provided,
however, that such release shall not apply to any loss or damage caused by the
willful, wanton, or premeditated negligence of the Practice. Business Manager
shall obtain from any insurance company issuing the foregoing policies its
consent to the release from liability contained in this Section. Upon the
request of the Practice, Business Manager shall provide the Practice with a
certificate evidencing such insurance coverage. Business Manager may also
obtain key man life insurance policies on the life of any Shareholder as is
consistent with 1.18(n).
25
3.16. No Warranty. The Practice acknowledges that Business Manager has
-----------
not made and will not make any express or implied warranties or representations
that the Management Services provided by Business Manager will result in any
particular amount or level of optometry practice or income to the Practice.
Specifically, Business Manager has not represented that its Management Services
will result in higher revenues, lower expenses, greater profits or growth in the
number of patients treated by the Practice's Professionals.
3.17. Non-Competition Covenant from Business Manager. The Business
--------------------------------------------------
Manager hereby recognizes and acknowledges that the Practice shall incur
substantial costs in modifying its business activities to carry out this
Business Management Agreement and that in the process of Business Manager's
providing services under this Business Management Agreement, the Business
Manager will be privy to financial and Confidential Information, to which the
Business Manager would not otherwise be exposed. Business Manager agrees and
acknowledges that the non-competition covenants described hereunder are
necessary for the protection of the Practice, and that the Practice would not
have entered into this Business Management Agreement without such covenants.
Business Manager represents, warrants and covenants that during the Term of this
Business Management Agreement and for a period of two (2) years from the date
this Business Management Agreement is terminated, other than if terminated by
Business Manager for cause, neither Business Manager nor any person or entity
affiliated directly or indirectly with Business Manager will, anywhere within
five (5) miles of any office operated by the Practice on the effective date of
this Business Management Agreement, enter into a direct or indirect relationship
similar to the relationship between the Practice and Business Manager, or
acquire the non-optometric assets of, any professional practice group or engage
in any other eye care business currently engaged in by the Business Manager
without approval of the Practice. The Local Advisory Council shall consult with
Business Manager with respect to any acquisition of or merger with a health care
practice outside such five (5) mile area and within the region described in
Exhibit 2.10. Notwithstanding anything to the contrary in this Section,
---------
Business Manager (a) may establish and maintain relationships with the entities
---
described on Exhibit 3.17, (b) may enter into managed care agreements with (i)
------------
other practices on the one hand, and national or regional payor entities on the
other hand, if the Practice, upon being offered the opportunity to enter into
such managed care agreements, elects not to enter into such managed care
agreements, (ii) other health care practices within the above-described file (5)
mile area if and to the extent that the Practice is unable to provide the
specific services, reasonable access to, or minimum standards as required by, a
managed care payor for all of the patients to be covered by a managed care
agreement, and (iii) other health care practices where Business Manager
reasonably believes additional providers are required to obtain a contract;
provided, however, that the exceptions to Business Manager's covenant not to
compete contained in this subsection (b) shall not permit Business Manager to
enter into business management agreements with such other health care practices.
If the Business Manager breaches any obligation set forth in this Section, in
addition to any other remedies available under this Business Management
Agreement, at law or in equity, the Practice shall be entitled to enforce this
Business Management Agreement by injunctive relief and by specific performance
of the Business Management Agreement, such relief to be without the necessity of
posting a bond, cash or otherwise. Additionally, nothing in this Section 3.17
shall limit the Practice's right to recover any
26
other damages to which it is entitled as a result of the Business Manager's
breach. The time period for which the non-competition covenants are effective
shall be extended day for day for the time period the Business Manager is in
violation of the non-competition covenants. If any provision of the covenants is
held by a court of competent jurisdiction to be unenforceable due to an
excessive time period, geographic area, or restricted activity, the covenants
shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable. Following termination of
this Agreement pursuant to Section 6.2(b) hereof, Business Manager shall be
released from any and all of the restrictions imposed in this Section 3.17.
3.18. Marketing and Public Relations. In accordance with applicable
---------------------------------
laws, regulations and ethical standards, Business Manager shall use its best
efforts to provide such marketing, support, advertising and public relations
services as are appropriate to promote and market the Practice's Professional
Eye Care Services. Such services shall be subject to review by the Local
Advisory Council. At the option of Business Manager and to the extent permitted
by law, the Business Manager's corporate name may be included on any or all
signage, letterhead, advertisements, announcements and the like relating to
Professional Eye Care Services provided by the Practice. Marketing support
services include training the Practice's personnel concerning marketing
techniques, providing written materials that may be used in marketing, and
providing technical assistance to the Practice's personnel engaged in direct
marketing efforts such as administrative support and assistance in contract
negotiation and implementation. Business Manager shall not perform direct
marketing to potential sources of business, but shall provide assistance to the
Practice's personnel who perform any such direct marketing as set forth above.
Use of the Practice's name in any advertising or promotions shall require the
Practice's advance approval.
3.19. Inconsistent Transaction by Business Manager. The Business
------------------------------------------------
Manager agrees that in performing the Management Services with respect to the
Practice, it shall not enter into any agreements, commitments or transactions or
engage in any activities which are exclusively within the authority and
responsibility of the Practice as set forth in this Agreement or are otherwise
materially inconsistent with the provisions of this Agreement.
4. OBLIGATIONS AND RESPONSIBILITIES OF THE PRACTICE.
-----------------------------------------------------
4.1. Organization and Operation. The Practice, as a continuing
----------------------------
condition of Business Manager's obligations under this Business Management
Agreement, shall at all times during the Term be and remain legally organized
and operated to provide Professional Eye Care Services in a manner consistent
with all State, federal and local laws. The Practice shall operate and maintain
within the Practice Territory, consistent with past practice and then current
needs, a practice of optometry specializing in the provision of Professional Eye
Care Services and shall maintain and enforce employment agreements in the form
of Exhibit 4.1A with the Shareholders of the Practice specified in Exhibit 4.1B;
------------ ------------
provided, however, that after the expiration of such employment agreements
(which, with regard to Xxxxxx X. Shack, has a one year term, and with respect to
Xxxxxxx X. Xxxxxxx, a three year term) in the event that such Shareholders
continue a relationship with the Practice thereafter, the Practice shall
maintain and enforce employment
27
agreements with such Shareholders substantially in such form as Exhibit 4.1A
(the economics may vary). For any future ------------- shareholder (other than
those described on Exhibit 4.1B) of the Practice, the ------------ Practice
shall cause such individual to execute and maintain thereafter so long as they
are affiliated with the Practice, an employment agreement in such form as future
shareholders execute and maintain in other practices managed by Vision 21. The
Practice shall not amend such employment agreements or waive any rights
thereunder without the prior approval of Business Manager. Recognizing that
Business Manager would not have entered into this Business Management Agreement
but for the Practice's covenant to maintain employment agreements with its
Shareholders, the Practice shall pay to Business Manager, in addition to the
Management Fee, 87% of any damages, compensation, payment, or settlement
received by the Practice from each future shareholder not specified in Exhibit
------- 4.1B pursuant to any non-competition covenant contained in any
employment --- agreement described in this paragraph. All expenses and costs in
enforcing the --- foregoing covenants not to compete shall be deemed to be
Office Expenses. The Practice shall take steps to have all future Shareholders
execute any reasonable documentation as required by Business Manager in
connection with this Section.
4.2. Practice Personnel. The Practice shall retain, as a Practice
-------------------
Expense, as the case may be, and not as an Office Expense, that number of
Professionals sufficient in the sole discretion of the Practice as are
reasonably necessary and appropriate for the provision of Professional Eye Care
Services, each of whom shall act in accordance with the applicable provisions of
this Business Management Agreement. Each Optometrist retained by the Practice
shall hold and maintain a valid and unrestricted license to practice optometry
in the State, and shall be competent in the practice of optometry. The Practice
shall be responsible for hiring, training, supervision, discipline, termination
and paying the compensation, and benefits as applicable, for all Professional
personnel and other contracted or affiliated Professionals. The Practice shall
cause its Professionals to obtain and maintain all licenses and permits required
in connection with the practice of optometry, any other business it has or the
administration of drugs by such Professionals. Business Manager shall neither
control nor direct any Professional in the performance of Professional Eye Care
Services for patients. All damages recovered by the Practice for violations of
non-competition covenants from professionals pursuant to agreements with them
(including pursuant to Partnership Agreements) shall be treated as Adjusted
Gross Revenue.
4.3. Professional Standards. Each Optometrist and any other
-----------------------
Optometrist personnel retained by the Practice to provide optometry services
must (i) have and maintain a valid and unrestricted license to practice
optometry in the State, (ii) comply with, be controlled and governed by and
otherwise provide optometry services in accordance with applicable federal,
State and municipal laws, rules, regulations, ordinances and orders, and the
ethics and standard of care of the optometric community wherein the principal
Office of the Practice is located, (iii) obtain and retain appropriate staff
membership with appropriate privileges at any hospital or health care facility
at which optometry services are to be provided, and (iv) provide on a continual
basis, quality care to its patients. Procurement of temporary staff privileges
pending the completion of the staff approval process shall satisfy this
provision, provided the Optometrist actively pursues full appointment and
actually receives full appointment within a reasonable time.
28
4.4. Professional Eye Care Services. The Practice shall ensure that
---------------------------------
Professionals are available as necessary to provide quality Professional Eye
Care Services to patients and shall assist the Business Manager in ensuring that
Clinical Personnel are available as necessary to provide quality Professional
Eye Care Services to patients. In the event that Professionals employed by, or
Shareholders of, the Practice are not available to provide Professional Eye Care
Services coverage, the Practice shall engage and retain locum tenens coverage.
----- ------
Professionals retained on a locum tenens basis shall meet all of the
----- ------
requirements of Section 4.3, and the cost of providing locum tenens coverage
----- ------
shall be a Practice Expense. With the assistance of the Business Manager, the
Practice and the Professionals shall be responsible for scheduling Professional
and Clinical Personnel coverage of all optometric procedures. The Practice
shall cause all Professionals to exert their best efforts to develop and promote
the Practice in such manner as to ensure the Practice is able to serve the
diverse needs of the community.
4.5. Peer Review/Quality Assurance. The Practice shall adopt a peer
-------------------------------
review/quality assurance program to monitor and evaluate the quality and
cost-effectiveness of Professional Eye Care Services provided by Professional
personnel of the Practice, the expenses of which shall be deemed an Office
Expense. Pursuant to such program, the Practice shall designate a committee of
Professionals to function as an optometric peer review committee to review
credentials of potential recruits, perform quality assurance functions, and
otherwise resolve optometric competence issues. The optometric peer review
committee shall function pursuant to formal written policies and procedures.
Upon request of the Practice, Business Manager shall provide administrative
assistance to the Practice in performing its peer review/quality assurance
activities, but only if such assistance can be provided consistent with
maintaining the confidentiality, immunity, and non-discoverability of the
processes and actions of the peer review/quality assurance process of the
Practice.
4.6. Practice's Insurance. The Practice shall, as a Practice Expense,
---------------------
obtain and maintain with commercial carriers chosen by the Practice appropriate
workers' compensation coverage for the Practice's employed personnel, if any,
and professional and comprehensive general liability insurance covering the
Practice and each of the Professionals and Clinical Personnel the Practice
retains to provide Professional Eye Care Services. The comprehensive general
liability coverage with respect to each Professional and Clinical Personnel
shall be in the minimum amount of One Million Dollars ($1,000,000) and
professional liability coverage shall be in the minimum amount of One Million
Dollars ($1,000,000) for each occurrence and Three Million Dollars ($3,000,000)
annual aggregate; provided, however, that with Business Manager Consent, which
shall not be unreasonably withheld or delayed, the Practice may from
time-to-time change such liability coverage amounts to amounts which are
consistent with industry standards. The insurance policy or policies shall
provide for at least thirty (30) days' advance written notice to the Practice
from the insurer as to any alteration of coverage, cancellation, or proposed
cancellation for any cause. The Practice shall obtain from any insurance
company issuing the foregoing policies its consent to the release from liability
contained in this Section. The Practice shall cause to be issued to Business
Manager by such insurer or insurers a certificate reflecting such coverage and
obtain the consent of such insurer or insurers to provide prior written notice
to Business Manager equal to notice given to a Professional of the cancellation
or proposed cancellation of such insurance for any
29
cause. Such insurance policies shall be issued by a carrier or carriers having a
current rating of not less than "A" as rated by A.M. Best Company, unless
Business Manager agrees in writing to the purchase of a policy or policies from
a carrier having a lesser rating than "A". The Local Advisory Council may, from
time-to-time, select a different commercial carrier or carriers for such
workers' compensation and professional and general liability coverage upon the
establishment of a program affecting substantially all practice groups within
the market in which the Practice is located for which Business Manager provides
management services, which decision shall be binding upon the Practice. After
such election of a single carrier or carriers by the Local Advisory Council, the
costs of such coverage shall continue to be treated as a Practice Expense. Upon
the termination of this Business Management Agreement for any reason, the
Practice shall continue to carry professional liability insurance in the amounts
specified herein for the shorter period of (i) the period set forth in the
State's statute of repose (or if no statute of repose exists, the State's
statute of limitations) for bringing professional malpractice claims based upon
injuries which are not immediately discoverable plus any applicable tolling
periods, or (ii) ten (10) years after termination; or if the Practice dissolves
or ceases to practice optometry, the Practice shall obtain and maintain as a
Shareholder Expense "tail" professional liability coverage, in the amounts
specified in this Section for the shorter period of (i) the period set forth in
the State's statute of repose (or if no statute of repose exists, the State's
statute of limitations) for bringing professional malpractice claims based upon
injuries which are not immediately discoverable plus any applicable tolling
periods, or (ii) ten (10) years. The Practice shall pay for all malpractice
insurance for Professionals, which shall be deemed a Practice Expense, except
for Shareholder Optometrists. Except as determined by the Local Advisory
Council, the professional liability insurance carrier shall not be replaced or
changed without Practice Consent and Business Manager Consent.
4.7. Confidential and Proprietary Information. The Practice agrees and
----------------------------------------
acknowledges that all materials provided by Business Manager to the Practice
constitute Confidential Information disclosed in confidence and with the
understanding that it constitutes valuable business information developed by
Business Manager at great expenditures of time, effort, and money. The Practice
further agrees that it shall not, directly or indirectly, disclose any
Confidential Information of the Business Manager to other persons without
Business Manager's express written authorization, such Confidential Information
shall not be used in any way directly or indirectly detrimental to Business
Manager, and the Practice will keep such Confidential Information confidential
and will ensure that its affiliates and advisors who have access to such
Confidential Information comply with these nondisclosure obligations; provided,
however, that the Practice may disclose Confidential Information to those of its
Representatives who need to know Confidential Information for the purposes of
this Business Management Agreement, it being understood and agreed to by the
Practice that such Representatives will be informed of the confidential nature
of the Confidential Information, will agree to be bound by this Section, and
will be directed by the Practice not to disclose to any other person any
Confidential Information. The Practice agrees to be responsible for any breach
of this Section by its affiliates, advisors, or Representatives. If the
Practice is requested or required (by oral questions, interrogatories, requests
for information or documents, subpoenas, civil investigative demands, or similar
processes) to disclose or produce any Confidential Information furnished in the
course of its dealings with Business Manager or its affiliates, advisors, or
Representatives, the Practice will (i) provide
30
Business Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that Business Manager may seek an appropriate protective order or
waive compliance with the provisions of this Section and (ii) consult with
Business Manager as to the advisability of Business Manager's taking of legally
available steps to resist or narrow such request. The Practice further agrees
that, if in the absence of a protective order or the receipt of a waiver
hereunder, the Practice is nonetheless, in the written opinion of its legal
counsel, compelled to disclose or produce Confidential Information concerning
Business Manager to any tribunal legally authorized to request and entitled to
receive such Confidential Information or to stand liable for contempt or suffer
other censure or penalty, the Practice may disclose or produce such Confidential
Information to such tribunal without liability hereunder; provided, however,
that the Practice shall give Business Manager written notice of the Confidential
Information to be so disclosed or produced as far in advance of its disclosure
or production as is practicable and shall use its best efforts to obtain, to the
greatest extent possible, an order or other reliable assurance that confidential
treatment will be accorded to such Confidential Information so required to be
disclosed or produced. The Practice acknowledges that the disclosure of
Confidential Information to it by Business Manager is done in reliance upon its
representations and covenants in this Business Management Agreement. Upon
expiration or termination of this Business Management Agreement by either Party
for any reason whatsoever, the Practice shall immediately return and shall cause
its Representatives, affiliates, and independent contractors to immediately
return to Business Manager all Confidential Information, and the Practice will
not, and will cause its Representatives, affiliates, and independent contractors
not to, thereafter use, appropriate or reproduce such Confidential Information.
The Practice further expressly acknowledges and agrees that any such use,
appropriation, or reproduction of any such Confidential Information by any of
the foregoing after the expiration or termination of this Agreement will result
in irreparable injury to Business Manager, that the remedy at law for the
foregoing would be inadequate, and that in the event of any such use,
appropriation, or reproduction of any such Confidential Information after the
termination or expiration of this Agreement, Business Manager, in addition to
any other remedies or damages available to it, shall be entitled to injunctive
or other equitable relief without the necessity of posting a bond, cash, or
otherwise, and without the necessity of proving actual damages. Such rights to
relief shall not preclude Business Manager from other remedies which may be
available to it hereunder.
4.8. Non-Competition. The Practice hereby recognizes and acknowledges
---------------
that Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Business Management Agreement and
that in the process of providing services under this Business Management
Agreement, the Practice will be privy to financial and Confidential Information,
to which the Practice would not otherwise be exposed. The Parties also
recognize that the services to be provided by Business Manager will be feasible
only if the Practice operates an active practice to which the Professionals
associated with the Practice devote their full time and attention. The Practice
agrees and acknowledges that the non-competition covenants described hereunder
are necessary for the protection of Business Manager, and that Business Manager
would not have entered into this Business Management Agreement without the
following covenants.
31
(a) During the Term of this Business Management Agreement and except
for its obligations pursuant to this Business Management Agreement, the Practice
shall not establish, operate, or provide Professional Eye Care Services at a
medical office, optometric office or other health care facility anywhere within
ten (10) miles of any current or future location (as of the date such office is
established), at which Business Manager provides business management services
similar to the services contemplated in this Agreement without violating this
Section 4.8.
(b) Except as specifically agreed to by Business Manager in writing,
the Practice and its Shareholders covenant and agree that during the Term of
this Business Management Agreement and for a period of two (2) years from the
date this Business Management Agreement is terminated, other than if terminated
by the Practice for cause, or expires, the Practice shall not directly or
indirectly own (excluding ownership of less than one percent (1%) of the equity
of any publicly traded entity and excluding ownership of the common stock of
Business Manager), manage, operate, control, contract with, lend funds to, lend
its name to, maintain any interest whatsoever in, or be employed by, any
enterprise (i) having to do with the provision, distribution, promotion, or
advertising of any type of management or administrative services or products to
third parties in competition with Business Manager, located anywhere in the
United States of America; and/or (ii) offering any type of service(s) or
product(s) to third parties substantially similar to those offered by Business
Manager to the Practice or by the Practice to consumers located anywhere in the
United States of America. Notwithstanding the above restriction, nothing herein
shall prohibit (i) the Practice or any of its Shareholders from providing
management and administrative services to this or their own optometry practices
after the termination of this Business Management Agreement, (ii) the Practice
or its Shareholders from contracting with a third-party manager to provide
administrative or management services for its or their professional eye care
practices after termination of this Business Management Agreement and two (2)
years thereafter, as long as such relationship complies with the provisions of
this Section 4.8(b); (iii) any of the Practice's Shareholders from providing
management and administrative services to their own optometry practices after
the termination of their employment relationship with the Practice in accordance
with this Business Management Agreement, and (iv) such Shareholders from
contracting with a third-party manager to provide administrative or management
services for their professional eye care practices after the termination of
their employment relationship with the Practice in accordance with this Business
Management Agreement. If the Practice violates this Section at a time when the
current Shareholders are the Shareholders of Practice, then Practice shall pay
to Business Manager the amount received as consideration by the Practice and/or
the Shareholders in connection with the Acquisition Transaction, as agreed upon
liquidated damages. If the Practice violates this Section once the current
Shareholders are no longer Shareholders of the Practice, the Business Manager
shall not be entitled to liquidated damages but shall be entitled to any other
remedies available at law or equity. The Practice and the Shareholders
acknowledge and agree that such sum is reasonable in light of the severe harm
that Business Manager would suffer as a result of the Practice's breach of this
restrictive covenant.
(c) The written employment agreements in the form of Exhibits 4.1A 4.1B
------------------
shall contain covenants of the Shareholder employees pursuant to which the
Shareholders
32
agree not to compete with the Practice or with the Business Manager for two (2)
years after termination or expiration of their employment agreements except as
limited therein.
(d) Reserved.
(e) The Practice understands and acknowledges that Business Manager
shall suffer severe harm in the event that the foregoing non-competition
covenants in Section 4.8 are violated, and accordingly, if the Practice breaches
any obligation of Section 4.8, in addition to any other remedies available under
this Business Management Agreement, at law or in equity, Business Manager shall
be entitled to enforce this Business Management Agreement by injunctive relief
and by specific performance of the Business Management Agreement, such relief to
be without the necessity of posting a bond, cash or otherwise. Additionally,
nothing in this Section 4.8(e) shall limit Business Manager's right to recover
any other damages to which it is entitled as a result of the Practice's breach.
The time period for which the non-competition covenant is effective shall be
extended day for day for the time period the Practice is in violation of the
non-competition covenant. If any provision of the covenants is held by a court
of competent jurisdiction to be unenforceable due to an excessive time period,
geographic area, or restricted activity, the covenant shall be reformed to
comply with such time period, geographic area, or restricted activity that would
be held enforceable. Following termination of this Agreement pursuant to
Section 6.2(b) hereof, the Practice shall not amend, alter or otherwise change
any term or provision of the restrictive covenants or liquidated damages
provisions of the employment agreements with the Professionals. Following
termination of this Agreement pursuant to Section 6.2(a) hereof, the Practice
and the Professionals shall be relieved of the restrictions imposed by this
Section 4.8. Notwithstanding any provision in this Business Management
Agreement to the contrary, the Business Manager acknowledges that the current
Shareholders of the Practice will eventually depart from the Practice and that
replacement shareholders will be substituted for them and further acknowledges
that it would be unfair to penalize such departing Shareholders for the actions
of the Practice after such departure. Therefore, the Business Manager shall not
hold any such departing Shareholder responsible for any damages, penalties,
losses or costs suffered by the Practice or any substitute Shareholders as a
result of the actions taken or omitted to be taken by the Practice after the
time the departing Shareholder has departed from the Practice (whether such
damages occur as a result of a claim made by the Business Manager or any other
third party).
4.9. Name, Trademark. The Practice represents and warrants that the
----------------
Practice conducts its professional practice under the name of, and only under
the name of "The Eye Drx," and that such name is duly registered, qualified, or
licensed under the law of the State, and that, to the Practice's knowledge, the
Practice is the sole and absolute owner of the name in the State. The Practice
covenants and promises that, without the prior written consent of the Business
Manager, the Practice will not:
(a) take any action that is reasonably likely to result in the loss of
registration, qualification or licensure of the name;
33
(b) fail to take any reasonably necessary action that will maintain the
registration, qualification, or licensure current;
(c) license, sell, give, or otherwise transfer the name or the right to
use the name to any optometry practice, Optometrist, professional corporation,
or any other entity; or
(d) cease conducting the professional practice of the Practice under
the name.
4.10. Lease Assignment. Upon Business Manager's request, if the
-----------------
Practice is the lessee of the Office under a lease with an unrelated and
unaffiliated lessor, the Practice shall assign the lease to Business Manager
upon receipt of consent from the lessor. The Practice shall use its best
efforts to assist in obtaining the lessor's consent to the assignment. Upon
request, the Practice shall execute any instruments and shall take any acts that
Business Manager may deem necessary to accomplish the assignment of the lease.
All expenses related to the assignment of such leases for leased property
existing upon the Effective Date hereof and described on Exhibit 3.2, shall be
-----------
deemed a Business Manager Expense, and Business Manager agrees to indemnify
Practice for any damages relating to the assignment of such lease. In the event
any terms contained in this Section 4.10 are deemed to be inconsistent with that
of the Asset Purchase Agreement of even date between the parties, the terms of
the Asset Purchase Agreement shall prevail.
4.11. Billing Information and Assignments; Establishment of Fees. The
-----------------------------------------------------------
Practice shall promptly provide the Business Manager with all billing and other
information reasonably requested by the Business Manager to enable it to xxxx
and collect the Practice's fees and other charges and reimbursement claims
pursuant to Section 3.9, and the Practice shall use its best efforts to procure
consents to assignments and other approvals and documents necessary to enable
the Business Manager to obtain payment or reimbursement from third parties for
such fees, other charges and claims. The Practice shall establish reasonable
fees for all professional and ancillary services and pharmaceutical items in
connection with the provision of Professional Eye Care Services.
4.12. Provider Agreements. The Practice shall not enter into
--------------------
contractual arrangements with third parties for the Practice's provision of
Professional Eye Care Services which are inconsistent with guidelines
established by the Local Advisory Council or any capitated fee arrangement
without the prior approval of the Practice Advisory Council. Subject to the
foregoing provision, the Practice shall have the final authority with regard to
all of such contractual arrangements.
4.13. Inconsistent Transaction by the Practice. The Practice agrees
-------------------------------------------
that it shall not enter into any agreements, commitments or transactions or
engage in any activities which are within the authority and responsibility of
the Business Manager as set forth in this Agreement or otherwise materially
inconsistent with the provisions of this Agreement.
34
4.14. Recommendations. The Practice shall make recommendations to
---------------
Business Manager regarding the Office, the equipment, the business operations,
and the services to be provided by Business Manager under this Business
Management Agreement.
4.15. General Obligations. The Practice shall take all lawful actions
--------------------
reasonably necessary to maximize revenues and shall not take any action to
reduce revenues other than in the ordinary course of business.
4.16. Tax Matters. The Practice shall prepare or arrange for the
------------
preparation by an accountant selected by the Practice of all appropriate
corporate tax returns and reports required of the Practice including such
returns and reports required with respect to the Account. All costs and
expenses relating to the preparation of such returns and reports shall be deemed
a Shareholder Expense.
4.17. Shareholders' Undertaking to Enforce Certain Provisions of
----------------------------------------------------------------
Agreement. The Practice shall cause to be executed by all Shareholders of the
---
Practice an undertaking in the form of Exhibit 4.17 by such Shareholders to
------------
ensure that the corporate existence of the Practice is maintained and that the
covenants not to compete described in Section 4.1 of this Agreement are enforced
by the Practice against any individuals violating such covenants.
5. BUSINESS MANAGER'S COMPENSATION.
---------------------------------
5.1. Management Fee. The Practice and Business Manager agree to the
---------------
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. Each month Business Manager shall be paid the sum
of that percentage set forth in Exhibit 5.1 of Adjusted Gross Revenue (the
-----------
"Management Fee"). Except for its obligation to pay in full all Office
Expenses, Business Manager shall not be liable for any losses generated by the
Practice.
5.2. Reasonable Value. Payment of the Management Fee is not intended
-----------------
to be and shall not be interpreted or applied as permitting Business Manager to
share in the Practice's fees for Professional Eye Care Services or any other
services, but is acknowledged as the Parties' negotiated agreement as to the
reasonable fair market value of Business Manager's commitment to pay all Office
Expenses and the fair market value of the equipment, contract analysis and
support, other support services, purchasing, personnel, office space,
management, administration, strategic management and other items and services
furnished by Business Manager pursuant to the Business Management Agreement,
considering the nature and volume of the services required and the risks assumed
by Business Manager. The Practice and Business Manager recognize and
acknowledge that Business Manager will incur substantial costs and business
risks in undertaking to pay all Office Expenses, arranging for the Practice's
use of the Office and in providing the equipment, support services, personnel,
marketing, office space, management, administration, and other items and
services that are the subject matter of this Business Management Agreement, and
certain of such costs and expenses can vary to a considerable degree according
to the extent of the Practice's business and services. It is the intent of the
Parties that the Management Fee reasonably
35
compensate Business Manager for the value to the Practice of Business Manager's
administrative expertise, given the considerable business risk to Business
Manager in providing the Management Services that are the subject of this
Business Management Agreement.
5.3. Payment of Management Fee. To facilitate the payment of the
----------------------------
Management Fee as provided in Section 5.1(a) hereof, the Practice hereby
expressly authorizes Business Manager to make withdrawals of the Management Fee
from the Account as such fee becomes due and payable during the Term in
accordance with Section 3.10(a) and after termination of the Agreement as
provided in Section 6.3. Business Manager shall deliver to the Practice an
invoice for the Management Fee accompanied by a reasonably detailed statement of
the information upon which the Management Fee calculation is based.
5.4. Assignment of Fees for Optometry Services.
----------------------------------------------
(a) As security for the performance of its obligations under this
Business Management Agreement, the Practice hereby irrevocably assigns and sets
over to Business Manager all of its right to receive payment for Professional
Eye Care Services (other than rights to receive payments relating to the
activities described in Exhibit 1.3) to the extent permitted by law (the
------------
"Accounts Receivable") and retain such payment for its own account, and shall
obtain a like assignment from all Professionals. To the extent such rights to
receive payment cannot legally be assigned, the "Accounts Receivable" shall
include the right to have any amounts received by the Practice pursuant to such
non-assignable rights paid over to Business Manager upon receipt. The Practice
shall take such action as may be necessary to confirm to Business Manager the
rights set forth in this Section 5.4(a).
(b) Without limiting the generality of the foregoing, it is the intent
of the Parties that the assignments to Business Manager of the rights described
in Section 5.4(a) above shall be inclusive of the rights of the Practice and the
Professionals to receive payment with respect to any services rendered prior to
the effective date of any expiration or termination of this Agreement; provided,
however, that the right to receive payments relating to the activities described
in Exhibit 1.3 shall be excluded from such assignment. The Practice agrees and
-----------
shall cause each Professional to agree, that Business Manager shall retain the
right to collect and hold as security any Accounts Receivable relating to any
such services rendered prior to the effective date of any such expiration or
termination ("Pre-Termination Accounts Receivable").
(c) The Practice acknowledges that it is the intent of Business Manager
to grant a security interest in all of the Pre-Termination Accounts Receivable
to the lender(s) under its working capital credit facility (whether one or more,
the "Credit Facility Lender"), as in effect from time-to-time. The Practice
agrees that such security interest of the Credit Facility Lender is intended to
be a first priority security interest and is superior to any right, title or
interest which may be asserted by the Practice or any Professional with respect
to the then applicable portion of the Pre-Termination Accounts Receivable or the
proceeds thereof. The Practice further agrees, and shall cause each
Professional to agree, that, upon the occurrence of an event which, under the
terms of such working capital credit facility, would allow the Credit Facility
Lender to exercise its right to
36
collect such portion of the Pre-Termination Accounts Receivable and apply the
proceeds thereof toward amounts due under such working capital credit facility,
the Credit Facility Lender will succeed to all rights and powers of Business
Manager under the powers of attorney provided for in Section 3.9(f) above as if
such Credit Facility Lender had been named as the attorney-in-fact therein, and
the Practice and each Professional hereby waive, and the Credit Facility Lender
shall not take the Pre-Termination Accounts Receivable subject to, any and all
defenses the Practice and/or such Professionals may have with respect to money
coming into the Account and any defenses they may have against the Credit
Facility Lender. The Practice shall, and shall cause its Professionals to,
execute any and all documents, financing statements, and agreements reasonably
requested by such Credit Facility Lender to evidence and effectuate the Credit
Facility Lender's rights contemplated in this Section.
(d) In the event that, contrary to the mutual intent of Business
Manager and the Practice, the assignment of rights described in this Section 5.4
shall be deemed, for any reason, to be ineffective as an outright assignment,
the Practice and each Professional shall, effective as of the date of this
Business Management Agreement, be deemed to have granted (and the Practice does
hereby grant, and shall cause each Professional to grant) to Business Manager a
first priority lien on and security interest in and to any and all interests of
the Practice and such Professionals in any accounts receivable generated by the
provision of Professional Eye Care Services by the Practice and its
Professionals or otherwise generated through the operations of the Office, and
all proceeds with respect thereto, to secure the payment to Business Manager of
all amounts due to Business Manager hereunder, and this Business Management
Agreement shall be deemed to be a security agreement to the extent necessary to
give effect to the foregoing. The Practice shall execute and deliver, and cause
each Professional to execute and deliver, all such financing statements as
Business Manager may request in order to perfect such security interest. The
Practice shall not grant (and shall not suffer any Professional to grant) any
other lien on or security interest in or to such accounts receivable or any
proceeds thereof.
(e) Upon termination of this Business Management Agreement, Business
Manager shall release the foregoing lien with respect to Accounts Receivable
generated after the effective date of such termination and shall execute and
cause to be filed any termination statements relating to such release of lien.
However, it is understood that all rights of the Parties to the Pre-Termination
Accounts Receivable shall be subordinate to any interest of the Credit Facility
Lender.
5.5. Disputes Regarding Fees.
-------------------------
(a) It is the Parties' intent that any disputes regarding performance
standards of the Business Manager be resolved to the extent possible by good
faith negotiation. To that end, the Parties agree that if the Practice in good
faith believes that Business Manager has failed to perform its obligations, and
that as a result of such failure, the Practice is entitled to a set-off or
reduction in its Management Fees, the Practice shall give Business Manager
notice of the perceived failure and request in the notice a set-off or reduction
in Management Fees. Business Manager and
37
the Practice shall then negotiate the dispute in good faith, and if an agreement
is reached, the Parties shall implement the resolution without further action.
(b) If the Parties cannot reach a resolution within a reasonable time,
the Parties shall submit the dispute to mediation to be conducted in accordance
with the American Arbitration Association's Commercial Mediation Rules.
(c) If the mediation process fails to resolve the dispute, the Parties
may seek such legal redress as they choose.
6. TERM AND TERMINATION.
----------------------
6.1. Initial and Renewal Term. The Term of this Business Management
---------------------------
Agreement will be for an initial period of forty (40) years after the effective
date, and shall be automatically renewed for successive five (5) year periods
thereafter, provided that neither Business Manager nor the Practice shall have
given notice of termination of this Business Management Agreement at least one
hundred twenty (120) days before the end of the initial term or any renewal
term, or unless otherwise terminated as provided in Section 6.2 of this Business
Management Agreement.
6.2. Termination.
-----------
(a) Termination by the Practice. The Practice may immediately
------------------------------
terminate this Agreement at its discretion, upon written notice pursuant to
Section 8.3, as follows:
(i) if Business Manager becomes insolvent by reason of its inability to
pay its debts as they mature; is adjudicated bankrupt or insolvent; files a
petition in bankruptcy, reorganization or similar proceeding under the
bankruptcy laws of the United States or shall have such a petition filed against
it which is not discharged within thirty (30) days; has a receiver or other
custodian, permanent or temporary, appointed for its business, assets or
property; makes a general assignment for the benefit of creditors; has its bank
accounts, property or accounts attached; has execution levied against its
business or property; or voluntarily dissolves or liquidates or has a petition
filed for corporate dissolution and such petition is not dismissed with thirty
(30) days; or
(ii) if the Business Manager fails to comply with any material
provision of this Agreement, or any other agreement with the Practice, and does
not correct such failure within sixty (60) days after written notice of such
failure to comply is delivered by the Practice specifying the nature of the
breach in reasonable detail. However, in the event that as of the 60th day the
Business Manager is diligently working to cure the material breach and there is
a reasonable likelihood that the same will be cured within a reasonable period
of time, and without a material adverse result to the Practice, reasonable
additional time to cure such breach shall be provided to the Business Manager.
38
(b) Termination by Business Manager. Business Manager may immediately
--------------------------------
terminate this Agreement at its discretion, upon written notice pursuant to
Section 8.3, as follows:
(i) if the Practice becomes insolvent by reason of its inability to pay
its debts as they mature; is adjudicated bankrupt or insolvent; files a petition
in bankruptcy, reorganization or similar proceeding under the bankruptcy laws of
the United States or shall have such a petition filed against it which is not
discharged within thirty (30) days; has a receiver or other custodian, permanent
or temporary, appointed for its business, assets or property; makes a general
assignment for the benefit of creditors; has its bank accounts, property or
accounts attached; has execution levied against its business or property; or
voluntarily dissolves or liquidates or has a petition filed for corporate
dissolution and such petition is not dismissed with thirty (30) days; or
(ii) if the Practice fails to comply with any material provision of
this Agreement, or any other agreement with Business Manager, and does not
correct such failure within sixty (60) days after written notice of such failure
to comply is delivered by Business Manager specifying the nature of the breach
in reasonable detail. However, in the event that as of the 60th day the
Practice is diligently working to cure the material breach and there is a
reasonable likelihood that the same will be cured within a reasonable period of
time and without a material adverse result to the Business Manager, reasonable
additional time to cure such breach shall be provided to the Practice.
(c) Termination by Agreement. In the event the Practice and Business
--------------------------
Manager shall mutually agree in writing, this Business Management Agreement may
be terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event
----------------------------------------------------
there shall be a change in the Medicare or Medicaid statutes, federal statutes,
state statutes, case laws, administrative interpretations, regulations or
general instructions, the adoption of new federal or state legislation, or a
change in any third-party reimbursement system, any of which are reasonably
likely to materially and adversely affect the manner in which either Party may
perform or be compensated for its services under this Business Management
Agreement or which shall make this Business Management Agreement or any related
agreements unlawful or unenforceable, or which would be reasonably likely to
subject either Party to this Agreement, or any member, shareholder, officer,
director, employee, agent or affiliated organization to any civil or criminal
penalties or administrative sanctions, the Parties shall immediately use their
best efforts to enter into a new service arrangement or basis for compensation
for the services furnished pursuant to this Business Management Agreement that
complies with the law, regulation, or policy, or which minimizes the possibility
of such penalties, sanctions or unenforceability, and that approximates as
closely as possible the economic position of the Parties prior to the change.
39
6.3. Effects of Termination.
------------------------
(a) Upon termination of this Business Management Agreement, as
hereinabove provided, neither Party shall have any further obligations hereunder
except for (i) obligations accruing prior to the date of termination, including,
without limitation, payment of the Management Fee relating to services provided
prior to the termination of this Business Management Agreement, (ii)
obligations, promises, or covenants set forth herein that are expressly made to
extend beyond the Term, including, without limitation, insurance, indemnities
and non-competition provisions, which provisions shall survive the expiration or
termination of this Business Management Agreement, (iii) the obligation of the
Practice described in Section 6.4, (iv) the obligation of Business Manager to
repay amounts borrowed from the Account pursuant to Section 5.4(a), (v) the
obligation of the Practice to repay amounts advanced by Business Manager to the
Practice, and (vi) the obligations set forth in paragraph (b) of the section
6.3. In effectuating the provisions of this Section 6.3, the Practice
specifically acknowledges and agrees that if this Business Management Agreement
terminates pursuant to Sections 6.2(b) or (d), Business Manager shall continue
for a period not to exceed ninety (90) days to exclusively collect and receive
on behalf of the Practice all cash collections from accounts receivable in
existence at the time this Business Management Agreement is terminated, it being
understood that (a) such cash collections may be used to compensate Business
Manager for Management Services rendered prior to the termination of this
Business Management Agreement, (b) Business Manager shall not be entitled to
collect accounts receivables after the termination date if this Agreement is
terminated pursuant to Section 6.2(a), and (c) the Business Manager shall deduct
from such cash collections any other amounts owed to Business Manager under this
Business Management Agreement, including, without limitation, (i) ten percent
(10%) of such cash collections as its Management Fee during any period after the
termination of this Business Management Agreement while such collections are
taking place, (ii) any reasonable costs incurred by Business Manager in carrying
out the post termination procedures and transactions contemplated herein, and
(iii) any adjustments pursuant to Section 3.10(b). Business Manager shall remit
remaining amounts from such collection activities, if any, to the Practice.
Upon the expiration or termination of this Business Management Agreement for any
reason or cause whatsoever, Business Manager shall surrender to the Practice all
books and records pertaining to the Practice's optometry practices. All sums
received or collected by either Party after termination for Adjusted Gross
Revenues earned prior to termination shall be split in accordance with this
Section 6.3.
(b) If this Business Management Agreement is eventually held to be
unlawful or unenforceable due to health care regulatory matters (and/or if
efforts are made to achieve such a result) and the Parties are unable to enter
into a new service arrangement as contemplated by paragraph 8.14 of this
Business Management Agreement, then (i.) if the Practice sought to have the
Business Management Agreement held unlawful or unenforceable, the Practice shall
disgorge to the Business Manager the amount received as consideration by the
Practice and/or the Shareholders in connection with the Acquisition Transaction,
(ii) if the Business Manager sought to have the Business Management Agreement
held unlawful or unenforceable, the Practice may keep the entire amount received
as consideration by the Practice and/or the Shareholders in
40
connection with the Acquisition Transaction despite the termination of the
Business Management Agreement and notwithstanding the terms of any other
documents relating to the Acquisition Agreement, and (iii) if a third party
sought to have the Business Management Agreement held unlawful or unenforceable,
the Practice may keep the entire amount received as consideration by the
Practice and/or the Shareholders in connection with the Acquisition Transaction
despite the termination of the Business Management Agreement and notwithstanding
the terms of any other documents relating to the Acquisition Agreement.
6.4. Purchase Obligation. Upon expiration of this Business Management
--------------------
Agreement in accordance with Section 6.1 or termination of this Business
Management Agreement by Business Manager, or upon a violation of covenants not
to compete pursuant to Section 4.8, the Practice shall upon Business Manager's
demand:
(a) Pay to Business Manager the difference between the consideration
received in the Acquisition Transaction minus the book value of the net tangible
assets (for purposes of such repurchase obligations such difference shall be
amortized over a forty (40) year period), deferred charges, and all other
amounts on the books of the Business Manager relating to the Business Management
Agreement, as such amounts shall be established pursuant to the Acquisition
Transaction and including amounts, if any, for the covenants described in
Section 4.8 above, as adjusted through the last day of the month most recently
ended prior to the date of such termination in accordance with GAAP to reflect
amortization or depreciation of the intangible assets, deferred charges, or
covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and the
Practice, each selecting a duly qualified appraiser, who in turn will agree on a
third appraiser. This agreed-upon appraiser shall perform the appraisal which
shall be binding on both Parties. In the event either Party fails to select an
appraiser within fifteen (15) days of the selection of an appraiser by the other
Party, the appraiser selected by the other Party shall perform the appraisal
which shall be binding on both Parties;
(c) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Office and that
relate principally to the performance of Business Manager's obligations under
this Business Management Agreement;
(d) Assume all contracts and leases and the Practice's pro rata share
of all debts and payables that are obligations of Business Manager and that
relate principally to the performance of Business Manager's obligations under
this Business Management Agreement or the properties leased or subleased by
Business Manager; provided, however, that the Practice shall only be obligated
to assume such contacts and leases if the Practice will be able to enjoy the
benefits of the contracts and leases following such assumption;
41
(e) Purchase from Business Manager at book value all of the equipment
leased to the Practice, including all replacements and additions thereto made by
Business Manager pursuant to the performance of its obligations under this
Business Management Agreement, and all other assets, including inventory and
supplies, tangibles and intangibles, set forth on the books of Business Manager
as adjusted through the last day of the month most recently ended prior to the
date of such termination in accordance with GAAP to reflect operations of the
Office, depreciation, amortization, and other adjustments of assets shown on the
books of Business Manager; and
(f) Cause to be executed by Shareholders of the Practice such personal
guaranties and any security agreements reasonably required by Business Manager
in connection with the purchase described in this Section 6.4. For purposes of
this Section 6.4(f), the term "Shareholders" shall mean any individual who is a
Shareholder of the Practice on the date that notice is given of the termination
of this Business Management Agreement and any additional individual who is a
Shareholder of the Practice on the effective date of this Business Management
Agreement. However, such obligations of personal guaranties by the Shareholders
existing upon the execution hereof shall expire upon the earlier of their
substitution as a shareholder by a designee of Business Manager, or the
expiration of any covenants not to compete as to them personally as contemplated
hereunder.
Any future Shareholders of the Practice not existing on this date shall
upon becoming a Shareholder of the Practice, execute and deliver to Business
Manager an undertaking to comply with this Section 6.4(f) which shall be in the
form of Exhibit 6.4(f). The future Shareholders shall not permit without
---------------
Business Manager Consent, during any three (3) year period during which this
Agreement is in effect, the transfer of over fifty percent (50%) of the
ownership interests of the Practice, except in cases of death, disability or
retirement of such transferring Shareholders. Notwithstanding any provision in
this Business Management Agreement to the contrary, the Business Manager
acknowledges that the current Shareholders of the Practice will eventually
depart from the Practice and that replacement shareholders will be substituting
for them and further acknowledges that it would be unfair to penalize such
departing Shareholder for the actions of the Practice after such departure.
Therefore, the Business Manager shall not hold any such departing Shareholder
responsible for any damages, penalties, losses or costs suffered by the Practice
or any terminating/substituting Shareholders as a result of the actions taken by
or omitted to be taken by the Practice after the time the departing Shareholder
has departed from the Practice (whether such Practice damages occur as a result
of a claim made by the Business Manager or any other third party).
6.5. Purchase Option. Upon termination of this Business Management
----------------
Agreement by the Practice pursuant to Section 6.2(a), the Practice shall be
released from the restrictive covenants in Section 4.8 and shall have the option
but not the obligation to do all or none of the following:
(a) Pay to Business Manager the difference between the consideration
received in the Acquisition Transaction minus the book value of the net tangible
assets (for purposes of such repurchase obligations such difference shall be
amortized over a forty (40) year period),
42
deferred charges, and all other amounts on the books of the Business Manager
relating to the Business Management Agreement, as such amounts shall be
established pursuant to the Acquisition Transaction and including amounts, if
any, for the covenants described in Section 4.8 above, as adjusted through the
last day of the month most recently ended prior to the date of such termination
in accordance with GAAP to reflect amortization or depreciation of the
intangible assets, deferred charges, or covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and the
Practice, each selecting a duly qualified appraiser, who in turn will agree on a
third appraiser. This agreed-upon third appraiser shall perform the appraisal
which shall be binding on both Parties. In the event either Party fails to
select an appraiser within fifteen (15) days of the selection of an appraiser by
the other Party, the appraiser selected by the other Party shall perform the
appraisal which shall be binding on both Parties;
(c) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Office and that
relate principally to the performance of Business Manager's obligations under
this Business Management Agreement;
(d) Assume all contracts and leases and the Practice's pro rata share
of all debts and payables that are obligations of Business Manager and that
relate principally to the performance of Business Manager's obligations under
this Business Management Agreement or the properties leased or subleased by
Business Manager; provided, however, that the Practice shall only be obligated
to assume such contracts and leases if the Practice will be able to enjoy the
benefits of the contract's and leases following such assumption; and
(e) Purchase from Business Manager at book value all of the equipment
leased to the Practice, including all replacements and additions thereto made by
Business Manager pursuant to the performance of its obligations under this
Business Management Agreement, and all other tangible assets, including
inventory and supplies, set forth on the books of the Business Manager as
adjusted through the last day of the month most recently ended prior to the date
of such termination in accordance with GAAP to reflect operations of the Office,
depreciation, amortization, and other adjustments of assets shown on the books
of the Business Manager.
The Practice shall provide notice to Business Manager of its intent to
exercise the option above described at the same time that the Practice provides
notice to Business Manager of the Practice's election to terminate this Business
Management Agreement for cause.
6.6. Closing of Purchase. If the Practice purchases the assets
---------------------
pursuant to Section 6.4 or 6.5, the Practice shall pay cash for the purchased
assets; provided, however, that the Practice may also use Business Manager's
common stock as consideration for the purchased assets, which stock shall be
valued for purposes of this Agreement as follows: (a) in the event of a Section
6.4 termination, the shares shall be valued at the lower of the value on the
date the shares were received
43
by the Shareholder (as agreed to by the parties), and the value on the date of
the closing of this purchase, or (b) in the event of a Section 6.5 termination,
the shares shall be valued at the higher of the value of such shares on the
dates set forth in 6.6(a) above. The amount of the purchase price shall be
reduced by the amount of debt and liabilities of Business Manager, if any,
assumed by the Practice and by any unpaid portion of any promissory notes
payable by Business Manager to any Shareholder of the Practice, which shall be
offset against the purchase price. The Practice and all Shareholders of the
Practice shall execute such documents as may be required to assume the
liabilities set forth in Section 6.4(d) or Section 6.5(c) and to remove Business
Manager from any liability with respect to such repurchased asset and with
respect to any property leased or subleased by Business Manager. The closing
date for the purchase shall be determined by the Parties, but shall in no event
occur later than the expiration date of this Business Management Agreement if
this Agreement expires in accordance with Section 6.1, or sixty (60) days from
the date of the notice of termination for cause. The termination of this
Business Management Agreement shall become effective upon the closing of the
sale of the assets if the assets are purchased, and all Parties shall be
released from any restrictive covenants provided for in Section 3.17 or Section
4.8 on the closing date. If the Practice chooses not to purchase the assets
pursuant to Section 6.5, the termination shall be effective as of the notice
date given by the Practice under Section 6.2(a), at which time the parties shall
be released from the restrictive covenants in Section 3.17 and Section 4.8. From
and after any termination, each Party shall provide the other Party with
reasonable access of the books and records then owned by it to permit such
requesting Party to satisfy reporting and contractual obligations that may be
required of it.
7. INDEMNIFICATION; THIRD PARTY CLAIMS.
--------------------------------------
7.1. Indemnification by the Practice. The Practice shall indemnify and
-------------------------------
hold harmless Business Manager and Business Manager's shareholders, directors,
officers, agents and employees, from and against all claims, demands,
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees, resulting in any manner, directly or indirectly, (a) from the
negligent or intentional acts or omissions of the Practice or its members,
Shareholders, directors, officers, employees, agents or independent contractors,
including but not limited to any such claims, demands, liabilities, losses,
damages, costs and expenses which accrued or arose prior to the date of
execution of this Business Management Agreement, or (b) from the Practice's
efforts to defend the termination of this Business Management Agreement by
Business Manager as contemplated under Section 6.3(b)(ii) or by a third party as
contemplated under Section 6.3(b)(iii).
7.2. Indemnification by Business Manager. Business Manager shall
--------------------------------------
indemnify and hold harmless the Practice, and the Practice's members,
Shareholders, directors, officers, agents and employees, from and against any
and all claims, demands, liabilities, losses, damages, costs and expenses,
including reasonable attorneys' fees, resulting in any manner, directly or
indirectly, from the negligent or intentional acts or omissions of Business
Manager or its shareholders, directors, officers, employees, agents or
independent contractors.
7.3. Notice of Claim for Indemnification. No claims for
---------------------------------------
indemnification under this Agreement relating to claims solely between the
Parties shall be valid unless notice of such
44
claim is delivered to the Practice (in the case of a claim by Business Manager)
or Business Manager (in the case of a claim by the Practice) within one (1) year
after the Party making such claim first obtained knowledge of the facts upon
which such claim is based. Any such notice shall set forth in reasonable detail,
to the extent known by the Party giving such notice, the facts on which such
claim is based and the resulting estimated amount of damages.
7.4. Matters Involving Third Parties.
----------------------------------
(a) If the Practice or Business Manager receives notice or acquires
knowledge of any matter which may give rise to a claim by another person and
which may then result in a claim for indemnification under this Agreement, then:
(i) if such notice or knowledge is received or acquired by the Practice, the
Practice shall promptly notify Business Manager; and (ii) if such notice or
knowledge is received or acquired by Business Manager, the Business Manager
shall promptly notify the Practice; except that no delay in giving such notice
shall diminish any obligation under this Agreement to provide indemnification
unless (and then solely to the extent) the Party from whom such indemnification
is sought is prejudiced.
(b) Any Party from whom such indemnification (the "Indemnifying Party")
is sought shall have the right to defend the Party seeking such indemnification
(the "Indemnified Party") against such claim by another person (the "Third Party
Claim") with counsel of the Indemnifying Party's choice reasonably satisfactory
to the Indemnified Party so long as: (i) within fifteen (15) days after the
Indemnified Party has given notice of the Third Party Claim to the Indemnifying
Party, the Indemnifying Party notifies the Indemnified Party that the
Indemnifying Party will indemnify the Indemnified Party from and against all
adverse consequences the Indemnified Party may suffer caused by, resulting from,
arising out of or relating to such Third Party Claim; (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably satisfactory to
the Indemnified Party that the Indemnifying Party has the financial resources
necessary to defend against the Third Party Claim and fulfill its
indemnification obligations; (iii) the Third Party Claim seeks money damages;
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim (other than a medical malpractice claim) is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified Party;
and (v) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 7.4(b): (i) the Indemnified Party
may retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim; (ii) the Indemnified Party shall not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior consent of the Indemnifying Party;
and (iii) the Indemnifying Party shall not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without the
prior consent of the Indemnified Party.
(d) If any of the conditions specified in Section 7.4(b) is or becomes
unsatisfied, however; (i) the Indemnified Party may defend against, and consent
to the entry of any
45
judgment or enter into any settlement with respect to, the Third Party Claim in
any manner it may deem advisable (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection
therewith); (ii) the Indemnifying Party shall reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys' and accountants' fees and expenses); and
(iii) the Indemnifying Party shall remain responsible for any adverse
consequences the Indemnified Party may suffer caused by, resulting from, arising
out of or relating to such Third Party Claim to the fullest extent provided in
this Agreement.
7.5. Settlement. Except as permitted by Section 7.4, a Party shall not
----------
compromise or settle any claim for which the other Party is obligated to
indemnify it without the written consent of such Party.
7.6. Cooperation. The Indemnified Party shall make available all
-----------
information and assistance that the Indemnifying Party may reasonably request in
conjunction with assessing, defending and settling said claim.
8. MISCELLANEOUS.
-------------
8.1. Administrative Services Only. Nothing in this Business Management
----------------------------
Agreement is intended or shall be construed to allow Business Manager to
exercise control, authority or direction over the manner or method by which the
Practice and its Professionals perform Professional Eye Care Services or other
professional health care services. The rendition of all Professional Eye Care
Services, including, but not limited to, the prescription or administration of
medicine and drugs, shall be the sole responsibility of the Practice and its
Professionals, and Business Manager shall not interfere in any manner or to any
extent therewith. Nothing contained in this Business Management Agreement shall
be construed to permit Business Manager to engage in the practice of optometry,
it being the sole intention of the Parties hereto that the services to be
rendered to the Practice by Business Manager are solely for the purpose of
providing non-optometric management and administrative services to the Practice
so as to enable the Practice to devote its full time and energies to the
professional conduct of its professional eye care practice and provision of
Professional Eye Care Services to its patients and not to administration or
practice management.
8.2. Status of Independent Contractor. It is expressly acknowledged
-----------------------------------
that the Parties hereto are "independent contractors," and nothing in this
Business Management Agreement is intended and nothing shall be construed to
create an employer/employee, partnership, or joint venture relationship, or to
allow either to exercise control or direction over the manner or method by which
the other performs the services that are the subject matter of this Business
Management Agreement; provided always that the services to be provided hereunder
shall be furnished in a manner consistent with the standards governing such
services and the provisions of this Business Management Agreement. Each Party
understands and agrees that (i) the other will not be treated as an employee for
federal tax purposes, (ii) neither will withhold on behalf of the other any sums
for income tax, unemployment insurance, social security, or any other
withholding pursuant to any law
46
or requirement of any governmental body or make available any of the benefits
afforded to its employees, (iii) all of such payments, withholdings, and
benefits, if any, are the sole responsibility of the Party incurring the
liability, and (iv) each will indemnify and hold the other harmless from any and
all loss or liability arising with respect to such payments, withholdings, and
benefits, if any.
8.3. Notices. Any notice, demand, or communication required,
-------
permitted, or desired to be given hereunder shall be deemed effectively given
when in writing and personally delivered or mailed by prepaid certified or
registered mail, return receipt requested, addressed as follows:
The Practice: Xxxxxxx X. Xxxxxxx, O.D. and Xxxxxx X. Shack, O.D., P.A.
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Shack, O.D. and Xxxxxxx X. Xxxxxxx, O.D.
With a copy to: H. Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxx & Xxxxxxx, a professional corporation
Suite 000
Xxx Xxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Business Manager: Vision Twenty-One, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxx, Xxxxxxx
Attention: Xxxxxxx X. Xxxxx, CFO
With a copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxx, Loop & Xxxxxxxx, LLP
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
8.4. Governing Law. This Business Management Agreement shall in all
--------------
respects be governed, interpreted and construed in accordance with the laws of
the State without giving effect to principles of comity or conflicts of laws
thereof.
8.5. Jurisdiction and Venue. Business Manager and the Practice hereby
-----------------------
consent to the personal jurisdiction and venue of the state and federal courts
in the judicial circuit where the Practice has its principal corporate office,
and do hereby waive all questions of personal jurisdiction and venue, including,
without limitation, the claim or defense that such courts constitute an
inconvenient forum.
47
8.6. Assignment. Except as may be herein specifically provided to the
----------
contrary, this Business Management Agreement shall inure to the benefit of and
be binding upon the Parties hereto and their respective legal representatives,
successors, and assigns; provided, however, that the Practice may not assign
this Business Management Agreement without the prior written consent of Business
Manager, which consent may be withheld. The sale, transfer, pledge, or
assignment of any of the ownership interests held by any Shareholder of the
Practice, the sale of any material portion of its assets by the Practice, or the
issuance by the Practice of voting ownership interests to any other person
(except to designee Shareholders pursuant to the Transition Agreement and Stock
Pledge), or any combination of such transactions such that the existing
Shareholders in the Practice, or designees pursuant to the Transition Agreement
and Stock Pledge, fail to maintain a majority of the voting interests in the
Practice shall be deemed an attempted assignment by the Practice, and shall be
null and void unless consented to in writing by Business Manager prior to any
such transfer or issuance (unless Business manager has not successfully found an
Optometrist to acquire Shareholder's stock as required under the Transition
Agreement and Stock Pledge). Any breach of this provision, whether or not void
or voidable, shall constitute a material breach of the Business Management
Agreement, and in the event of such breach, Business Manager may terminate this
Business Management Agreement upon twenty-four (24) hours' notice to the
Practice and shall have all rights available at law or in equity. Except as
otherwise provided in this Agreement, Business Manager may assign or transfer
its rights and obligations under this Business Management Agreement only in the
following situations: (a) pursuant to a merger of Business Manager into another
entity or the sale of substantially all of the assets of Business Manager to a
health care company; (b) pursuant to the sale of all of the health care
contracts of Business Manager within a multistate region in which the Practice
is located with the Practice's consent, which shall not be unreasonably withheld
and which may not be withheld where the proposed assignment or transfer is to a
healthcare practice management company with similar or greater financial
standing, expertise and service capabilities to that of Business Manager; (c)
pursuant to a transfer or assignment of this Agreement to one of Business
Manager's subsidiaries or parent organizations; or (d) pursuant to any transfer
or assignment to or by any financial lender of the Business Manager, and this
Agreement is subordinate to the rights of such lender. After such assignment
and transfer, the Practice agrees to look solely to such assignee or transferee
for performance of this Business Management Agreement. In addition, Business
Manager or the assignee or transferee shall have the right to (i) collaterally
assign its interest in this Business Management Agreement and its right to
collect Management Fees hereunder to any financial institution or other third
party without the consent of the Practice, and (ii) subject to the foregoing
provisions, assign its rights and obligations hereunder to any third party
without the consent of the Practice. In the event that Business Manager assigns
its rights and obligations hereunder to one or more of its subsidiaries,
Business Manager shall unconditionally guaranty the obligations of such
subsidiary or subsidiaries. The Practice and executing Shareholders agree to
execute in the future any and all documentation reasonably required to
subordinate their rights pursuant to this Section 8.6 to that of a lender.
8.7. Legal Process. The Parties shall use good faith negotiation to
--------------
resolve any controversy, dispute or disagreement arising out of or relating to
this Business Management Agreement or the breach of this Business Management
Agreement. Except as otherwise provided
48
herein and except as it relates to Sections 4.7 and 4.8 of this Business
Management Agreement and except for matters which are to be determined by the
Local Advisory Council and/or the National Appeals Council as contemplated in
this Business Management Agreement, any matter not resolved by negotiation shall
be submitted to non-binding mediation conducted in accordance with the American
Arbitration Association's Commercial Mediation Rules. If the mediation process
fails to resolve the dispute, either parties may seek such legal redress as they
choose.
8.8. Waiver of Breach. The waiver by either Party of a breach or
------------------
violation of any provision of this Business Management Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
8.9. Enforcement. In the event either Party resorts to legal action to
-----------
enforce or interpret any provision of this Business Management Agreement, the
prevailing Party shall be entitled to recover the costs and expenses of such
action so incurred, including, without limitation, reasonable attorneys' fees.
8.10. Gender and Number. Whenever the context of this Business
-------------------
Management Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
8.11. Additional Assurances. Except as may be herein specifically
----------------------
provided to the contrary, the provisions of this Business Management Agreement
shall be self-operative and shall not require further agreement by the Parties;
provided, however, at the request of either Party, the other Party shall execute
such additional instruments and take such additional acts as are reasonable and
as the requesting Party may deem necessary to effectuate this Business
Management Agreement.
8.12. Consents, Approvals, and Exercise of Discretion. Whenever this
-------------------------------------------------
Business Management Agreement requires any consent or approval to be given by
either Party, or either Party must or may exercise discretion, the Parties agree
that such consent or approval shall not be unreasonably withheld or delayed, and
that such discretion shall be reasonably exercised.
8.13. Force Majeure. Neither Party shall be liable or deemed to be in
--------------
default for any delay or failure in performance under this Business Management
Agreement or other interruption of service deemed to result, directly or
indirectly, from acts of God, civil or military authority, acts of public enemy,
war accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either Party's employees,
or any other similar cause beyond the reasonable control of either Party unless
such delay or failure in performance is expressly addressed elsewhere in this
Business Management Agreement. Notwithstanding the same, the Parties hereto
agree to continue this Agreement to the best degree they can so long as
reasonably possible and the Practice shall not be excused from its obligations
under Sections 4.2, 6.4 and 6.6 pursuant to this Section 8.13.
49
8.14. Severability. The Parties hereto have negotiated and prepared
------------
the terms of this Business Management Agreement in good faith with the intent
that each and every one of the terms, covenants and conditions herein be binding
upon and inure to the benefit of the respective Parties. Accordingly, if any
one or more of the terms, provisions, promises, covenants or conditions of this
Business Management Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be reformed, construed and enforced
as if such unenforceable provision had not been contained herein, and each and
all of the remaining terms, provisions, promises, covenants and conditions of
this Business Management Agreement or their application to other persons or
circumstances shall not be affected thereby and shall be valid and enforceable
to the fullest extent permitted by law. To the extent this Business Management
Agreement is in violation of applicable law, then the Parties agree to negotiate
in good faith to amend the Business Management Agreement, to the extent possible
consistent with its purposes, to conform to law.
8.15. Press Releases and Public Announcements. Except as otherwise
-------------------------------------------
required by law or by applicable rules of any securities exchange or association
of securities dealers, neither the Practice nor the Business Manager shall issue
any press release, make any public announcement or otherwise disclose any
information for the purpose of publication by any print, broadcast or other
public media, relating to the transactions contemplated by this Agreement,
without the prior approval of the other Party.
8.16. Divisions and Headings. The divisions of this Business
------------------------
Management Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith are solely for convenience and
shall not affect in any way the meaning or interpretation of this Business
Management Agreement.
8.17. Amendments and Execution. This Business Management Agreement and
------------------------
any amendments hereto shall be in writing and executed in multiple copies on
behalf of the Practice by its President, and on behalf of Business Manager by
its President. Each multiple copy shall be deemed an original, but all multiple
copies together shall constitute one and the same instrument.
8.18. Licenses, Permits and Certificates. Business Manager and the
-------------------------------------
Practice shall each obtain and maintain in effect, at all times during the term
of this Business Management Agreement, all licenses, permits and certificates
required by law which are applicable to the performance of their respective
obligations pursuant to this Business Management Agreement.
8.19. No Third Party Beneficiaries. Except as otherwise provided
-------------------------------
herein, this Business Management Agreement shall not confer any rights or
remedies upon any person other than Business Manager and the Practice and their
respective successors and permitted assigns.
8.20. Compliance with Applicable Laws. Business Manager and the
----------------------------------
Practice shall comply with all applicable federal, state and local laws,
regulations, rules and restrictions in the conduct of their obligations under
this Business Management Agreement.
50
8.21. Language Construction. The Practice and Business Manager
----------------------
acknowledge that each Party hereto and its counsel have reviewed and revised
this Business Management Agreement and agree that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting Party shall not be employed in the interpretation of this Business
Management Agreement.
8.22. Entire Business Management Agreement. With respect to the
---------------------------------------
subject matter of this Business Management Agreement, this Business Management
Agreement supersedes all previous contracts and constitutes the entire agreement
between the Parties. Neither Party shall be entitled to benefits other than
those specified herein. No prior oral statements or contemporaneous
negotiations or understandings or prior written material not specifically
incorporated herein shall be of any force and effect, and no changes in or
additions to this Business Management Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to become
effective on the date stipulated in such amendment(s). The Parties specifically
acknowledge that, in entering into and executing this Business Management
Agreement, the Parties rely solely upon the representations and agreements
contained in this Business Management Agreement and no others.
8.23. DISCLAIMER OF WARRANTY. BUSINESS MANAGER MAKES NO WARRANTY,
------------------------
EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE OFFICE OR ANY EQUIPMENT PROVIDED
BY BUSINESS MANAGER PURSUANT TO THIS BUSINESS MANAGEMENT AGREEMENT, AND ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY
EXPRESSLY DISCLAIMED.
8.24. Transition Agreement and Stock Pledge. Contemporaneously with
----------------------------------------
the execution of this Agreement and to ensure the continued viability and
production of the Practice, the Parties hereto have executed and delivered that
certain Transition Agreement and Stock Pledge attached as Exhibit 8.24 pursuant
------------
to which the Shareholders have agreed to pledge all of the shares of common
stock of the Practice to the Business Manager and have agreed that the Business
Manager shall be entitled to designate a replacement Professional to acquire all
such shares of common stock of the Practice in return for payment of a fair
value for such stock.
8.25. Limitation on Responsibility of Departing Shareholders.
-----------------------------------------------------------
Notwithstanding any provision in this Business Management Agreement to the
contrary, the Business Manager acknowledges that the current Shareholders of the
Practice will eventually depart from the Practice and that replacement
shareholders will be substituting for them and further acknowledges that it
would be unfair to penalize such departing Shareholder for the actions of the
Practice after such departure. Therefore, the Business Manager shall not hold
any such departing Shareholder responsible for any damages, penalties, losses or
costs suffered by the Practice or any terminating/substituting Shareholders as a
result of the actions taken or omitted to be taken by the Practice after the
time the departing Shareholder has departed from the Practice (whether such
Practice damages occur as a result of a claim made by the Business Manager or
any other third party).
51
8.26. Authority. Business Manager and the Practice hereby warrant and
---------
represent to each other that they have the requisite corporate authority to
execute and deliver this Business Management Agreement in their respective name.
52
IN WITNESS WHEREOF, the Practice and Business Manager have caused this
Business Management Agreement to be executed by their duly authorized
representatives, all as of March 31, 1998.
"PRACTICE"
Xxxxxxx X. Xxxxxxx, O.D.
and Xxxxxx X. Shack, O.D., P.A.
By:_____________________________________
Xxxxxxx X. Xxxxxxx, O.D., as its President
"BUSINESS MANAGER"
Vision Twenty-One, Inc.
By:_____________________________________
Xxxxxxx X. Xxxxx, Chief Financial Officer
The undersigned is executing this Agreement for the purposes of reflecting
its approval of those matters specifically and expressly contained herein
relative to it.
XXXXXX X. SHACK, O.D., P.A.
By:_____________________________________
Xxxxxx X. Shack, President
53
