BUSINESS SERVICE AGREEMENT
Between
INTEGRAMED AMERICA, INC.
And
ARIZONA REPRODUCTIVE MEDICINE SPECIALISTS
THIS BUSINESS SERVICE AGREEMENT ("Agreement") is dated July 9, 2008,
("Effective Date") by and between IntegraMed America, Inc., a Delaware
corporation, with its principal place of business at Two Manhattanville Road,
Purchase, New York 10577 ("IntegraMed") and Arizona Reproductive Medicine
Specialists Ltd., an Arizona professional corporation, with its principal place
of business at 1701 E. Thomas Road, Phoenix, Arizona 85016 ("ARMS"). IntegraMed
and ARMS are individually referred to herein as a "Party" and jointly, as
"Parties."
RECITALS:
ARMS specializes in gynecological, reproductive endocrinology and
infertility services encompassing the provision of in vitro fertilization and
other assisted reproductive services ("Infertility Services"). ARMS provides
Infertility Services through Drew Moffitt, M.D., Mark D. Johnson, M.D., Barbara
M. Faber, M.D. and Kimball O. Pomeroy, Ph.D., the shareholders of ARMS. Drs.
Moffitt, Johnson and Faber are collectively referred to as "Physicians" and Mr.
Pomeroy is referred to as the "Lab Director", and the Physicians and the Lab
Director are sometimes collectively referred to as the "Shareholders." ARMS also
contemplates providing Infertility Services through other physician employees.
The Shareholders have entered or will enter into employment agreements with ARMS
on or about the date of execution of this Agreement.
IntegraMed is in the business of making available to medical providers
such as ARMS certain assets (principally, facilities and equipment) and support
services, primarily consisting of (i) financial management; (ii) administrative
systems; (iii) clinical and laboratory organization and function; (iv) marketing
and (v) operations management. Such support services and the provision of
certain fixed assets are collectively referred to as "Business Services."
ARMS believes the Business Services will benefit its medical practice
and desires IntegraMed's assistance with various aspects of ARMS' medical
practice through the utilization of the Business Services as more particularly
set forth herein. ARMS acknowledges and agrees that the Business Services being
made available to ARMS require ARMS' cooperation and collaboration, and that
IntegraMed, in making the Business Services available, makes no warranty or
representation that the Business Services will achieve ARMS' desired goals and
objectives except as expressly provided in this Agreement. It is further
understood and agreed that the full range of Business Services will only be made
available when IntegraMed exercises its option as set forth in Section 12.2
hereof.
In addition, after IntegraMed exercises the Option as set forth in
Section 12.2, ARMS may desire access to capital for funding its growth and
development, and IntegraMed agrees to provide such capital or access to capital
as provided herein.
NOW THEREFORE, in consideration of the above recitals which the parties
incorporate into this Agreement, the mutual covenants and agreements herein
contained and other good and valuable consideration, ARMS hereby agrees to
purchase from IntegraMed the Business Services and IntegraMed agrees to provide
the Business Services to ARMS on the terms and conditions provided herein.
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
1.1.1 "Adjustments" shall mean adjustments for refunds,
discounts, contractual adjustments, professional courtesies, and other
activities that do not generate a collectible fee as reasonably
determined by IntegraMed and ARMS. Adjustments shall not include Bad
Debt.
1.1.2 "Additional Service Fee" shall mean a monthly fee paid
by ARMS to IntegraMed in an amount equal to a percentage of ARMS'
monthly PDE (as defined in Section 1.1.15).
1.1.3 "Assets" shall mean those fixed assets utilized in
connection with the operation of ARMS' medical practice, including, but
not limited to, fixed assets and leasehold improvements.
1.1.4 "Bad Debt" shall mean all or a portion of an account,
loan or note receivable considered to be uncollectible in accordance
with Generally Accepted Accounting Principles ("GAAP").
1.1.5 "Base Service Fee" shall mean a monthly fee paid by ARMS
to IntegraMed in an amount equal to a percentage of ARMS' monthly
Physician and Other Professional Revenues.
1.1.6 "Business Services" shall mean IntegraMed making
available certain personnel and assets (including, without limitation,
all facilities and equipment necessary to operate ARMS' medical
practice for the provision of Infertility Services) and support
services, primarily consisting of (i) financial management; (ii)
administrative systems; (iii) clinical and laboratory organization and
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function; (iv) marketing and (v) operations management, all as more
fully set forth in Article 3.
1.1.7 "Cost of Services" shall have the meaning set forth in
Article 2.
1.1.8 "Facilities" shall mean the medical offices and clinical
spaces of ARMS, including any satellite locations, related businesses
and all medical group business operations of ARMS, which are utilized
by ARMS in its medical practice.
1.1.9 "Fiscal Year" shall mean the 12-month period beginning
January 1 and ending December 31 of each year.
1.1.10 "Infertility Services" shall mean gynecological,
reproductive endocrinology and infertility services encompassing the
provision of in vitro fertilization and other assisted reproductive
services provided by ARMS or any Physician Employee and Other
Professional Employee.
1.1.11 "IntegraMed Overhead" shall mean salaries, bonuses,
payroll taxes and benefits for IntegraMed corporate office employees,
rent and expenses related to the operation of the IntegraMed corporate
office, travel and entertainment expenses for corporate employees,
costs associated with the IntegraMed data center (excluding those ARMS
specific items set forth in Section 2.1.17), and all costs incurred to
provide the services set forth in Article 3 that are not specifically
listed in Section 2.1
1.1.12 "Other Professional Employee" shall mean a
non-physician individual who provides services, including, nurses,
nurse anesthetists, physician assistants, nurse practitioners,
psychologists, and other such professional employees who generate
professional charges.
1.1.13 "Physician-Employee" shall mean an individual,
including any ARMS physician owner and any other physician who is an
employee of ARMS or is under contract with ARMS, including physicians
employed by entities with whom ARMS has contracted, to provide
Infertility Services to ARMS' patients and is duly licensed as a
physician in the jurisdiction (s) where ARMS provides Infertility
Services.
1.1.14 "Physician and Other Professional Revenues" shall mean
all fees, whether received or accrued, and actually recorded each month
(net of Adjustments) by or on behalf of ARMS as a result of
professional medical and laboratory services furnished to patients by
Physicians and Physician-Employees and Other Professional Employees
and, except as described in the next succeeding sentence, other fees or
income earned in their capacity as professionals, whether rendered in
an inpatient or outpatient setting, including but not limited to,
medical director fees or technical fees from medical ancillary
services, consulting fees, ultrasound fees from businesses owned or
operated by Physicians and, including, but not limited to,
contributions by pharmaceutical and other companies for marketing and
research activities). Physician and Other Professional Revenues shall
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not include (i) board attendance fees and other compensation in
connection with board memberships, (ii) Pre-Existing Receivables, (iii)
any fee or income earned in connection with primary care treatment at a
local clinic, obstetric services at a local hospital, and health care
treatment related to sexually transmitted diseases at local clinics,
all of which are unrelated to Infertility Services provided through
ARMS and for which each physician providing such services maintains
professional liability insurance apart from ARMS, but only until the
physician's share of PDE (less the Additional Service Fee) exceeds
$200,000, and (iv) other services where Physician does not provide
professional medical services such as testimony and consultation for
litigation-related proceedings, reviewing insurance claims, lectures,
passive investments, business ventures not involved in the provision of
health care, fundraising, writing, or conception and development of
intellectual property including patent rights and similar activities
("Permitted Services"); the compensation from Permitted Services may be
retained by a Physician or Physician-Employee without limit, subject to
Section 4.7.5 hereof. Physician and Other Professional Revenues are
sometimes referred to herein as "Revenues."
1.1.15 "Pre-distribution Earnings" ("PDE") shall mean (i)
Physician and Other Professional Revenues, less (ii) Cost of Services
and the Base Service Fee.
1.1.16 "Pre-Existing Receivables" shall mean all rights to
payment for services rendered or goods sold, including, without
limitation, accounts receivables, contract rights, chattel paper,
documents, instruments and other evidence of patient indebtedness to
ARMS, policies and certificates of insurance relating to any of the
foregoing, and all rights to payment, reimbursement or settlement or
insurance or other medical benefit payments assigned to ARMS by
patients or pursuant to any Preferred Provider, HMO, capitated payment
agreements or other agreements between ARMS and a payer incurred by
ARMS in connection with such services rendered or goods sold by ARMS on
or before the Effective Date.
1.1.17 "Receivables" shall mean and include all rights to
payment for services rendered or goods sold, including, without
limitation, accounts receivables, contract rights, chattel paper,
documents, instruments and other evidence of patient indebtedness to
ARMS, policies and certificates of insurance relating to any of the
foregoing, and all rights to payment, reimbursement or settlement or
insurance or other medical benefit payments assigned to ARMS by
patients or pursuant to any Preferred Provider, HMO, capitated payment
agreements or other agreements between ARMS and a payer, recorded each
month (net of Adjustments). Receivables shall not include Pre-Existing
Receivables.
1.1.18 "Technical Employees" shall mean the Lab Director,
embryologists and other laboratory personnel, ultrasonographers,
phlebotomists and technicians who provide services to ARMS.
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ARTICLE 2
COST OF SERVICES
2.1 "Cost of Services" shall mean all ordinary and necessary expenses
of ARMS and all direct ordinary and necessary operating expenses, without
mark-up, of IntegraMed, exclusive of IntegraMed Overhead, incurred in connection
with products and/or services that are specific to ARMS or customized for ARMS
or that are related to volume-based usage by ARMS, including, without
limitation, the following costs and expenses, whether incurred by IntegraMed or
ARMS:
2.1.1 Salaries and fringe benefits of all IntegraMed and other
employees employed at ARMS Facilities, along with payroll taxes or all
other taxes and charges now or hereafter applicable to such personnel,
and services of independent contractors;
2.1.2 Marketing expenses incurred by or on behalf of ARMS,
such as costs of printing marketing materials, media placements and
consumer seminars;
2.1.3 Any sales and use taxes assessed against ARMS related to
the operation of ARMS' medical practice;
2.1.4 Lease payments, depreciation expense (determined
according to GAAP), taxes and interest directly relating to the
Facilities and equipment, and other expenses of the Facilities
described in Section 3.2 below;
2.1.5 Legal fees paid by IntegraMed or ARMS to outside counsel
in connection with matters specific to the operation of ARMS such as
regulatory approvals required as a result of the parties entering into
this Agreement; provided, however, legal fees incurred by the parties
relative to the execution or performance of this Agreement or as a
result of a dispute between the parties under this Agreement shall be
borne by each party and shall not be considered a Cost of Services; and
provided, further any cost related to disputes between or among
Physicians and/or the Lab Director shall not be considered Cost of
Services and are outside the scope of this Agreement;
2.1.6 Health benefits provided to Physicians and
Physician-Employees, including health and life insurance and long-term
disability;
2.1.7 All insurance necessary to operate ARMS including fire,
theft, general liability professional liability and malpractice
insurance for Physicians and Physician-Employees of ARMS, and Other
Professional and Technical Employees provided by IntegraMed;
2.1.8 Professional licensure fees and board certification fees
of Physician- Employees, and Other Professional Employees rendering
Infertility Services on behalf of ARMS;
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2.1.9 Membership in professional associations and continuing
professional education for Physicians and Physician-Employees and Other
Professional Employees;
2.1.10 Risk Management Program described in Section 3.8
herein;
2.1.11 Cost of filing fictitious name permits pursuant to
this Agreement;
2.1.12 Cost of supplies, medical and administrative, and all
direct general and administrative expenses, including but not limited
to travel and entertainment expenses, dues and subscriptions, and other
business related expenses, such as cellular telephone, relative to
ARMS;
2.1.13 Such other costs and expenses directly incurred by
IntegraMed related to ARMS' operations which are included in the annual
operation budget referred to in Section 5.2.1 or otherwise approved by
ARMS in writing;
2.1.14 Cost incurred by IntegraMed with respect to specific
requests for services from ARMS that are outside those provided for in
this Agreement. For such requested services, IntegraMed and ARMS will
mutually determine how such specific requests will be carried out, as
well as how charges and costs, including, but not limited to travel,
will be applied;
2.1.15 ARMS' Bad Debt;
2.1.16 Costs incurred by IntegraMed with respect to Business
Services related to a specific activity requested by ARMS that are in
excess of those Business Services typically provided to other medical
providers for the same activity, including, but not limited to
additional travel and staffing provided such additional costs have been
pre-approved by ARMS;
2.1.17 Such costs charged by third-party vendors that are, in
turn, allocated among network practices. For example, and not by way of
limitation, costs to install and maintain telecommunication lines
linking ARMS to the IntegraMed data center; annual software license
maintenance fees and hardware maintenance fees related to MISYS Optimum
and software license and maintenance fees associated with all other
software applications utilized by ARMS, including but not limited to
HRIS/ON-core, Goldmine, MAS500, Centrix, HelpSTAR, Secure ID/RSA token
and spam reduction services provided by IntegraMed; insurance premiums
for professional liability and other insurance coverages, and; any
other cost or expense that is allocated among the network practices
based on volume usage; and
2.1.18 Such additional training that ARMS may request from
IntegraMed beyond basic training for such applications as ARTworks or
in connection with basic Marketing and Sales training; provided such
additional costs have been approved by ARMS.
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2.2 Notwithstanding anything to the contrary contained herein,
Cost of Services shall not include costs of the following:
2.2.1 Any federal or state income taxes of ARMS or IntegraMed
other than as provided above;
2.2.3 The Base Service Fee and the Additional Service Fee;
2.2.4 Any amount paid to or on behalf of any Physician, the
Lab Director or Physician-Employee including salary, payroll taxes,
draw or pension contributions (all of which come out of ARMS' share of
PDE);
2.2.5 IntegraMed's cash outlay to acquire capital assets for
which depreciation expense is to be charged as a Cost of Services under
Section 2.1.4; and
2.2.6 IntegraMed Overhead.
ARTICLE 3
DUTIES AND RESPONSIBILITIES OF INTEGRAMED
3.1 BUSINESS SERVICES AND ADMINISTRATION.
3.1.1 ARMS hereby engages IntegraMed to provide the Business Services
within the Counties of Coconino, Gila, Maricopa and Yavapai in Arizona (the
"Territory"), and ARMS agrees to limit its use of the Business Services to the
Territory, without prior written consent from IntegraMed. None of the Business
Services made available to ARMS include any physician medical functions. Unless
and until this Agreement is terminated or otherwise amended in writing by ARMS
and IntegraMed, in consideration of the commitment of services and resources by
ARMS, IntegraMed grants to ARMS the exclusive right within the Territory to
receive the type and nature of services provided by IntegraMed pursuant to this
Agreement during the Initial and, if applicable, the Option Term and each
Renewal Term.
3.1.2 IntegraMed will, on behalf of ARMS and as directed by
ARMS, bill patients timely and collect professional fees for
Infertility Services rendered by ARMS at the Facilities, outside the
Facilities for ARMS' hospitalized patients, and for all other
Infertility Services rendered by any Physician- Employee or Other
Professional Employees. ARMS hereby appoints IntegraMed for the term
hereof to be its true and lawful attorney-in-fact, for the following
purposes: (i) bill patients in ARMS' name and on its behalf; (ii)
collect Receivables resulting from such billings in ARMS' name and on
its behalf (recognizing that successfully collecting Receivables may be
dependent on ARMS' participation and cooperation, ARMS will reasonably
cooperate with respect to IntegraMed's collection efforts, and policies
and procedures established by the Practice Management Board governing
the collection of Receivables); (iii) receive payments from insurance
companies, prepayments from health care plans, and all other
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third-party payers, including payments with respect to Pre-Existing
Receivables; (iv) take possession of and endorse in the name of ARMS
(and/or in the name of any Physician Employee or Other Professional
Employee rendering Infertility Services to patients of ARMS) any notes,
checks, money orders, and other instruments received in payment of
Receivables and Pre-Existing Receivables; and (v) at ARMS' request,
initiate the institution of legal proceedings in the name of ARMS, with
ARMS' cooperation, to collect any accounts and monies owed to ARMS, to
enforce the rights of ARMS as creditor under any contract or in
connection with the rendering of any service by ARMS, and to contest
adjustments and denials by governmental agencies (or its fiscal
intermediaries) as third-party payers. IntegraMed shall have no
obligation or responsibility to bill, collect, or initiate legal
proceedings with respect to Pre- Existing Receivables except as set
forth in Section 12.1
3.1.3 IntegraMed will provide the administrative services
function of supervising and maintaining (on behalf of ARMS) all files
and records relating to the operations of the Facilities, including but
not limited to accounting and billing records, including for billing
purposes, patient medical records, and collection records. Patient
medical records shall at all times be and remain the property of ARMS
and shall be located at the Facilities in paper form or electronically
and be readily accessible for patient care. IntegraMed's management of
all files and records shall comply with all applicable state and
federal laws and regulations, including without limitation, those
pertaining to confidentiality of patient records. The medical records
of each patient shall be expressly deemed confidential and shall not be
made available to any third party except in compliance with all
applicable laws, rules and regulations. IntegraMed shall have access to
such records in order to provide the Business Services hereunder, to
perform billing functions, and to prepare for the defense of any
lawsuit in which those records may be relevant. The obligation to
maintain the confidentiality of such records shall survive termination
of this Agreement. ARMS shall have unrestricted access to all of its
records at all times.
3.1.4 IntegraMed will provide, as requested by ARMS, all
reasonably necessary clerical, accounting, bookkeeping and computer
services, printing, postage and duplication services, medical
transcribing services, and any other necessary or appropriate
administrative services reasonably necessary for the efficient
operation of ARMS' medical practice at the Facilities. Benefits offered
by vendors or credit or charging card providers, any of which are
specific to ARMS, resulting from purchasing equipment, supplies or
other items for the operation of the medical practice shall inure to
the benefit of ARMS.
3.1.5 With ARMS' cooperation and participation IntegraMed will
design and assist with implementing an appropriate marketing program
for ARMS. ARMS's participation is essential in developing such
marketing program and accordingly, will designate one or more
physicians to work with IntegraMed in designing and implementing such
marketing program.
Page 8 of 37
3.1.6 IntegraMed, upon request of ARMS, will assist ARMS in
recruiting additional physicians, including IntegraMed providing such
administrative functions as advertising for and identifying potential
candidates, checking credentials, and arranging interviews; provided,
however, ARMS shall interview and make the ultimate decision as to the
suitability of any physician to become associated with ARMS. All
physicians recruited by IntegraMed and accepted by ARMS shall be
employees of or independent contractors to ARMS.
3.1.7 IntegraMed will assist ARMS in negotiating any managed
care contracts to which ARMS desires to become a party. IntegraMed will
provide administrative assistance to ARMS in fulfilling its obligations
under any such contract.
3.1.8 IntegraMed will arrange, in consultation with ARMS, for
legal and accounting services as may otherwise be reasonably required
in the ordinary course of ARMS's operation.
3.2 FACILITIES. ARMS shall determine the nature and extent of the
facilities reasonably needed for ARMS' medical practice and IntegraMed will
assist ARMS in obtaining such Facilities, including providing administrative
support, effort and resources in obtaining the Facilities, including all
furniture, equipment and furnishings necessary for the Facilities, all repairs,
maintenance and improvements thereto, utility (telephone, electric, gas, water)
services, customary janitorial services, refuse disposal and all other services
reasonably necessary in conducting ARMS's medical practice at the Facilities.
IntegraMed will arrange for the cleaning of the Facilities, and timely
maintenance and cleanliness of the equipment, furniture and furnishings located
therein. IntegraMed will advise, counsel and collaborate with ARMS regarding the
condition, use and needs for the Facilities, the improvements thereto, equipment
and services.
3.3 EXECUTIVE DIRECTOR AND OTHER PERSONNEL.
3.3.1 EXECUTIVE DIRECTOR. Notwithstanding anything in Article
3 to the contrary, as soon as practical after commencement of the
Initial Term, ARMS will employ an Executive Director approved by
IntegraMed to manage and administer all of the day-to-day business
functions of the Facilities. At the commencement of the Option Term,
IntegraMed will employ such Executive Director to manage and administer
all of the day-to-day business functions of the Facilities. The
Executive Director's compensation and benefits shall be approved by
Practice Management Board. ARMS agrees not to offer any compensation or
benefits to the Executive Director other than those approved by the
Practice Management Board.
3.3.2 PERSONNEL. Notwithstanding anything in Article 3 to the
contrary, as soon as practical after the commencement of the Initial
Term, ARMS will employ among other personnel, a Practice Development
Manager, Professional Liaison, In-Bound Sales Representative and
Finance Manager, in addition to Other Professional Employees, Technical
Employees, support and administrative personnel, clerical, secretarial,
bookkeeping and collection personnel reasonably necessary for the
efficient operation of ARMS at the Facilities. Such personnel must be
under the direction and supervision of the Executive Director, except
that Technical Employees and Other Professional Employees are subject
Page 9 of 37
to the clinical supervision of ARMS. The compensation of such personnel
shall be approved by IntegraMed and IntegraMed may request that any of
such personnel be terminated in its reasonable discretion and in such
event, all cost and expenses associated with such termination shall be
a Cost of Services. At the commencement of the Option Term, IntegraMed
will employ such personnel.
3.4 FINANCIAL PLANNING AND GOALS. IntegraMed, in collaboration with
ARMS, will prepare, for the approval of the Practice Management Board, an annual
capital and operating budget (the "Budget") reflecting the anticipated Revenues
and Cost of Services, sources and uses of capital for growth of ARMS' practice
and for the provision of Infertility Services at the Facilities. IntegraMed will
present the Budget to the Practice Management Board for its approval at least
thirty (30) days prior to the commencement of the Fiscal Year. If the Practice
Management Board can not agree on the Budget for any Fiscal Year during the term
of this Agreement, the Budget for the preceding Fiscal Year will serve as the
Budget until such time as a new Budget is approved.
3.5 FINANCIAL STATEMENTS. IntegraMed will deliver to ARMS monthly
financial statements ("Financial Statements") within thirty (30) days after the
end of each calendar month. Such Financial Statements will comprise, on a
monthly and year-to-date basis, a statement of ARMS' Revenues and Cost of
Services and PDE, as hereinafter defined.
3.6 TAX PLANNING AND TAX RETURNS. IntegraMed will not be responsible
for any tax planning or tax return preparation for ARMS, but will provide
support documentation in connection with the same. Such support documentation
will not be destroyed without ARMS' consent.
3.7 INVENTORY AND SUPPLIES. For the account of ARMS, IntegraMed shall
order and purchase inventory and supplies, and such other materials which are
requested by ARMS to enable ARMS to deliver Infertility Services in a
cost-effective quality manner.
3.8 RISK MANAGEMENT. IntegraMed shall assist ARMS in the
development of a Risk Management Program and in meeting the standards of such
Program.
3.9 PERSONNEL POLICIES AND PROCEDURES. IntegraMed shall develop, in
cooperation with ARMS, personnel policies, procedures and guidelines, governing
office behavior, protocol and procedures which will aid in compliance with
applicable laws and guidelines related to employment and human resources
management.
3.10 LICENSES AND PERMITS. IntegraMed will coordinate and assist ARMS
in its application for and efforts to obtain and maintain all federal, state and
local licenses, certifications and regulatory permits required for or in
connection with the operations of ARMS and equipment located at the Facilities,
other than those relating to the practice of medicine or the administration of
drugs by Physicians and Physician-Employees.
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3.11 SUBCONTRACTED BUSINESS SERVICES. Subject to prior approval of
ARMS, which approval shall not be unreasonably withheld, IntegraMed is expressly
authorized to subcontract with other persons or entities for any of the services
that IntegraMed is required to perform pursuant to this Agreement ("Authorized
Subcontractors"). Provided, however, that IntegraMed shall disclose any term of
this Agreement to any subcontractor or potential subcontractor of IntegraMed who
does or will perform services to ARMS to the extent the subcontractor or
potential subcontractor will perform significant or continuing functions for
ARMS which are specific obligations of IntegraMed hereunder and shall
incorporate such terms into such subcontract, including but not limited to the
restrictive provisions of Section 3.1.1 hereof. No such subcontract will limit
the overall responsibility of IntegraMed for compliance with the terms and
provisions of this Agreement unless ARMS specifically agrees in writing. Nothing
in this Section 3.11 shall apply to contracts entered into by IntegraMed that
relate to services not required to be performed directly by IntegraMed such as
payroll services.
3.12 ACCESS TO PROTECTED HEALTH INFORMATION. In connection with the
Business Services provided by IntegraMed pursuant to this Agreement, IntegraMed
and its employees, representatives and agents will have access to protected
health information ("PHI") maintained by ARMS. In connection with such PHI,
IntegraMed contemporaneous with entering into this Agreement will enter into a
Business Associate Agreement with ARMS, substantially in the form of Exhibit
3.12, in accordance with the regulations promulgated under the Health Insurance
Portability & Accountability Act of 1996.
3.13 TIMELY PERFORMANCE. IntegraMed, in exchange for receiving the
Compensation described in this Agreement, acknowledges that IntegraMed's timely
performance of its duties and responsibilities as delineated in this Article 3
are material to this Agreement and to ARMS' interest.
ARTICLE 4
DUTIES AND RESPONSIBILITIES OF ARMS
4.1 TIMELY PERFORMANCE. ARMS, in engaging IntegraMed to provide the
Business Services described in this Agreement, acknowledges that ARMS' timely
performance of its duties and responsibilities as delineated in this Article 4
are material to this Agreement and to IntegraMed's interest.
4.2 PROFESSIONAL SERVICES. ARMS shall use its best efforts to cause its
Physicians and Physician-Employees to provide Infertility Services to ARMS'
patients in compliance at all times with ethical standards, laws and regulations
applying to the practice of medicine in the applicable jurisdiction which such
Physician or Physician-Employee provides Infertility Services on behalf of ARMS.
ARMS shall ensure that each Physician, Physician-Employee, any Other
Professional Employee employed by ARMS, and any other professional provider
associated with ARMS is duly licensed to provide the Infertility Services being
rendered within the scope of such provider's practice. In addition, ARMS shall
require each Physician and Physician-Employee to maintain a DEA number and
appropriate medical staff privileges as determined by ARMS during the term of
this Agreement. In the event that any disciplinary actions or medical
malpractice actions are initiated against any Physician, Physician-Employee or
other professional provider, ARMS shall promptly inform the Executive Director
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(or IntegraMed's Sr. Vice President for the Western Region, if an Executive
Director has not yet been employed) and provide the underlying facts and
circumstances of such action, and the proposed course of action to resolve the
matter. Periodic updates, but not less than monthly, shall be provided to
IntegraMed.
4.3 MEDICAL PRACTICE. ARMS shall use and occupy the Facilities
exclusively for the purpose of providing Infertility Services, related services
and activities, teaching medical students and residents and hosting fellows, and
Permitted Services and shall use its best efforts to comply with all applicable
laws and regulations and all applicable standards of medical care, including,
but not limited to, those established by the American Society of Reproductive
Medicine. The medical practice conducted at the Facilities shall be conducted
solely by Physicians employed by ARMS and Physician-Employees employed by or
serving as independent contractors to ARMS, and Other Professional Employees
employed by ARMS. No other physician or medical practitioner shall be permitted
to use or occupy the Facilities without the prior written consent of IntegraMed,
except in the case of a medical emergency, in which event, notification shall be
provided to IntegraMed as soon after such use or occupancy as possible.
4.4 EMPLOYMENT OF PHYSICIAN AND OTHER PROFESSIONAL EMPLOYEES. In the
event ARMS shall determine that additional physicians are necessary, ARMS shall
undertake and use its best efforts to select physicians who, in ARMS' judgment,
possess the credentials and expertise necessary to enable such physician
candidates to become affiliated with ARMS for the purpose of providing
Infertility Services. ARMS shall cause each Physician-Employee
to enter into an employment or service agreement with ARMS or their respective
professional association which is a partner of ARMS ("Physician Employment
Agreement") in such forms as are consistent with Exhibit 4.7.2. Upon ARMS'
request, IntegraMed shall consult with and advise ARMS respecting the hiring,
compensation, supervision, evaluation and termination of Physician-Employees.
4.5 CONTINUING MEDICAL EDUCATION ARMS shall require its
Physician-Employees to participate in such continuing medical education as ARMS
deems to be reasonably necessary for such physicians to remain current in the
provision of Infertility Services.
4.6 PROFESSIONAL INSURANCE.
4.6.1 ARMS shall maintain professional liability coverage at
all times during the Term, in limits of not less than $1,000,000.00 per
occurrence, $3,000,000.00 in the aggregate. If possible, under the
terms of the insurance coverage, ARMS shall use its best efforts to
cause IntegraMed to be named an additional named insured to the extent
reasonably available at no additional cost or expense. Upon request of
IntegraMed, evidence of such coverage shall be provided to IntegraMed.
4.6.2 IntegraMed, in conjunction with practices in the
IntegraMed network, maintains a malpractice captive insurance company,
ARTIC, Ltd. ("ARTIC"). As a member of the IntegraMed network, in lieu
of maintaining professional liability coverage as provided for in
Section 4.6.1, ARMS is eligible to become a member of ARTIC provided it
Page 12 of 37
meets the underwriting requirements and pays applicable premiums and
fees. As an ARTIC member, ARMS is required to participate in the
IntegraMed Risk Management Program.
4.7 DIRECTION OF PRACTICE ARMS, as a continuing condition of
IntegraMed's obligations under this Agreement, shall at all time during the Term
be and remain legally organized and operated to provide Infertility Services in
a manner consistent with state and federal laws. ARMS, through its physicians,
is expected to provide leadership in its market area and reasonably cooperate
with IntegraMed in IntegraMed's efforts to make the Business Services available
to ARMS. In furtherance of which:
4.7.1 ARMS shall operate and maintain at the Facilities a
full-time practice of medicine specializing in the provision of
Infertility Services and shall maintain and enforce the Physician
Employment Agreements or in such other form as is mutually and
reasonably agreed to by ARMS and IntegraMed in writing. ARMS covenants
that it shall not employ any physician, or have any physician as a
shareholder, unless said physician shall sign the Physician Employment
Agreement in substantially the same form as Exhibit 4.7.2 hereof prior
to assuming the status as employee and/or shareholder. ARMS covenants
that should a physician become a shareholder of ARMS, that a condition
precedent to the issuance of the shares shall be the ratification of
this Business Service Agreement. The relationship between ARMS and
physicians who independently contract with ARMS to provide services
shall be in such other form as is mutually and reasonably agreed to in
writing by ARMS and IntegraMed.
4.7.2 ARMS shall not terminate the Physician Employment
Agreement(s) of any Physician, except in accordance with the Physician
Employment Agreement(s). ARMS shall not amend or modify the Physician
Employment Agreements in any material manner, nor waive any material
rights of ARMS thereunder without the prior written approval of
IntegraMed, which approval will not be unreasonably withheld, and it
shall be deemed unreasonable for IntegraMed to withhold consent of an
amendment or modification mandated by the necessity of compliance with
applicable law. ARMS covenants to enforce the terms of each Physician
Employment Agreement, including but not limited to any terms confirming
a Physician-Employee's commitment to practice medicine solely through
ARMS for a specified number of years. Attached hereto as Exhibit 4.7.2
are copies of all Physician Employment Agreement.
4.7.3 Recognizing that IntegraMed would not have entered into
this Agreement but for ARMS' covenant to maintain and enforce the
Physician Employment Agreements with any physician now employed or
physicians who may hereafter become employees of ARMS, and in reliance
upon such Physician-Employee's observance and performance of all of the
obligations under the Physician Employment Agreements, any damages,
liquidated damages, compensation, payment or settlement received by
ARMS from a physician whose employment is terminated, shall be
considered to be Physician and Other Professional Revenues. During the
Option Term, each such Physician Employment Agreement will contain a
non-compete provision that, at a minimum, seeks to restrict such
Page 13 of 37
Physician from competing with ARMS as an employee, shareholder,
director, independent contractor or agent of any medical practice that
provides Infertility Services: (i) within the ten (10) mile radius of
any ARMS' medical office that performs retrievals and transfers and
maintains an embryology lab; (ii) during the Option Term and for the
one (1) year period after termination of employment; and (iii) provides
for liquidated damages in lieu of enforcement in an amount equal to any
departing and competing Physician's pro rata share of the payment
provided for in Section 9.1.1(b) hereof.
4.7.4 ARMS shall retain that number of Physician-Employees as
are reasonably necessary and appropriate for the provision of
Infertility Services. Each Physician-Employee shall hold and maintain a
valid and unrestricted license to practice medicine in the applicable
jurisdiction where such Physician-Employee provides Infertility
Services on behalf of ARMS, and all full-time Physician-Employees shall
be board eligible in the practice of gynecology, with training in the
subspecialty of infertility and assisted reproductive medicine. ARMS
shall be responsible for paying the compensation and benefits, as
applicable, for all Physician-Employees, and for withholding, as
required by law, any sums for income tax, unemployment insurance,
social security, or any other withholding required by applicable law.
IntegraMed, at the request of ARMS, will establish and administer the
compensation with respect to such Physician-Employees in accordance
with the written agreement between ARMS and each Physician Employee.
IntegraMed shall neither control nor direct any Physician in the
performance of Infertility Services for patients, and IntegraMed will
not unreasonably interfere with the employer-employee relationship
between ARMS and its Physician-Employees.
4.7.5 ARMS and its Physician-Employees shall provide patient
care and clinical backup as required for the proper provision of
Infertility Services to patients of ARMS at ARMS' Facilities. ARMS
shall require that its full-time Physician-Employees devote
substantially all of their professional time, effort and ability to
ARMS' practice, including the provision of Infertility Services and the
development of such practice, and that Permitted Services, of any
Physician-Employee do not interfere with such Physician-Employees full
time practice of Infertility Services at ARMS' Facilities.
4.7.6 ARMS shall obtain and maintain necessary licenses and
operate its clinical laboratory and tissue bank services in accordance
with all applicable laws and regulations. ARMS agrees that the Medical
Director or Tissue Bank Director, if applicable, shall be
Physician-Employees or Other Professional Employees, if applicable, of
ARMS who meet the qualifications required by applicable State law or
regulation, and that should there be a vacancy in any such position,
ARMS will cause another Physician-Employee or Other Professional
Employee, if applicable, to fill such vacancy in accordance with
applicable State law.
4.7.7 ARMS acknowledges that it bears all medical obligations
to patients treated at the Facilities and covenants that it is
responsible for all tissue, specimens, embryos or biological material
("Biological Materials") kept at the Facilities on behalf of the
patients (or former patients) of ARMS, except for the negligence,
willful or intentional misconduct of IntegraMed's employees; provided,
Page 14 of 37
however, this shall not apply to circumstances where an IntegraMed
employee is acting under the direction or supervision of a
Physician-Employee. In the event of a termination or dissolution of
ARMS, or the termination of this Agreement for any reason, ARMS and the
Physicians will have the obligation to account to patients and to
arrange for the storage or disposal of such Biological Materials in
accordance with patient consent and the ethical guidelines of the
American Society of Reproductive Medicine ("Relocation Program").
IntegraMed, in such event, will, at the request of ARMS, assist in the
administrative details of such a Relocation Program for so long as ARMS
shall request and an appropriate fee shall be paid to IntegraMed during
that time. These obligations shall survive the termination of this
Agreement.
4.7.8 ARMS will designate certain physicians to (i) work with
IntegraMed in designing and implementing marketing plans, (ii)
participate in marketing strategy sessions, and (iii) identify targeted
referral sources and managed care opportunities.
4.7.9 During the Option Term, except for circumstances beyond
the control of ARMS or the Physicians, ARMS covenants not to cease
operations or dissolve except with the consent of IntegraMed. In the
event ARMS ceases operations or dissolves without the requisite
consent, for reasons other than the death or disability of all of the
shareholders, or any successor entity fails to continue the medical
practice of ARMS substantially in the form contemplated by this
Agreement, ARMS and its individual shareholders shall indemnify
IntegraMed up to the amount of ARMS' liability under Section 9.1.1.
These obligations shall survive the termination of this Agreement.
4.8 PRACTICE DEVELOPMENT, COLLECTION EFFORTS AND NETWORK
INVOLVEMENT. ARMS agrees that during the term of this Agreement, ARMS covenants
for itself and will use reasonable efforts to cause its Physician-Employees to:
4.8.1 Execute such documents and take such steps reasonably
necessary to assist billing and collecting for patient services
rendered by ARMS and its Physician-Employees;
4.8.2 Promote ARMS' medical practice and participate in
marketing efforts developed by IntegraMed and approved by ARMS;
4.8.3 Reasonably cooperate with respect to IntegraMed's
collection efforts, and policies and procedures governing the
collection of Receivables; and
4.8.4 Comply with all applicable laws and regulations,
federal, state and local.
4.8.5 Participate in IntegraMed network activities and
programs, including, but not limited to, the Council of Physicians and
Scientists and the IntegraMed Shared Risk(R) Refund Program to patients
and participating in other product and service offerings IntegraMed has
in effect from time to time. It is understood and agreed that ARMS will
not be able to offer the Shared Risk Refund Program, among other
programs, to its patients until approximately 90 days after
commencement of the Initial Term
Page 15 of 37
ARTICLE 5
JOINT DUTIES AND RESPONSIBILITIES
5.1 FORMATION AND OPERATION OF PRACTICE MANAGEMENT BOARD. IntegraMed
and ARMS will establish a practice management board ("Practice Management
Board"), which will be responsible for developing management and administrative
policies for the overall operation of ARMS. The Practice Management Board will
consist of designated representatives from IntegraMed as determined by
IntegraMed, designated representatives of ARMS as determined by ARMS, the
Executive Director and the Medical Director. It is the intent and objective of
IntegraMed and ARMS that they agree on the overall provision of the Business
Services to ARMS. In the case of any matter requiring a formal vote, ARMS shall
have one (1) vote and IntegraMed shall have one (1) vote; provided, however, the
determination with respect to adding Shareholders, or hiring or firing of
Physician-Employees shall be determined solely by ARMS. The desire is that
IntegraMed and ARMS agree on matters of operations and that, if they disagree,
they will have to work cooperatively to resolve any disagreement. During the
Initial Term, the Practice Management Board will meet not less than monthly.
Thereafter, the Practice Management Board shall meet at least three (3) times
per calendar year and will maintain minutes of all meetings, which minutes
shall, among other things, reflect all decisions of the Practice Management
Board.
5.2 DUTIES AND RESPONSIBILITIES OF THE PRACTICE MANAGEMENT Board. With
the assistance of IntegraMed, the Practice Management Board shall have, among
others, the following duties and responsibilities:
5.2.1 ANNUAL BUDGETS AND PROFITABILITY. Review and approve
annual capital and operation budgets prepared by IntegraMed. The
parties covenant and agree to use their respective best efforts to
assist the Practice Management Board in achieving the projected
budgets. ARMS and IntegraMed agree that, recognizing changes in
circumstances, annual budgets and forecast are subject to revisions.
Accordingly, the Practice Management Board may, from time to time,
propose to modify the annual budgets, as needed, including without
limitation, staff reductions, so that ARMS operates in a profitable
mode which means that PDE is positive on a monthly basis. ARMS's
approval of such modifications shall not be unreasonably withheld and
shall become part of the Budget. Further, ARMS agrees that in the event
ARMS incurs operational losses at any point during the term of this
Agreement, nothing herein shall obligate IntegraMed to incur losses
under this Agreement in order to sustain ARMS's operations. For
example, IntegraMed may take appropriate steps to reduce its Cost of
Services in order to avoid negative PDE at any point.
5.2.2 CAPITAL IMPROVEMENTS AND EXPANSION.Except as otherwise
provided herein, any renovation and expansion plans, and capital
equipment expenditures with respect to ARMS shall be reviewed and
approved by the Practice Management Board and shall be based upon the
best interests of ARMS, and shall take into account capital priorities,
economic feasibility, physician support, productivity and then current
market and regulatory conditions.
Page 16 of 37
5.2.3 MARKETING BUDGET.ARMS shall assist in the development of
an annual marketing budget and plan prepared by IntegraMed for approval
by the Practice Management Board. All annual advertising and other
marketing budgets prepared by IntegraMed shall be subject to the
review, amendment, approval and disapproval of the Practice Management
Board.
5.2.4 STRATEGIC PLANNING. The Practice Management Board shall
develop long-term strategic plans.
5.2.5 PHYSICIAN HIRING.The Practice Management Board shall
make recommendations regarding the number and type of physicians
required for the efficient operation of ARMS; provided, the final
determination on physician hiring shall be made by ARMS.
5.2.6 EXECUTIVE DIRECTOR. The Practice Management Board will
direct the day-to-day functions of the Executive Director in
implementing the policies agreed by the Practice Management Board. The
Executive Director shall meet with the Medical Director on a regular
basis as reasonably requested by either party to discuss issues
pertaining to ARMS. Salary and fringe benefits paid to the Executive
Director shall be approved by the Practice Management Board. The
Practice Management Board will conduct an annual evaluation of such
individual's performance.
.
ARTICLE 6
FINANCIAL ARRANGEMENTS
6.1 COMPENSATION. The compensation set forth in this Article 6 is being
paid to IntegraMed in consideration of the substantial commitment made, capital
provided and services to be rendered by IntegraMed hereunder and is fair and
reasonable. IntegraMed shall be paid the following amounts ("Compensation"):
6.1.1 during each year of the Initial Term, as defined in
Section 7.1, of this Agreement, a Base Service Fee, paid monthly but
reconciled to annual Revenues, of an amount equal to six percent (6%)
of ARMS' Revenues.
6.1.2 during each year of the Option Term, as defined in
Section 7.1, IntegraMed shall be paid the following amounts:
6.1.2.1 an amount reflecting all Cost of Services
(whether incurred by IntegraMed or ARMS) paid or
accrued by IntegraMed pursuant to the terms of this
Agreement;
Page 17 of 37
6.1.2.2 a Base Service Fee, paid monthly but
reconciled to annual Revenues, of six percent (6%) of
ARMS' Revenues; and
6.1.2.3 an additional service fee ("Additional
Service Fee") paid monthly but reconciled to ARMS'
Fiscal Year operating results, equal to the lesser of
twenty percent (20%) of PDE or 50% of PDE greater
than $600,000.
It is understood and agreed that the Additional Service Fee is
paid to IntegraMed in the event ARMS achieves positive PDE. Nothing
herein shall be interpreted to mean that if PDE is negative, IntegraMed
makes a contribution to ARMS to cover any such operating losses. By way
of example, set forth below is the Additional Service Fee that results
from possible ARMS' Fiscal Year PDE results:
ARMS' Fiscal Year PDE Additional Service Fee
--------------------- ----------------------
$600,000 $ 0
$700,000 $ 50,000
$1,000,000 $200,000
$1,200,000 $240,000
6.2 ACCOUNTS RECEIVABLE.
6.2.1 During each year of the Option Term, on or before the
20th business day of each month, commencing with the first month
following the Effective Date, IntegraMed shall reconcile the
Receivables of ARMS arising during the previous calendar month. Subject
to the terms and conditions of this Agreement, ARMS hereby sells and
assigns to IntegraMed as absolute owner, and IntegraMed hereby
purchases from ARMS all Receivables hereafter owned by or arising in
favor of ARMS on or before the 20th business day of each month.
IntegraMed shall transfer or pay such amount of funds to ARMS equal to
the Receivables less Compensation due IntegraMed pursuant to Section
6.1. ARMS shall cooperate with IntegraMed and execute all necessary
documents in connection with the purchase and assignment of such
Receivables to IntegraMed or at IntegraMed's option, to its lenders.
All collections in respect of such Receivables shall be deposited in a
bank account at a bank designated by IntegraMed. To the extent ARMS
comes into possession of any payments in respect of such Receivables
and with regard to payments in respect of Pre-Existing Receivables,
ARMS shall direct such payments to IntegraMed for deposit in bank
accounts designated by IntegraMed.
6.2.2 Any Medicare or Medicaid Receivables due to ARMS shall
be excluded from the operation of Section 6.2.1 hereof. Any such
Receivables shall be subject to agreement of ARMS and IntegraMed with
respect to the collection thereof.
6.2.3 During each year of the Option Term, ARMS will be
charged monthly interest at an annualized rate equal to the Prime Rate
plus two percent (2%) charged by IntegraMed's primary bank on
Receivables with average days sales outstanding ("DSO") greater than 60
Page 18 of 37
days for a trailing three-month period. For example, if prime is 6% and
ARMS' Revenues are $1,385,000 for a three-month period, the average
Revenues per day (assuming 90 days in such three-month period) equals
$15,389. If on the last day of that same three-month period ARMS'
Receivables are $1.5 million, then ARMS' DSO equal 97 days ($1.5
million divided by $15,389), resulting in interest being charged for
the month on $569,393.00 of ARMS' Receivables ($15,389 times 37 days)
at a rate of 0.5% ( 6% prime rate divided by 12), or a $2,846.97
interest charge. Any application of this Section 6.2.3 shall exclude
Bad Debt from the determination of Receivables subject to an interest
payment.
6.2.4 On or before the 20th business day of each month,
commencing with the month following the Effective Date, IntegraMed
shall remit to ARMS the PDE generated for the previous calendar month.
6.3 ADVANCES. During each year of the Option Term, IntegraMed
may, in its sole discretion, advance necessary funds for ARMS to meet Cost of
Services and, to meet Physician distributions (through their respective
professional associations), and Physician-Employee salaries; provided, however,
nothing herein shall obligate IntegraMed to incur Cost of Services and Physician
salary Advances in excess of Revenues under this Agreement in order to sustain
ARMS' operations or to generate positive PDE. As security for such Advances,
ARMS shall deliver to IntegraMed at the closing of the Option, as set forth in
Section 12.2, a Security Agreement in the form of Exhibit 6.3 hereto giving
IntegraMed a collateral interest in all Pre-Existing Receivables and Receivables
of ARMS and PDE payable to ARMS Shareholders. IntegraMed shall, in its sole
discretion, be entitled to take any and all necessary action to prevent
financial losses, in the form of Cost of Services on behalf of ARMS, to
IntegraMed in the event ARMS' Cost of Services exceed ARMS' Revenues at any
point during the Term of this Agreement. Notwithstanding anything herein to the
contrary, no Advances will be made by IntegraMed to satisfy Physician or the Lab
Director draws, salaries or pension contributions, unless requested by ARMS.
6.3.1 Any Advance hereunder shall be a debt owed to IntegraMed
by ARMS and shall have payment priority over any distribution to
Physicians who are shareholders and the Lab Director. Any Advance shall
be repaid from any distribution to Physicians and the Lab Director
either as a lump sum payment, within 60 days after the advance, or in
installments as agreed to by IntegraMed in its sole discretion. To the
extent PDE is available for distribution to Physicians for a particular
month, IntegraMed is authorized to deduct any outstanding Advance from
the PDE prior to distribution to the Physicians to pay any amount or
installment then due.
6.3.2 Interest expense will be charged on an Advance and will
be computed at the Prime Rate charged by IntegraMed's primary bank plus
two percent (2%).
6.3.3 In addition to Security Agreement provided for in
Section 6.3, at the closing of the Option, as set forth in Section
12.2, ARMS agrees to enter into a Continuing General Limited Security
Agreement in the form of Exhibit 6.3.3 with IntegraMed's current bank,
Bank of America, in connection with assigning to Bank of America, the
Receivables identified in Section 6.2 that are otherwise assigned to
IntegraMed pursuant to the Security Agreement identified in Section
6.3.
Page 19 of 37
6.4 BUILD OUT AND CAPITAL COMMITMENT.
During the Option Term, IntegraMed agrees to invest sufficient capital
to build, equip and supply appropriate office and laboratory space for ARMS to
conduct its medical practice at the Facilities. As an expression of IntegraMed's
commitment to the growth of ARMS' practice, IntegraMed agrees to maintain,
during the Option Term, an on-going investment in the Facilities and equipment,
of an amount up to $500,000.00 ("Capital Commitment") without an interest
charge. Any amount invested by IntegraMed in ARMS' medical Facilities in excess
of $500,000.00 will be charged to ARMS as a capital cost at an interest rate
equal to the Prime Rate, plus two (2) percent charged by IntegraMed's primary
bank.
ARTICLE 7
TERM, SERVICE RIGHTS, PAYMENTS, AND OTHER COMMITMENTS
7.1 This Agreement shall begin on the Effective Date and shall continue
for twenty-five years (the "Initial Term"), with automatic successive
twenty-five year terms (each, a "Renewal Term"), unless sooner terminated as
herein provided. In the event either party elects not to renew this Agreement at
the expiration of the Term or a Renewal Term, said party shall give the other
not less than one (1) year's prior written notice of its intention not to renew
at the expiration of the Term or a Renewal Term. In the event IntegraMed
exercises the Option, the remainder of the Initial Term shall be termed the
"Option Term."
7.2 Unless and until this Agreement is terminated, in consideration of
the considerable investment of time and resources in ARMS expected by
IntegraMed, ARMS grants to IntegraMed the exclusive right to provide the
Business Services to ARMS during the Initial and, if applicable, the Option Term
and each Renewal Term.
7.3 In the event IntegraMed exercises the Option, IntegraMed agrees to
purchase the fixed assets of ARMS at net book value, free and clear of all liens
and encumbrances, as of the end of the month prior to date on which IntegraMed
acquires the fixed assets and ARMS' Pre-Existing Receivables and Receivables,
net of patient deposits, reserves for contractual allowances and doubtful
accounts.
ARTICLE 8
TERMINATION OF THE AGREEMENT
8.1 TERMINATION
This Agreement may be terminated by either party in the event
of the following:
Page 20 of 37
8.1.1 INSOLVENCY. If a receiver, liquidator or trustee of any
party shall be appointed by court order, or a petition to reorganize shall be
filed against any party under any bankruptcy, reorganization or insolvency law,
and shall not be dismissed within 90 days, or any party shall file a voluntary
petition in bankruptcy or make assignment for the benefit of creditors, then
either party may terminate this Agreement upon 10 days prior written notice to
the other party.
8.1.2 MATERIAL BREACH. If either party believes that the other
party has materially breached its obligations hereunder, then the non-breaching
party ("Accuser") shall give notice ("Breach Notice") to the breaching party
("Accused"), setting forth in detail the basis for the belief ("Accusation") and
indicating that the Accused must cure said breach within 30 days ("Cure
Period").
(a) If the Accused, in good faith denies the Accusation, then
the Accused shall give notice within the Cure Period to the Accuser demanding an
arbitration of whether there has been a material breach of this Agreement. Such
arbitration shall be conducted in accordance with Section 11.7 hereof and the
parties agree, in good faith, to commence the arbitration within 60 days of the
Breach Notice and participate in the arbitration in a "time is the essence of
the arbitration" basis.
(b) If the Accused agrees with the Breach Notice and cures the
Material Breach within the Cure Period, no further action will be required by
either party.
(c) If the Accused agrees with the Breach Notice, but the
breach is not curable within the Cure Period and the Accused is making diligent
efforts to cure the breach during the Cure Period ("Good Faith Cure Efforts"),
the parties shall continue to operate under the terms and conditions of this
Agreement. If after the exercise of such Good Faith Cure Efforts, the Accused
shall be unable to cure the breach within 60 days from the Breach Notice, the
Accuser shall, in good faith, extend the time in which to cure the breach, upon
request of the Accused. In the event the Accuser does not extend the time in
which to cure the breach, the Accused shall be entitled to arbitrate pursuant to
Section 11.7 whether the Accused is entitled to an extension in order to cure
the breach.
(d) It is the intent of the parties that in the event of a
material breach hereunder, the Accused shall the have the opportunity to a full
determination of whether there was a material breach, before this Agreement
terminates. If as a result of arbitration, there is a finding ("Finding") of a
material breach, the Accuser shall be entitled to terminate this Agreement and
the applicable section of Article 9 shall govern.
8.2 TERMINATION BY INTEGRAMED FOR PROFESSIONAL DISCIPLINARY ACTIONS.
ARMS shall be obligated to suspend a physician whose authorization to practice
medicine is suspended, revoked or not renewed. IntegraMed may terminate this
Agreement upon 10 days prior written notice to ARMS if a Physician's
authorization to practice medicine is suspended, revoked or not renewed and ARMS
has failed to suspend such physician; provided, however, such action may not be
taken until ARMS has been given 30 days to resolve such physician's
authorization to practice medicine. ARMS shall notify IntegraMed within five (5)
days of a notice that a physician's authorization to practice medicine is
Page 21 of 37
suspended, revoked or not renewed or that formal disciplinary action has been
taken against a physician which could reasonably lead to a suspension,
revocation or non-renewal of a physician's license.
8.3 TERMINATION BY INTEGRAMED FOR OTHER REASONS. During the Initial
Term, IntegraMed shall have the right to terminate this Agreement, upon 30 days
prior written notice, for any reason.
8.4 TERMINATION BY ARMS OR INTEGRAMED AFTER FIVE (5) YEARS. During the
Option Term, either ARMS or IntegraMed shall have the right at any time after
this Agreement has been in effect for five (5) years to terminate this Agreement
without cause by giving the other party twelve (12) months' prior written notice
(the "Termination Notice") of either party's intent to terminate.
ARTICLE 9
PURCHASE OF ASSETS - OBLIGATIONS AND OPTIONS
9.1 TERMINATION BY INTEGRAMED. During the Option Term, if IntegraMed
terminates this Agreement due to the insolvency of ARMS (Section 8.1.1), for a
material breach by ARMS (Section 8.1.2), or ARMS fails to suspend a physician
whose license is suspended, revoked or not renewed (Section 8.2), the following
shall apply:
9.1.1 On the closing date (the "Closing Date") for purposes of
consummating the termination, ARMS shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to ARMS by
IntegraMed;
(b) Pay to IntegraMed, in immediately available funds, an
amount equal to five (5) times the Base and Additional Service Fees for
the trailing 12-month period prior to the month in which notice of
termination is given by IntegraMed; provided, however, such amount
shall not exceed $1.1 million.
(c) Provide to IntegraMed a Consent to Assignment from each
landlord of real estate leased by IntegraMed for the benefit of ARMS to
the extent each landlord is willing to provide such consent. The
parties shall endeavor to obtain a consent that includes a release of
IntegraMed from any further obligations or liability under the leases
as of the Closing Date, except for liabilities accruing prior to the
Closing Date, and shall satisfy any requirements provided for in the
assignment provisions of the applicable leases;
(d) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
Page 22 of 37
(e) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances.
(f) Execute such documents and perform such acts as
may be reasonably necessary to
accomplish the transactions required to effect the termination.
For purposes of Sections 9.1, 9.2 9.3 and 9.4 the Closing Date shall
mean 90 days following termination of this Agreement.
9.2 TERMINATION BY ARMS During the Option Term, in the event
this Agreement is terminated by ARMS as a result of the insolvency of IntegraMed
(8.1.1) or a material breach by IntegraMed (8.1.2), the following shall apply:
9.2.1 On the Closing Date for purposes of consummating the
termination, ARMS shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to ARMS by
IntegraMed, in the event ARMS opts to acquire the Assets;
(c) Have the option of assuming leases for office and
equipment used directly for the operation of ARMS' business. In such
event, a Consent to Assignment from each landlord of real estate leased
by IntegraMed for the benefit of ARMS to the extent each landlord is
willing to provide such consent shall be obtained. ARMS shall endeavor
to obtain a consent that include a release of IntegraMed from any
further obligations or liability under the leases as of the Closing
Date, except for liabilities accruing prior to the Closing Date and
shall satisfy any requirements provided for in the assignment
provisions of the applicable leases ;
(d) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
(e) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances
(f) Execute such documents and perform such acts as may be
reasonably necessary to accomplish the transactions required to effect
the termination.
9.3 EXPIRATION OF THE TERM OR A RENEWAL TERM. In the event
this Agreement expires at the end of the Option Term or a Renewal Term, the
following shall apply:
9.3.1 On the last day of the Term, ARMS shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to ARMS by
IntegraMed;
Page 23 of 37
(b) Provide to IntegraMed a Consent to Assignment from each
landlord of real estate leased by IntegraMed for the benefit of ARMS to
the extent each landlord is willing to provide such consent. The
parties shall endeavor to obtain a consent that include a release of
IntegraMed from any further obligations or liability under the leases
as of the Closing Date, except for liabilities accruing prior to the
Closing Date, and shall satisfy any requirements provided for in the
assignment provisions of the applicable leases;
(c) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
(d) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances
(e) Execute such documents and perform such acts as
may be reasonably necessary to
accomplish the transactions required to effect the termination.
9.4 TERMINATION BY INTEGRAMED UNDER SECTION 8.3
9.4.1 During the Initial Term, if IntegraMed terminates this
Agreement pursuant to Section 8.3 then as of the 31st day after giving
the notice provided for in Section 8.3, IntegraMed and ARMS will cease
further business relationships and IntegraMed will have made
arrangements for funds in any bank account established by IntegraMed
for the benefit of ARMS to be remitted to ARMS.
9.4.2 During the Option Term, if IntegraMed terminates this
Agreement pursuant to Section 8.4, on the Closing Date ARMS shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to ARMS by
IntegraMed;
(b) Pay to IntegraMed in immediately available funds, an
amount equal to the uncollected accounts receivable purchased from ARMS
immediately prior to the Closing Date which have not been charged to
ARMS as a Bad Debt under Cost of Services;
(c) Provide to IntegraMed a Consent to Assignment from each
landlord of real estate leased by IntegraMed for the benefit of ARMS to
the extent each landlord is willing to provide such consent. The
parties shall endeavor to obtain a consent that include a release of
IntegraMed from any further obligations or liability under the leases
as of the Closing Date, except for liabilities accruing prior to the
Closing Date, and shall satisfy any requirements provided for in the
assignment provisions of the applicable leases;
Page 24 of 37
(d) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
(e) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances; and
(f) Execute such documents and perform such acts as may be
reasonably necessary to accomplish the transactions required to effect
the termination.
9.5 TERMINATION UNDER SECTION 8.4 BY ARMS. In the event ARMS
elects to terminate this Agreement pursuant to Section 8.4 hereof, the following
shall apply:
9.5.1 On the Closing Date ARMS shall:
(a) Pay to IntegraMed in immediately available funds, an
amount equal to the net book value (in accordance with GAAP) of all
IntegraMed Assets at all Facilities made available to ARMS by
IntegraMed;
(b) Pay to IntegraMed in immediately available funds, an
amount equal to the uncollected accounts receivable purchased from ARMS
immediately prior to the Closing Date which have not been charged to
ARMS as a Bad Debt under Cost of Services;
(c) Pay to IntegraMed, in immediately available funds, an
amount equal to five (5) times the Base and Additional Service Fees for
the trailing 12-month period prior to the month in which notice of
termination is given by IntegraMed; provided, however, such amount
shall not exceed $1.1 million;
(d) A Consent to Assignment from each landlord of real estate
leased by IntegraMed for the benefit of ARMS to the extent each
landlord is willing to provide such consent. ARMS shall endeavor to
obtain a consent that includes a release of IntegraMed from any further
obligations or liability under the leases as of the Closing Date,
except for liabilities accruing prior to the Closing Date and shall
satisfy any requirements provided for in the assignment provisions of
the applicable leases ;
(e) Hire all IntegraMed employees working at the Facilities or
make provision for their termination, without liability to IntegraMed
after the Closing Date.
(f) Pay to IntegraMed in immediately available funds any
outstanding liabilities under this Agreement, including any and all
loans or Advances
(g) Execute such documents and perform such acts as may be
reasonably necessary to accomplish the transactions required to effect
the termination.
Page 25 of 37
9.6 TRANSFER OF OWNERSHIP
Upon receipt of payments due under this Article 9 and other payments
due, IntegraMed shall transfer ownership and possession of the Assets, provide
electronic medical records in a "Flat File Format" which is capable of
reproducing the information contained in the medical records, at ARMS' cost, and
assign all right, title and interest in and to and obligations under the
Lease(s) to ARMS and return to ARMS all security deposits. ARMS shall have the
option of receiving full credit on the payments due under this Article 9 for all
liens, encumbrances or security interest, or of having IntegraMed transfer
ownership of the Assets free and clear of all liens, encumbrances or security
interests thereon.
ARTICLE 10
INSURANCE
10.1 ARMS shall carry professional liability insurance, covering itself
and its employees providing Infertility Services under this Agreement in
accordance with Section 4.6 hereof. If possible under the terms of the insurance
coverage, ARMS shall use its best efforts to cause IntegraMed to be named an
additional insured on such policies. Certificates of Insurance evidencing such
policies and additional insured status shall be presented to IntegraMed upon
request.
10.2 IntegraMed, through ARTIC, maintains, at its own expense,
professional liability insurance, covering itself and its employees providing
patient care under this Agreement.
10.3 ARMS and IntegraMed shall provide written notice to the other at
least thirty (30) days in advance of the effective date of any reduction,
cancellation or termination of the insurance required to be carried by each
hereunder.
ARTICLE 11
MISCELLANEOUS
11.1 INDEPENDENT CONTRACTOR. IntegraMed and ARMS are independent
contracting parties. In this regard, the parties agree that:
11.1.1 The relationship between IntegraMed and ARMS is that of
an independent supplier of non-medical services and a medical practice,
respectively, and, unless otherwise provided herein, nothing in this
Agreement shall be construed to create a principal-agent,
employer-employee, or master-servant relationship between IntegraMed
and ARMS;
11.1.2 Notwithstanding the authority granted to IntegraMed
herein, IntegraMed and ARMS agree that ARMS shall retain the full
authority to direct all of the medical, professional, and ethical
aspects of its medical practices;
11.1.3 Any powers of ARMS not specifically vested in
IntegraMed by the terms of this Agreement shall remain with ARMS;
Page 26 of 37
11.1.4 ARMS shall, at all times, be the sole employer of the
Physician-Employees, the Other Professional Employees required by law
to be employees of ARMS and all other professional personnel engaged by
ARMS in connection with the operation of its medical practice at the
Facilities, and shall be solely responsible for the payment of all
applicable federal, state or local withholding or similar taxes and
provision of workers' compensation and disability insurance for such
professional personnel that are employees of ARMS;
11.1.5 No party shall have the right to participate in any
benefits, employment programs or plans sponsored by the other party on
behalf of the other party's employees, including, but not limited to,
workers' compensation, unemployment insurance, tax withholding, health
insurance, life insurance, pension plans or any profit sharing
arrangement; provided, however, during the Option Term, ARMS'
physicians shall have the option of participating in benefit plans made
available to IntegraMed network physicians by the various insurance
companies offering such benefits to IntegraMed employees and network
physicians.
11.1.6 In no event shall any party be liable for the debts or
obligations of any other party except as otherwise specifically
provided in this Agreement; and
11.1.7 Matters involving the internal agreements and finances
of ARMS, including but not limited to the distribution of professional
fee income among Physician Employees and, if applicable, Other
Professional Employees who are providing professional services to
patients of ARMS, and other employees of ARMS, disposition of ARMS
property and stock, accounting, tax preparation, tax planning, and
pension and investment planning, hiring and firing of physicians,
decisions and contents of reports to regulatory authorities governing
ARMS and licensing, shall remain the sole responsibility of ARMS and
the individual Physicians.
11.2 FORCE MAJEURE. No party shall be liable to the other parties for
failure to perform any of the services required under this Agreement in the
event of a strike, lockout, calamity, act of God, unavailability of supplies, or
other event over which such party has no control, for so long as such event
continues and for a reasonable period of time thereafter, and in no event shall
such party be liable for consequential, indirect, incidental or like damages
caused thereby.
11.3 EQUITABLE RELIEF. Without limiting other possible remedies
available to a non-breaching party for the breach of the covenants contained
herein, including the right of IntegraMed to cause ARMS to enforce any and all
provisions of the Physician Employment Agreements described in Section 4.3
hereof, injunctive or other equitable relief shall be available to enforce those
covenants, such relief to be without the necessity of posting bond, cash or
otherwise. If any restriction contained in said covenants is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and remaining restrictions therein shall be enforced independently of
each other.
Page 27 of 37
11.4 PRIOR AGREEMENTS; AMENDMENTS. This Agreement supersedes all prior
agreements and understandings between the parties as to the subject matter
covered hereunder including the Former Agreement, and this Agreement may not be
amended, altered, changed or terminated orally. No amendment, alteration, change
or attempted waiver of any of the provisions hereof shall be binding without the
written consent of all parties, and such amendment, alteration, change,
termination or waiver shall in no way affect the other terms and conditions of
this Agreement, which in all other respects shall remain in full force.
11.5 ASSIGNMENT; BINDING EFFECT. This Agreement and the rights and
obligations hereunder may not be assigned without the prior written consent of
all of the parties, and any attempted assignment without such consent shall be
void and of no force and effect, except that IntegraMed may assign this
Agreement to any affiliate, which for purposes of this Agreement, shall include
any parent or subsidiary of IntegraMed but shall not include any entity that
provides medical services, without the consent of ARMS, provided IntegraMed
shall remain liable for its obligations hereunder. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties'
respective heirs, legal representatives, successors and permitted assigns.
11.6 WAIVER OF BREACH. The failure to insist upon strict compliance
with any of the terms, covenants or conditions herein shall not be deemed a
waiver of such terms, covenants or conditions, nor shall any waiver or
relinquishment of any right at any one or more times be deemed a waiver or
relinquishment of such right at any other time or times.
11.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona irrespective of the
principal place of business of the parties hereto. Any and all claims, disputes,
or controversies arising under, out of, or in connection with this Agreement or
any beach thereof, except for equitable relief sought pursuant to Section 11.3
hereof, shall be determined by binding arbitration in the State of Arizona, City
of Phoenix (hereinafter "Arbitration"). The party seeking determination shall
subject any such dispute, claim or controversy to the American Arbitration
Association, and the rules of commercial arbitration thereof shall govern. The
Arbitration shall be conducted and decided by a single arbitrator, unless the
parties mutually agree, in writing at the time of the Arbitration, to three
arbitrators. In reaching a decision, the arbitrator(s) shall have no authority
to change or modify any provision of this Agreement, including any liquidated
damages provision. Each party shall bear its own expenses and one-half the
expenses and costs of the arbitrator(s). Any application to compel Arbitration,
confirm or vacate an arbitral award or otherwise enforce this Section 11.7 shall
be brought in the Courts of the State of Arizona or the United States District
Court for the District of Arizona, to whose jurisdiction for such purposes ARMS
and IntegraMed hereby irrevocably consent and submit.
11.8 SEPARABILITY. If any portion of the provisions hereof shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such portion or provisions in circumstances other than those in
which it is held invalid or unenforceable, shall not be affected thereby, and
each portion or provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law, but only to the extent the same continues to
reflect fairly the intent and understanding of the parties expressed by this
Agreement taken as a whole.
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11.9 HEADINGS. Section and paragraph headings are not part of this
Agreement and are included solely for convenience and are not intended to be
full or accurate descriptions of the contents thereof.
11.10 NOTICES. Any notice or other communication required by or which
may be given pursuant to this Agreement shall be in writing and mailed,
certified or registered mail, postage prepaid, return receipt requested, or
overnight delivery service, such as FedEx or DHL Express, prepaid, and shall be
deemed given when received. Any such notice or communication shall be sent to
the address set forth below:
11.10.1 If for IntegraMed:
Jay Higham, President & CEO
IntegraMed America, Inc.
Two Manhattanville Road
Purchase, New York 10577
With a copy to:
Claude E. White, General Counsel
IntegraMed America, Inc.
Two Manhattanville Road
Purchase, New York 10577
11.10.2 If for ARMS:
Drew V. Moffitt, M.D.
Arizona Reproductive Medicine Specialists
1701 E. Thomas Road
Phoenix, Arizona 85016
With a copy to:
Robert Milligan, Esq.
Milligan, Lawless, Taylor, Murphy & Bailey, P.C.
4647 North 32nd Street, Suite 185
Phoenix, Arizona 85018
Any party hereto, by like notice to the other parties, may designate
such other address or addresses to which notice must be sent.
Page 29 of 37
11.11 ENTIRE AGREEMENT. This Agreement and all attachments hereto
represent the entire understanding of the parties hereto with respect to the
subject matter hereof and thereof, and cancel and supersede all prior agreements
and understandings among the parties hereto, including the Former Agreement,
whether oral or written, with respect to such subject matter.
11.12 NO MEDICAL PRACTICE BY INTEGRAMED. IntegraMed will not engage in
any activity that constitutes the practice of medicine, and nothing contained in
this Agreement is intended to authorize IntegraMed to engage in the practice of
medicine or any other licensed profession.
11.13 CONFIDENTIAL INFORMATION.
11.13.1 During the initial term and any renewal term(s) of
this Agreement, the parties may have access to or become acquainted
with each other's trade secrets and other confidential or proprietary
knowledge or information concerning the conduct and details of each
party's business ("Confidential Information"). At all times during and
after the termination of this Agreement, no party shall directly or
indirectly, communicate, disclose, divulge, publish or otherwise
express to any individual or governmental or non-governmental entity or
authority (individually and collectively referred to as "Person") or
use for its own benefit, except in connection with the performance or
enforcement of this Agreement, or the benefit of any Person any
Confidential Information, no matter how or when acquired, of another
party. Each party shall cause each of its employees to be advised of
the confidential nature of such Confidential Information and to agree
to abide by the confidentiality terms of this Agreement. No party shall
photocopy or otherwise duplicate any Confidential Information of
another party without the prior express written consent of the such
other party except as is required to perform services under this
Agreement. All such Confidential Information shall remain the exclusive
property of the proprietor and shall be returned to the proprietor
immediately upon any termination of this Agreement.
11.13.2 Confidential Information shall not include information
which (i) is or becomes known through no fault of a party hereto; (ii)
is learned by a party from a third-party legally entitled to disclose
such information; or (iii) was already known to a party at the time of
disclosure by the disclosing party.
11.13.3 In order to minimize any misunderstanding regarding
what information is considered to be Confidential Information,
IntegraMed or ARMS will designate at each others request the specific
information which IntegraMed or ARMS considers to be Confidential
Information.
11.14 INDEMNIFICATION.
11.14.1 IntegraMed agrees to indemnify and hold harmless ARMS,
its directors, officers, employees and servants from any suits, claims,
actions, losses, liabilities or expenses (including reasonable
attorney's fees) arising out of or in connection with any act or
Page 30 of 37
failure to act by IntegraMed related to the performance of its duties
and responsibilities under this Agreement. The obligations contained in
this Section 11.14.1 shall survive termination of this Agreement. This
indemnification provision shall apply to both third-party claims and
second-party claims, including, but not limited to, claims, actions,
damages, losses, expenses, or costs (including, but not limited to,
reasonable attorneys' fees and court costs) incurred by one party to
this Agreement as a result of an act, or omission to act, on the part
of the other party, its agents, or employees pursuant to this Agreement
11.14.2 ARMS agrees to indemnify and hold harmless IntegraMed,
its shareholders, directors, officers, employees and servants from any
suits, claims, actions, losses, liabilities or expenses (including
reasonable attorney's fees) arising out of or in connection with any
act or failure to act by ARMS related to the performance of its duties
and responsibilities under this Agreement. The obligations contained in
this Section 11.14.2 shall survive termination of this Agreement. This
indemnification provision shall apply to both third-party claims and
second-party claims, including, but not limited to, claims, actions,
damages, losses, expenses, or costs (including, but not limited to,
reasonable attorneys' fees and court costs) incurred by one party to
this Agreement as a result of an act, or omission to act, on the part
of the other party, its agents, or employees pursuant to this Agreement
11.14.3 In the event of any claims or suits in which
IntegraMed and/or ARMS and/or their directors, officers, employees and
servants are named, each of IntegraMed and ARMS for their respective
directors, officers, employees agree to cooperate in the defense of
such suit or claim; such cooperation shall include, by way of example
but not limitation, meeting with defense counsel (to be selected by the
respective party hereto), the production of any documents in his/her
possession for review, response to subpoenas and the coordination of
any individual defense with counsel for the respective parties hereto.
The respective party shall, as soon as practicable, deliver to the
other copies of any summonses, complaints, suit letters, subpoenas or
legal papers of any kind, served upon such party, for which such party
seeks indemnification hereunder. This obligation to cooperate in the
defense of any such claims or suits shall survive the termination, for
whatever reason, of this Agreement.
ARTICLE 12
ADDITIONAL TERMS AND PROVISIONS
12.1 COLLECTION OF PRE-EXISTING RECEIVABLES. During the Initial Term,
IntegraMed agrees to assist ARMS in the collection of ARMS' Receivables and
shall establish a bank account in which to deposit the Pre-Existing Receivables
and the Receivables. IntegraMed shall pay ARMS' accounts payable and cause ARMS'
payroll to be paid based on available cash in such bank account.
Page 31 of 37
12.2 GRANT OF OPTION. ARMS hereby grants IntegraMed an option,
exercisable in IntegraMed's sole discretion, once ARMS has annualized PDE of
$600,000, to extend the Business Services to a full range of Business Services
(the "Option"). In such event, IntegraMed will:
12.2.1 Acquire ARMS' fixed assets at net book value, less
outstanding liens, as of the end of the prior to the month in
which the closing of the purchase occurs, and acquire ARMS'
Pre-Existing Receivables and Receivables, net of patient
deposits, Excluded Pre-Existing Receivables, contractual
allowances and allowances for doubtful accounts as of the end
or the month prior to the month in which the closing of the
purchases occur;
12.2.2 Hire such ARMS employees working at the Facilities as
IntegraMed desires;
12.2.3 Assume ARMS' Facilities leases; and
12.2.4 Provide such full range of services necessary to
maintain and keep in good condition and repair the assets and
Facilities and to properly maintain the medical records
For purposes of this Section 12.2, "Excluded Pre-Existing Receivables" shall
mean certain doubtful accounts that ARMS elects, in its sole discretion, to
maintain and transfer to a third party for collection.
12.3 OPTION DOCUMENTS AND CLOSING. In the event IntegraMed exercises
the Option provided for in Section 12.2, at the closing of the Option which
shall be a date within 30 days of IntegraMed's exercise of the Option, ARMS
agrees to deliver executed copies of Exhibit 6.3 and Exhibit 6.3.3, deliver a
Bill of Sale for the fixed assets and execute and deliver whatever additional
documents are deemed reasonably necessary by counsel for the parties to effect
the Option Term.
12.4 CONDUCT OF ARMS' MEDICAL PRACTICE. notwithstanding anything herein
to the contrary, ARMS, for itself and its shareholders, agrees that IntegraMed
makes no representations or warranties that the results of IntegraMed's actions,
directions and instructions will achieve any specific aims or goals and that
IntegraMed specifically disclaims that any specific results will be achieved.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
ARIZONA REPRODUCTIVE MEDICINE SPECIALISTS, LTD.
By:/s/Drew V. Moffitt
- -----------------------------------
Drew V. Moffitt, M.D., President
INTEGRAMED AMERICA, INC.
By:/s/Jay Higham
-----------------------------
Jay Higham, President & CEO
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Exhibit 3.12
Business Associate Agreement
Page 34 of 37
Exhibit 4.7.2
Physician Employment Agreements
Page 35 of 37
Exhibit 6.3
Security Agreement
Page 36 of 37
Exhibit 6.3.3
Continuing Limited Security Agreement
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