MANAGEMENT AGREEMENT
AMONG
INTEGRAMED AMERICA, INC.
AND
REPRODUCTIVE ENDOCRINE & FERTILITY CONSULTANTS, P.A.
AND
MIDWEST FERTILITY FOUNDATIONS & LABORATORY, INC.
THIS MANAGEMENT AGREEMENT ("Agreement"), dated as of May 1, 1999, by
and among IntegraMed America, Inc., a Delaware corporation, with its principal
place of business at One Manhattanville Road, Purchase, New York 10577
("Management Company"), Reproductive Endocrine & Fertility Consultants, P.A., a
Kansas professional association, having its principal place of business at Two
Brush Creek, Suite 500, Kansas City, Missouri 64112 ("PA"), and Midwest
Fertility Foundations & Laboratory, Inc., a Kansas corporation, having its
principal place of business at Two Brush Creek, Suite 500, Kansas City, Missouri
64112 ("Midwest"). PA and Midwest are collectively referred to herein as
"Providers" and PA, Midwest and Management Company are collectively referred to
as "Parties" and individually, as a "Party."
RECITALS:
PA is a medical practice ("Medical Practice") specializing in
gynecological services, treatment of human infertility encompassing the
provision of in vitro fertilization and other assisted reproductive services
("Infertility Services").
Midwest is a licensed clinical reference laboratory (the "Lab").
Management Company is in the business of owning certain assets and
providing management and administrative services ("Management Services") to
medical practices specializing in the provision of Infertility Services, and
furnishing such medical practices with the necessary facilities, equipment,
personnel, supplies and support staff.
This Agreement is made with reference to that certain management
agreement by and among the Parties dated November 1, 1995, as amended by
agreements dated May 22, 1997 and July 1, 1998, and that certain interim
agreement by and among the Parties dated January 25, 1999, as amended by
agreement dated March 26, 1999 (collectively, "Former Agreements"). All Former
Agreements, upon execution of this Agreement are canceled, null, void and of no
further legal effect. Any obligation of a Party contained in the Former
Agreements not specifically set forth herein is deemed canceled.
Management Company will provide Management Services and the use of
certain Facilities, as defined herein, on the terms and conditions provided
herein for use by PA for conducting its Medical Practice, and Midwest to operate
the Lab, which Facilities and Management Services will be provided
simultaneously to other entities providing Infertility Services.
PA desires to utilize the services of Management Company to perform
management and administrative functions, on its behalf, to permit PA to devote
its efforts on a concentrated and continuous basis to the rendering of
Infertility Services to its patients; and Midwest desires to obtain the services
of Management Company to manage and administer the Lab.
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 , Management Company agrees
to provide the Management Services and the Facilities 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 "Assets" shall mean those fixed assets owned by
Management Company and utilized in connection with the operation of the
Medical Practice and the Lab, including, but not limited to, fixed
assets and leasehold improvements.
1.1.2 "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 Management Company and Providers.
1.1.3 "Facilities" shall mean the medical offices and clinical
spaces of Providers, including any satellite locations, related
businesses and all medical group business operations of PA, which are
provided by Management Company and utilized by Providers.
1.1.4 "Fiscal Year" shall mean the 12-month period beginning
January 1 and ending December 31 of each year.
1.1.5 "Infertility Services" shall mean gynecological
services, treatment of human infertility encompassing the provision of
in vitro fertilization, and other assisted reproductive services
provided by PA, Midwest or any Physician Employee, Other Professional
Employee, or Technical Employee.
1.1.6 "Lab Revenue" shall mean all fees earned and actually
recorded each month (net of Adjustments) based on the accrual method of
accounting pursuant to generally accepted accounting principles
("GAAP") by or on behalf of Midwest as a result of laboratory services
furnished by Lab.
1.1.7 "Other Professional Employee" shall mean a non-physician
individual who provides services to Providers, including nurse
anesthetists, physician assistants, nurse practitioners, psychologists,
and other such professional employees who generate professional
charges, but shall not include Technical Employees.
1.1.8 "RMC Receivables" shall mean, and include, those
receivables for services rendered by PA to RMC patients as more
particularly defined in Section 4.3 of that certain agreement among
Management Company, PA and Research Medical Center ("RMC") dated July
15, 1998 ("RMC Agreement"). RMC Receivables shall not mean, and
excludes, those receivables under the RMC Agreement for services
rendered by Management Company to RMC under the RMC Agreement.
1.1.9 "PDE" shall mean an amount equal to a) Revenue, less b)
the amount calculated under Section 7.1.1 plus the amount calculated
under Section 7.1.2.
1.1.10 "Physician-Employee" shall mean an individual, who is
an employee of PA or is otherwise under contract with PA to provide
professional services to PA patients and is duly licensed as a
physician in the state of Missouri.
1.1.11 "Physician and Other Professional Revenue" shall mean
all fees earned, and actually recorded each month (net of Adjustments)
in accordance with GAAP, by or on behalf of PA as a result of
professional medical services personally furnished to patients of PA by
Physician-Employees or Other Professional Employees, and 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 and ultrasound fees from businesses owned or
operated by Physician-Stockholders. In addition, Physician and Other
Professional Revenue shall include all fees earned, and actually
recorded each month (net of Adjustments) in accordance with GAAP, as a
result of professional medical services performed by PA for RMC at the
Facilities pursuant to the RMC Agreement. Physician and Other
Professional Revenues shall not include (i) board attendance fees and
other compensation in connection with board memberships, (ii) other
services where a Physician-Employee does not provide professional
medical services such as testimony and consultation for
litigation-related proceedings, lectures, passive investments,
fundraising, or writing ("Permitted Services"), the compensation from
which Permitted Services such Physician-Employee may retain without
limit, and (iii) compensation resulting from a Physician-Employee's
affiliation with an academic institution in a teaching capacity. PA
agrees that not less than 14 days prior to a Physician-Employee
engaging in an affiliation with an academic institution in a teaching
capacity, PA and the Physician-Employee will obtain Management
Company's consent, which shall not be unreasonably withheld, to such
activities.
1.1.12 "Providers' Receivables" shall mean and include all
rights to payment for services rendered or goods sold, accounts,
receivables, contract rights, chattel paper, documents, instruments and
other evidence of patient indebtedness to PA or Midwest, policies and
certificates of insurance relating to any of the foregoing, all rights
to payment, reimbursement or settlement or insurance or other medical
benefit payments assigned to PA or Midwest by patients or pursuant to
any Preferred Provider, HMO, capitated payment agreements, or other
agreements between PA and/or a payer, and all of PA's rights to payment
for services rendered by PA for RMC patients at the Facilities in
accordance with the RMC Agreement, recorded each month (net of
Adjustments) in accordance with GAAP. Providers' Receivables shall not
include any Medicare or Medicaid receivables.
1.1.13 "Receivables" shall mean the sum of Providers'
Receivables and RMC Receivables.
1.1.14 "Revenue" shall mean the sum of Physician and Other
Professional Revenue, and Lab Revenue.
1.1.15 "Technical Employees" shall mean technicians such as
embryologists and other laboratory personnel, ultrasonographers and
phlebotomists who provide services to Providers.
ARTICLE 2
COST OF SERVICES
2.1 "Cost of Services" shall mean all ordinary and necessary expenses of
Providers and all direct ordinary and necessary operating expenses of Management
Company incurred in connection with the management of Providers, and the
provision of Facilities, unless expressly provided otherwise herein, including
but not limited to:
2.1.1 Salaries, benefits, payroll taxes and other direct cost
of all Management Company employees working at the Facilities;
2.1.2 Expenses incurred in the recruitment of additional
physicians for PA, including, but not limited to employment agency
fees, relocation and interviewing expenses and any actual out-of-pocket
expenses, provided such out-of-pocket expenses are agreed upon by
Management Company and PA prior to being incurred, of Management
Company personnel or any Physician-Employee in connection with such
recruitment effort;
2.1.3 Direct marketing expenses of PA, such as direct costs of
printing marketing materials prepared by Management Company;
2.1.4 Any sales and use taxes assessed against PA related to
the operation of PA's medical practice;
2.1.5 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;
2.1.6 Legal fees paid by Management Company or PA to outside
counsel in connection with matters specific to the operation of PA 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 completion of this Agreement or as a result of a
dispute between the parties under this Agreement shall not be
considered a Cost of Services;
2.1.7 All insurance necessary to operate PA including fire,
theft, general liability and malpractice insurance for
Physician-Employees of the PA;
2.1.8 Professional licensure fees and board certification fees
of Physician-Employees, and Other Professional Employees rendering
Infertility Services on behalf of PA;
2.1.9 Membership in professional associations and continuing
professional education for Physician-Employees and Other Professional
Employees;
2.1.10 Quality Improvement 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 of PA;
2.1.13 $10,000 in the aggregate, annually, per
Physician-Employee for travel and entertainment expenses, car
allowances (including car leases), dues and subscriptions, cellular
telephone and other business related expenses relative to PA;
2.1.14 $9,000 in the aggregate, annually, per
Physician-Employee for health, life and long-term disability insurance;
and
2.1.15 Such other costs and expenses directly incurred by
Management Company necessary for the management or operation of PA.
2.2 Management Company covenants and represents that any management
agreement consummated between Management Company and a Co-Occupant
shall include a definition of cost of services that is substantially
the same as the definition of Cost of Services in Section 2.1 of the
Agreement.
2.3 "Facilities Cost of Services" shall mean the costs incurred under
Section 2.1 of this Agreement plus the costs incurred under the
definition of cost of services contained in each management agreement
consummated between Management Company and a Co-Occupant.
2.4 The amount paid to Management Company monthly by PA pursuant to Section
7.1.1 hereof shall cover the Cost of Services identified in Section
2.1. To the extent that PA requires services or equipment over and
above those provided for in, and covered by, Section 2.1, PA shall bear
the cost of such services or additional expenses, which costs and
additional expenses shall be excluded from determination of the PDE
calculation defined in Section 1.1.9. Management Company shall have no
obligation to make any payments for such costs and additional expenses,
and PA agrees not to incur any such costs or additional expenses in the
name of Management Company.
ARTICLE 3
DUTIES AND RESPONSIBILITIES OF MANAGEMENT COMPANY
3.1 MANAGEMENT SERVICES AND ADMINISTRATION.
3.1.1 The PA and Midwest acknowledge and agree that the
Management Services and Facilities will be provided to PA and Midwest
on a non-exclusive basis and that such Management Services and the
Facilities may be shared by other entities and/or medical practices who
have signed a management agreement with Management Company
("Co-Occupants"). Management Company will allocate resources and its
personnel's time so as to fulfill its obligations under this Agreement.
Notwithstanding anything herein to the contrary, nothing herein shall
obligate Management Company to devote all of its personnel at the
Facilities and Management Services to PA, Midwest and Co-Occupants, to
the exclusion of anyone of them.
3.1.2 Providers hereby appoint Management Company as
Providers' sole and exclusive manager and administrator of all of their
day-to-day business functions and grant Management Company all the
necessary authority to carry out, with Providers' advice and consent,
its duties and responsibilities pursuant to the terms of this Agreement
to provide the Management Services on a non-exclusive basis. Only
Physician-Employees or their designees, whose credentials are reviewed
and approved by Management Company prior to rendering any medical
functions at the Facilities, will perform the medical functions of the
Medical Practice. Management Company will have no authority, directly
or indirectly, to perform, and will not perform, any medical function.
3.1.3 Management Company will, on behalf of PA and Midwest,
and in accordance with applicable laws, bill patients and other
responsible persons and third-party payors and collect professional
fees for Infertility Services rendered by Providers to Providers'
patients at the Facilities, outside the Facilities for PA's
hospitalized patients, and for all other Infertility Services rendered
by any Physician- Employee, Other Professional Employee, or Technical
Employee. Providers hereby appoint Management Company for the term
hereof to be their true and lawful attorney-in-fact, for the following
purposes: (i) to bill patients in Providers' name and on their behalf;
(ii) to collect Receivables resulting from such billing in Providers'
name and on their behalf; (iii) to receive payments from insurance
companies, prepayments received from health care plans, and all other
third-party payors; (iv) to take possession of and endorse in the name
of Providers (and/or in the name of any Physician-Employee or Other
Professional Employee rendering Infertility Services to patients of PA)
any notes, checks, money orders, and other instruments received in
payment of Receivables; and (v) to initiate the institution of legal
proceedings in the name of Providers, with Providers' advice and
consent, to collect any accounts and monies owed to Providers, to
enforce the rights of either Provider as creditor under any contract or
in connection with the rendering of any service, and to contest
adjustments and denials by governmental agencies (or its fiscal
intermediaries) as third-party payors.
3.1.3.1 Prior to referring any Receivable to a collection
agency, or sending any letter, other than a standard billing cycle
statement, or commencing litigation, Management Company shall provide
Providers with thirty (30) days' written notice of its intent to take
such action. If within said period, Providers advise Management Company
that Providers do not want (i) a particular Receivable or any part
thereof referred to a collection agency, or (ii) any letter other than
a standard billing cycle statement sent or (iii) litigation commenced,
then Providers will repurchase the Receivable from Management Company
within thirty (30) days of such notice from Management Company. If
Providers fail to repurchase the Receivable within the thirty (30)
days, Management Company will proceed with such collection efforts, as
it deems appropriate.
3.1.4 Management Company will provide the administrative
services function of supervising and maintaining (on behalf of
Providers) 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 PA and, if applicable, Midwest, and shall be
located at the Facilities and be readily accessible for patient care.
Management Company'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.
Management Company shall have access to such records in order to
provide the Management 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. Providers
shall have access, on reasonable notice, to all of their records,
including but not limited to documentation of any expense incurred by
Management Company as Cost of Services, whether on behalf of Providers
or, to the extent Providers share payment of the expense, Providers
and/or other Co-Occupants, at all times.
3.1.5 Management Company will supply to Providers 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 Providers' businesses at the Facilities.
3.1.6 Management Company, subject to Providers' prior
approval, shall design and assist Providers with the implementation of
an appropriate marketing and public relations program, with appropriate
emphasis on public awareness of the availability of Infertility
Services from PA and the services of Midwest. The Parties agree that
the public relations program shall be conducted in compliance with
applicable laws and regulations governing advertising by the medical
profession. Recognizing that Providers' participation in carrying any
marketing and public relations program is essential, Providers shall
participate in developing advertising and marketing strategies, and
approve collateral materials, relative to any marketing and public
relations program.
3.1.7 Management Company, upon request of PA, will assist PA
in recruiting additional physicians, including such administrative
functions as advertising for and identifying potential candidates,
checking credentials, and arranging interviews; provided, however, PA
shall interview and make the ultimate decision as to the suitability of
any physician to become associated with PA. All physicians recruited by
Management Company and accepted by PA shall be employees of or
independent contractors to PA.
3.1.8 Management Company will assist Providers in negotiating
any managed care, PPO, HMO and other provider contracts to which either
Provider desires to become a party. Decisions regarding the
establishment, maintenance or termination of relationships with
institutional health providers shall be made by Providers, in
consultation with Management Company. Management Company will provide
administrative assistance to Providers in fulfilling their respective
obligations under any such contract. In connection with assisting
Providers in negotiating any managed care, PPO, HMO and other provider
contracts, Management Company will use its best efforts to safeguard
the confidentiality of Providers' Confidential Information, as herein
defined, as well as to avoid use of Providers' Confidential Information
for anti-competitive purposes.
3.1.9 Management Company will arrange for legal services as
may be reasonably required in the ordinary course of Providers'
operations, including the cost of enforcing any physician contract
containing restrictive covenants, but excluding personal legal,
accounting and tax services to any Physician-Employee.
3.1.10 Management Company will negotiate for and cause
premiums to be paid with respect to the insurance provided for in
Article 11.
3.1.11 Management Company will take such other reasonable
actions to collect fees and pay expenses of the Facilities in a timely
manner as are deemed reasonably necessary to facilitate the operations
of Providers at the Facilities.
3.2 FACILITIES. Management Company will provide the Facilities identified
in Exhibit 3.2 hereto, on a non-exclusive basis, necessary for the
operation of the Medical Practice and the Lab, including but not
limited to, the use of the Facilities, all furniture, equipment and
furnishings necessary for the proper and efficient operation of 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 the Facilities' physical operations. Management Company
will provide for the cleanliness of the Facilities, and timely
maintenance and cleanliness of the equipment, furniture and furnishings
located therein.
3.3 EXECUTIVE DIRECTOR AND OTHER PERSONNEL.
3.3.1 EXECUTIVE DIRECTOR. Management Company will hire and
appoint a manager, subject to the approval of the Joint Practices
Management Board, to manage and administer all of the day-to-day
business functions of the Facilities ("Executive Director/Manager").
Management Company shall determine salary and fringe benefits paid to
the Executive Director/Manager. At the direction, supervision and
control of Management Company, the Executive Director/Manager, subject
to the terms of this Agreement, will implement the policies agreed upon
by the Joint Practices Management Board and will generally perform the
administrative duties assigned to the Executive Director/Manager by
Management Company.
3.3.2 PERSONNEL. Management Company will employ and provide
Other Professional Employees, Technical Employees, support and
administrative personnel, clerical, secretarial, bookkeeping and
collection personnel reasonably necessary for the efficient operation
of the Providers at the Facilities. Management Company shall determine
and cause to be paid the salaries and benefits of all such personnel
who will be under the direction, supervision and control of Management
Company, with Technical Employees and Other Professional Employees
subject to the professional supervision of PA. Management Company
agrees that Other Professional Employees and Technical Employees will
comply with the reasonable instructions of Physician-Employees
supervising such personnel. If Providers are dissatisfied with the
services of any person employed by Management Company and working at
the Facilities, Providers will consult with Management Company.
Management Company shall in good faith determine whether the employment
of that employee warrants termination. The overriding principle and
goal of facilitating the Providers' provision of high quality medical
care and laboratory services will govern Management Company's
obligations to personnel described herein. Personnel assignments shall
be made to ensure consistent and continued rendering of quality support
services in the Facilities and to ensure prompt availability and
accessibility of individual medical support staff to
Physician-Employees in order to develop constant, familiar, and routine
working relationships between individual Physician-Employees and
individual members of the support staff. If Providers disagree with an
assignment Providers may appeal such assignment to the Management
Company. Management Company shall make every effort consistent with
sound business practices to honor the specific requests of Providers
with regard to the assignment of Management Company's employees. In
addition, Management Company, upon PA's request for nursing or other
personnel in excess of such covered by PA's share of Cost of Services
as provided for in Section 7.1.1, shall assist PA in recruiting
additional nursing and/or other personnel specific or unique to PA's
Medical Practice. All recruiting costs, salaries and benefits for such
personnel shall be borne by PA from PA's share of PDE.
3.3.1 OTHER PROFESSIONAL EMPLOYEES AND TECHNICAL EMPLOYEES.
Management Company will ensure that each Other Professional Employee
and Technical Employee:
3.3.3.1 Maintains a current, valid, unrestricted license or
other applicable authorization to practice his or her profession in the
State of Missouri, and maintains good standing with the authority
responsible for such licensure or authorization;
3.3.3.2 Performs professional services at the Facilities in
accordance with applicable laws and regulations and prevailing
standards of care in the medical community and in accordance with the
reasonable direction and/or instructions of a Physician-Employee.
3.3.3.3 Maintains his or her professional skills through
continuing education and training; and
3.3.3.4 Maintains eligibility for insurance under the
professional liability policy or policies carried by Management
Company.
3.4 FINANCIAL PLANNING AND GOALS. Management Company will prepare, for the
approval of Providers, an annual capital and operating budget (the "Budget")
reflecting the anticipated Revenue and Cost of Services, sources and uses of
capital for growth of PA's practice and for the provision of Infertility
Services at the Facilities. Management Company will present the Budget to
Providers for approval at least sixty (60) days prior to the commencement of the
Fiscal Year. Management Company will indicate the targeted profit margin for
Providers which will be reflected in the Budget. If the parties can not agree on
the Budget for PA 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
the dispute can be resolved.
3.5 FINANCIAL STATEMENTS. Management Company will prepare and deliver to the
representative of each Provider provided for in the notice section of this
Agreement an annual management report within sixty (60) days of the close of the
Fiscal Year ("Annual Management Report"). Management Company will prepare and
deliver to the representative of each Provider provided for in the notice
section of this Agreement a monthly management report within twenty (20) days of
the close of each month ("Monthly Management Report"). Each Annual or Monthly
Management Report will contain a balance sheet, statement of operations showing
Revenue and Costs of Services, and Receivables aging schedule. The Receivables
aging schedule will indicate Receivables aging for 30, 90 and 120 days.
Providers have the right to request from Management Company and inspect all
billing statements, original receipts, and other documents relating to the
management of Providers under this Agreement.
3.6 TAX PLANNING AND TAX RETURNS. Management Company will not be responsible for
any tax planning or tax return preparation for Providers, but will provide
support documentation in connection with the same. Such support documentation
will not be destroyed without Providers consent.
3.7 INVENTORY AND SUPPLIES. Management Company shall order and purchase
inventory and supplies, and such other materials that are requested by Providers
to enable PA Midwest to deliver Infertility Services in a cost-effective high
quality manner.
3.8 QUALITY IMPROVEMENT. Management Company shall assist PA in fulfilling its
obligations to maintain a Quality Improvement Program and in meeting the goals
and standards of such program. Management Company will also establish policies
and procedures for assisting Providers in offering Infertility Services to
patients under financial arrangements arranged through third parties, and
assisting patients in determining eligibility for Infertility Services coverage
through patients' medical carriers.
3.9 RISK MANAGEMENT. Management Company shall assist PA in the development of a
Risk Management Program and in meeting the standards of such Program.
3.10 PERSONNEL POLICIES AND PROCEDURES. Management Company shall develop
personnel policies, procedures and guidelines, to govern office behavior,
protocol and procedures, designed to insure that the Facilities observe all laws
and guidelines related to employment and human resources management.
3.11 LICENSES AND PERMITS. Management Company shall, on behalf of Providers,
coordinate and assist Providers 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 PA and Midwest, and
equipment located at the Facilities, including those relating to the practice of
medicine or the administration of drugs by Physician-Employees.
3.12 PRODUCTION REPORTS. Within thirty (30) days of the execution of this
Agreement, Management Company and Providers will mutually agree upon appropriate
periodic production reports that will provide Providers with the number and
types of procedures performed by Physician-Employees, and the charges for each
such procedures, and the number of patients who have received Infertility
Services at the Facilities over the applicable period and the aggregate charges
for all such services. Such production reports shall be produced on no less than
a monthly basis.
ARTICLE 4
DUTIES AND RESPONSIBILITIES OF PA AND MIDWEST
4.1 PROFESSIONAL SERVICES. PA shall cause its Physician-Employees to provide
Infertility Services to PA's 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-Employee provides Infertility
Services on behalf of PA. Such obligation of PA shall include ensuring that
adequate patient coverage is provided at all times for its patients. PA shall
ensure that each Physician-Employee, any Other Professional Employee employed by
PA, and any other professional provider associated with PA is duly licensed to
provide the Infertility Services being rendered within the scope of such
provider's practice. In addition, PA shall require each Physician-Employee to
maintain a DEA number and appropriate medical staff privileges as determined by
PA during the term of this Agreement. In the event that any disciplinary actions
or medical malpractice actions are initiated against any Physician-Employee or
other professional provider, PA shall promptly inform the Executive
Director/Manager 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 Management Company.
4.2 MEDICAL PRACTICE. PA shall use and occupy the Facilities exclusively for the
purpose of providing gynecologic services, Infertility Services, and related
services and shall 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 by PA shall be conducted solely by
Physician-Employees, and Other Professional Employees employed by PA, Midwest or
Management Company, as applicable. No other physician or medical practitioner
shall be permitted to use or occupy the Facilities without the prior written
consent of Management Company, except in the case of a medical emergency, in
which event, notification shall be provided to Management Company as soon after
such use or occupancy as possible.
4.3 EMPLOYMENT OF PHYSICIAN-EMPLOYEES AND OTHER PROFESSIONAL EMPLOYEES. In the
event PA shall determine that additional physicians are necessary, PA shall
undertake and use its best efforts to locate physicians who, in PA's judgment,
possess the credentials and expertise necessary to enable such physician
candidates to become affiliated with PA for the purpose of providing Infertility
Services. PA shall cause each Physician-Employee to enter into an employment
agreement in a form that is mutually acceptable to PA and Management Company
("Physician-Employment Agreement"), which acceptance shall not be unreasonably
withheld by either party. As long as Elwyn M. Grimes, MD ("Dr. Grimes"), remains
the sole shareholder and Physician-Employee of PA, Management Company shall not
withhold acceptance of Dr. Grimes' Physician-Employment Agreement on the basis
that it lacks a non-compete provision. Except as otherwise provided in Sections
4.6.4 and 5.2.8 of this Agreement, PA shall have complete control of and
responsibility for the hiring, compensation, supervision, evaluation, and
termination of its Physician-Employees, although at the request of PA,
Management Company shall consult with PA respecting such matters.
4.4 CONTINUING MEDICAL EDUCATION. PA shall require its Physician-Employees to
participate in such continuing medical education as PA deems to be reasonably
necessary for such physicians to remain current in the provision of Infertility
Services.
4.5 PROFESSIONAL INSURANCE ELIGIBILITY.PA shall cooperate in the obtaining and
retaining of professional liability insurance by assuring that its
Physician-Employees and Other Professional Employees, if applicable, are
insurable and participating in an on-going Risk Management Program, under
Management Company's directions.
4.6 DIRECTION OF PRACTICE. PA, as a continuing condition of Management Company'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. In furtherance of which:
4.6.1 PA shall operate and maintain at the Facilities, on a
non-exclusive basis, a full-time practice of medicine specializing in
the provision of Infertility Services and shall maintain and enforce
the Physician-Employment Agreements. PA covenants that it shall not
employ any physician, or have any physician as a shareholder, unless
said physician shall sign a Physician Employment Agreement prior to
assuming the status as employee and/or shareholder of PA.
4.6.2 PA shall not, except in accordance with the
Physician-Employment Agreement or as otherwise stated herein, terminate
any Physician-Employment Agreement, amend or modify any
Physician-Employment Agreement in any material manner, waive any
material rights of the PA thereunder without the prior written approval
of Management Company, which approval will not be unreasonably
withheld. PA may amend or modify the Physician-Employment Agreements
without Management Company's consent in order to comply with applicable
law. In addition, in the exercise of Management Company's sole
discretion, if PA fails to pursue the enforcement of its rights against
a Physician-Employee, Management Company shall have the right, but not
the obligation, to direct, initiate, or join in a lawsuit to enforce
the provisions of any Physician Employment Agreement and PA shall
assign its rights and remedies against such Physician-Employee upon the
request of Management Company.
4.6.3 Recognizing that Management Company would not have
entered into this Agreement but for the PA's covenant to maintain and
enforce the Physician-Employment Agreements, subject to the limitations
stated in Section 4.6.2, and in reliance upon a Physician-Employee's
observance and performance of all of the obligations under a Physician
Employment Agreement, any damages, liquidated damages, compensation,
payment, or settlement received by the PA from a physician whose
employment is terminated, shall be paid to Management Company in
proportion to Management Company's loss or damages.
4.6.4 PA shall retain that number of Physician-Employees as
are reasonably necessary and appropriate for the provision of
Infertility Services. However, PA agrees that it will not hire more
physicians than consented to by the Joint Practice Management Board,
which shall not be unreasonable in giving its consent. 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 PA, and
shall be board eligible in the practice of gynecology, with training in
the subspecialty of infertility and assisted reproductive medicine. PA
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.
Management Company may, on behalf of the PA, and at PA's request,
administer the compensation with respect to such Physician-Employees in
accordance with the written agreement between the PA and each
Physician-Employee. Management Company shall neither control nor direct
any Physician in the performance of Infertility Services for patients,
and Management Company will not unreasonably interfere with the
employer-employee relationship between PA and its Physician-Employees.
4.6.5 PA shall insure that Physician-Employees provide patient
care and clinical backup as required to insure the proper provision of
Infertility Services to patients of the PA at the Facilities set forth
in Exhibit 3.2, and/or such other location as shall be mutually agreed
to by PA and Management Company. PA shall insure that its
Physician-Employees devote substantially all of their professional
time, effort and ability to PA's practice, including the provision of
Infertility Services and the development of such practice. PA shall
insure that Physician-Employees timely (within 24 hours of rendering
services) note in all patient charts, any and all procedures performed
and services rendered so that proper billing of patients and
third-party payors can be performed by Management Company.
4.6.6 PA covenants to obtain necessary licenses and operate
clinical laboratory and tissue bank services in accordance with all
applicable laws and regulations. PA agrees that any Medical Director(s)
or Tissue Bank Director(s) shall be Physician-Employees or Other
Professional Employees, if applicable, of the PA who meet the
qualifications required by applicable State law or regulation, and that
should there be a vacancy in any such position, PA will cause another
Physician-Employee or Other Professional Employee, if applicable, to
fill such vacancy in accordance with applicable State law.
4.6.7 PA acknowledges that it bears all medical obligations to
patients treated at the Facilities and PA and Midwest covenant that
they are responsible for all tissue, specimens, embryos or biological
material ("Biological Materials") kept at the Facilities on behalf of
the patients (or former patients) of PA or Midwest. In the event of a
termination or dissolution of PA or Midwest, or the termination of this
Agreement for any reason, PA and Midwest will have the obligation to
account to its 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"). Management Company, in such event, will, at the
request of the PA, assist in the administrative details of such a
Relocation Program. These obligations shall survive the termination of
this Agreement.
4.6.8 Except for circumstances outside the control of PA or
Shareholders of PA, PA covenants not to terminate or dissolve as a
professional services corporation except on six months prior written
notice to Management Company. In the event that such termination or
dissolution occurs, for a reason other than the death or disability of
all of the shareholders, or any successor entity fails to continue the
medical practice of PA substantially in the form contemplated by this
Agreement, PA and its individual shareholders, shall indemnify
Management Company for: (a) the actual costs of maintaining the
Facilities and any reasonably necessary Other Professional Employees
during a Relocation Program (Section 4.6.7); and (b) any damages,
costs, liabilities, including reasonable attorneys fees, arising from
claims, suits, causes of action or proceedings, brought by a patient of
the PA having an interest in any Biological Materials kept at the
Facilities. These obligations shall survive the termination of this
Agreement.
4.7 PHYSICIAN-EMPLOYEES, SUPERVISION OF OTHER PROFESSIONAL AND TECHNICAL
EMPLOYEES. PA will ensure that each Physician-Employee:
4.7.1 Maintains a current, valid, unrestricted license or
other applicable authorization to practice his or her profession in the
State of Missouri, and maintains good and unrestricted standing with
the authority responsible for such licensure or authorization;
4.7.2 Performs professional services at the Facilities in
accordance with applicable laws and regulations and prevailing
standards of care in the community;
4.7.3 Maintains his or her professional skills through
continuing education and training;
4.7.4 Maintains eligibility for insurance; and
4.7.5 Does not ask or direct any Management Company employee
to engage in any conduct that violates any federal, local or state law
or regulation, or ask or direct any Management Company employee to
engage in conduct for which said employee is not licensed to perform or
engage.
4.8 PRACTICE DEVELOPMENT, COLLECTION EFFORTS AND NETWORK INVOLVEMENT. PA agrees
that during the term of this Agreement, PA covenants for itself and will use its
best 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 PA, Midwest and Physician-Employees;
4.8.2 Promote PA's medical practice and Midwest's Infertility
Services and participate in marketing efforts developed by Management
Company, and approved by PA and the Joint Practices Management Board.
4.8.3 Participate in Management Company Reproductive Science
Center Network activities and programs such as the Physician and
Scientist Council.
4.9 PERSONNEL POLICIES. PA covenants for itself and will cause its
Physician-Employees and any other employees to comply with reasonable personnel
policies and guidelines developed for the PA and Midwest by Management Company
and/or the Joint Practice Management Board, which shall include administrative
protocols and policies designed to insure that the Facilities comply with all
applicable laws and regulations, federal, state and local.
4.10 MIDWEST. Midwest shall provide clinical laboratory services to patients in
compliance at all times with all applicable ethical standards, laws and
regulations.
ARTICLE 5
JOINT DUTIES AND RESPONSIBILITIES
5.1 FORMATION AND OPERATION OF JOINT PRACTICES MANAGEMENT BOARD. Management
Company, PA and Co-Occupants will establish a joint practices management board
("Joint Practices Management Board") which will be responsible for developing
management and administrative policies for the overall operation of the
Facilities. The Joint Practices Management Board will consist of designated
management representatives from Management Company, one representative from PA,
one from each Co-Occupant, and the Executive Director/ Manager. It is the intent
and objective of Management Company and PA that they agree on the overall
operations of the Facilities. In the case of any matter requiring a formal vote,
PA shall have one (1) vote, each Co-Occupant shall have one (1) vote, and
Management Company shall have one (1) vote. The desire is that Management
Company, PA and Co-Occupants agree on matters of operations and that, if they
disagree, they will have to work cooperatively to resolve any disagreement.
5.2 DUTIES AND RESPONSIBILITIES OF THE JOINT PRACTICES MANAGEMENT BOARD. The
Joint Practices Management Board shall have, among others, the following duties
and responsibilities:
5.2.1 ANNUAL BUDGETS AND PROFITABILITY. All annual capital and
operation budgets prepared by Management Company for the Facilities
shall be subject to the review, amendment, approval, and disapproval of
the Joint Practices Management Board. Providers covenant and agree to
use their best efforts to agree upon the budgets, in place from time to
time. Providers and Management Company agree that, recognizing changes
in circumstances, annual budgets and forecast are subject to revisions
and, accordingly, they will cause the Joint Practices Management Board
to modify the annual budgets, as needed, including without limitation,
staff reductions, to ensure that Providers operate in a profitable
mode, subject to Management Company's duties and responsibilities under
this Agreement.
5.2.2 CAPITAL IMPROVEMENTS AND EXPANSION. Except as otherwise
provided herein, any renovation and expansion plans, and capital
equipment expenditures with respect to the Facilities shall be reviewed
and approved by the Joint Practices Management Board and shall be based
upon the best interests of all occupants, and shall take into account
capital priorities, economic feasibility, physician support,
productivity and then current market and regulatory conditions.
5.2.3 ADVERTISING BUDGET. All annual advertising and other
marketing budgets for the Facilities prepared by Management Company
shall be subject to the review, amendment, approval and disapproval of
the Joint Practices Management Board.
5.2.4 PATIENT FEES. Providers, in their sole discretion, shall
determine an appropriate fee schedule for all physician and ancillary
services rendered by Providers at the Facilities.
5.2.5 ANCILLARY SERVICES. The Joint Practices Management Board
shall approve ancillary services rendered at the Facilities.
5.2.6 STRATEGIC PLANNING. The Joint Practices Management Board
shall, to the extent permitted by applicable law, develop long-term
strategic plans, from time to time.
5.2.7 PHYSICIAN HIRING. The Joint Practices Management Board
shall, in conjunction with PA and Co-Occupants, determine the number
and type of physicians required for the efficient operation of the
Facilities.
5.2.8 EXECUTIVE DIRECTOR AND KEY PERSONNEL.
(a) The selection and retention of the Executive
Director/Manager pursuant to Section 3.3.1 by Management Company shall
be subject to the recommendation of the Joint Practices Management
Board. If PA is dissatisfied with the services provided by the
Executive Director/Manager, PA shall consult with Management Company
who shall, in good faith, determine whether the performance of the
Executive Director/Manager could be brought to acceptable levels
through counsel and assistance, or whether the Executive
Director/Manager should be terminated.
(b) Management Company shall follow the recommendations of the
Joint Practices Management Board with respect to the hiring,
terminating, or relocating of key personnel at the Facilities, provided
such recommendations do not cause Management Company to violate any
federal, state or local laws or regulations.
5.3 FEE SCHEDULES. PA understands and agrees that each Co-Occupant of the
Facilities may establish and publish its own separate and distinct fee schedule,
and nothing herein shall obligate PA to share its fee schedule with a
Co-Occupant or utilize the schedule of a Co-Occupant. Upon request of patients,
third parties, or governmental agencies, Management Company personnel will be
permitted to disclose PA's fee schedule.
ARTICLE 6
LICENSE OF MANAGEMENT COMPANY NAME
6.1 GRANT OF LICENSE. Management Company hereby grants to Providers a revocable,
non-exclusive and non-assignable license for the term of this Agreement to use
the name REPRODUCTIVE SCIENCE ASSOCIATES and a revocable, non-exclusive and
non-assignable license with respect to any other service names, trademark names
and logos of Management Company (the "Trade Names") in conjunction with the
provision of Infertility Services at the Facilities.
6.2 FICTITIOUS NAME PERMIT. If necessary, PA and Midwest shall file or cause to
be filed an original, amended or renewal application with an appropriate
regulatory agency to obtain a fictitious name permit which allows PA and Midwest
to practice at the Facilities under the Trade Names and shall take any other
actions reasonably necessary to procure protection of or protect Management
Company's rights to the Trade Names. Management Company shall cooperate and
assist PA and Midwest in obtaining any such original, amended or renewal
fictitious name permit.
6.3 RIGHTS OF MANAGEMENT COMPANY. PA and Midwest acknowledge Management
Company's exclusive right, ownership, title and interest in and to the Trade
Names and will not at any time do or cause to be done any act or thing
contesting or in any way impairing or tending to impair any part of such right,
title and interest. In connection with the use of the Trade Names, PA and
Midwest shall not in any manner represent that it has any ownership interest in
the Trade Names, and PA's and Midwest's use shall not create in PA's and
Midwest's favor any right, title, or interest in or to the Trade Names other
than the right of use granted hereunder, and all such uses by PA Midwest shall
inure to the benefit of Management Company. PA and Midwest shall notify
Management Company immediately upon becoming aware of any claim, suit or other
action brought against it for use of the Trade Names or the unauthorized use of
the Trade Names by a third party. PA and Midwest shall not take any other action
to protect the Trade Names without the prior written consent of Management
Company. Management Company, if it so desires, may commence or prosecute any
claim or suit in its own name or in the name of PA or Midwest or join PA and
Midwest as a party thereto. PA and Midwest shall not have any rights against
Management Company for damages or other remedy by reason of any determination of
Management Company not to act or by reason of any settlement to which Management
Company may agree with respect to any alleged infringements, imitations, or
unauthorized use by others of the Trade Names, nor shall any such determination
of Management Company or such settlement by Management Company affect the
validity or enforceability of this Agreement.
6.4 RIGHTS UPON TERMINATION.
6.4.1 Upon termination of this Agreement, PA and Midwest
shall: (i) within 30 days of the termination, cease using the Trade
Names in all respects and refrain from making any reference on its
letterhead or other publicly-disseminated information or material to
its former relationship with Management Company; and (ii) take any and
all actions required to make the Trade Names available for use by any
other person or entity designated by Management Company.
6.4.2 PA's or Midwest's failure (except as otherwise provided
herein) to cease using the Trade Names at the termination or expiration
of this Agreement will result in immediate and irreparable damage to
Management Company and to the rights of any licensee of Management
Company. There is no adequate remedy at law for such failure. In the
event of such failure, Management Company shall be entitled to
equitable relief by way of injunctive relief and such other relief as
any court with jurisdiction may deem just and proper. Additionally,
pending such a hearing and the decision on the application for such
permanent injunction, Management Company shall be entitled to a
temporary restraining order, without prejudice to any other remedy
available to Management Company. All such remedies hereunder shall be
at the expense of PA and Midwest and shall not be a Cost of Services.
ARTICLE 7
FINANCIAL ARRANGEMENTS
7.1 COMPENSATION. The compensation set forth in this Article 7 is being paid to
Management Company in consideration of the substantial commitment made and
services to be rendered by Management Company hereunder and is fair and
reasonable. Management Company shall be paid the following amounts (collectively
"Compensation"):
7.1.1 Based on Providers' current staffing and operations, for
the first 12 months of this Agreement, $75,000 per month ("Initial
Monthly Cost of Services") for all Cost of Services provided for in
Section 2.1 (whether incurred by Management Company or Providers)
accrued by Management Company pursuant to the terms of this Agreement.
Beginning with the 13th month of this Agreement and on a quarterly
basis thereafter, the Initial Monthly Cost of Services will be adjusted
and, as adjusted, will equal the product of (i) Revenue for the
previous 3 months divided by total revenue for all medical services
provided at the Facilities for the previous 3 months, multiplied by
(ii) Facilities Cost of Services for the previous 3 months ("Adjusted
Monthly Cost of Services"). Notwithstanding the above, neither the
Initial Monthly Cost of Services nor the Adjusted Monthly Cost of
Services for the 36-month period beginning May 1, 1999 and ending April
30, 2002, shall exceed $75,000 per month.
7.1.1.1 Notwithstanding the provisions of Section 7.1.1, in
the event that Co-Occupants begin utilizing the Facilities during the
first 12 months of this Agreement, cost of services paid to Management
Company by all occupants, including Providers, for the first 12 months
of this Agreement, in excess of the Facilities Cost of Services for the
first 12 months of this Agreement shall be remitted to Providers within
60 days after the first 12 months of this Agreement.
7.1.1.2 PA and Management Company recognize and agree that it
is in their mutual best interests to cooperate in bringing Co-Occupants
into the Facility. Accordingly, Providers agree to use their best
efforts to assist Management Company in consummating management
agreements with other Co-Occupants as soon as possible. In the event
Management Company successfully consummates a management agreement with
a Co-Occupant on or before October 31, 1999, Management Company will
pay $7,500.00 to PA. In the event Management Company successfully
consummates a management agreement with a second Co-Occupant on or
before October 31, 1999, Management Company will pay PA an additional
$15,000.00. All payments under this Section will be paid to PA as
follows: one-third of the total on the effective date of the relevant
management agreement between Management Company and a Co-Occupant, and
the remaining two-thirds in two equal monthly payments 30 days and 60
days after the effective date of the relevant management agreement.
This offer expires at midnight, October 31, 1999, except that any
payments due thereafter based on management agreements consummated
prior to that date will be paid in accordance with the schedule
provided for in this Section 7.1.1.2.
7.1.2 During each year of this Agreement, a Base Management
Fee, paid monthly but reconciled to annual Revenues, of an amount equal
to six percent (6%) of Revenues;
7.1.3 During each year of this Agreement, an Additional
Management Fee, paid monthly but reconciled to annual operating results
of PA, equal to 20% of PDE; provided, however, the first $8,333.33 of
monthly PDE and the first $100,000 of annual PDE shall inure to PA;
7.1.4 In the event that Section 7.1.2 and/or Section 7.1.3 of
this Agreement is found to be illegal, unenforceable, against public
policy, or forbidden by law, by any local, state or federal agency or
department, or any court of competent jurisdiction ("Findings"), then
Section 7.1.2 and/or 7.1.3 and the Base Management Fee and Additional
Management Fee shall be replaced, effective immediately and retroactive
tot he date of this Agreement, by a fixed annual Management Fee,
payable in equal monthly installments ("Alternate Management Fee") on
or before the 15th business day of each month. Said Alternate
Management Fee shall be an amount mutually agreed upon, within thirty
(30) day's time from the Findings, between Management Company and
Providers; however, pending such agreement, the Alternate Management
Fee shall be $96,700 per annum. In the event of a Finding which causes
the Alternate Management Fee to become operative, the parties shall,
within sixty (60) days of the Finding, account for all payments made
prior to the date of the Finding, and recalculate such amounts pursuant
to the formula provided for in the Alternate Management Fee. Any
overpayment to Management Company resulting from the prior application
of Sections 7.1.2 and/or 7.1.3 shall be applied so as to satisfy 50% of
each future monthly Alternate Management Fee until the aggregate of
such overpayment is fully paid by Management Company. Any underpayment
to Management Company resulting from the prior application of Sections
7.1.2 and/or 7.1.3 shall be paid to Management Company commencing on
the first day of the next full month following the date of the Finding,
in eighteen (18) equally monthly installments.
7.1.5 The right of termination provided for in Section 9.1.3
of this Agreement, if based on the fact that Section 7.1.2 and Section
7.1.3 of this Agreement have been found to be illegal, unenforceable,
void, against public policy or forbidden by law, shall only be
exercisable in the event that both (i) Sections 7.1.2 and 7.1.3 and
(ii) the Alternate Management Fee have been so found by a local, state
or federal agency or department, or a court of competent jurisdiction.
7.2 MONTHLY NET INCOME.
7.2.1 On or before the 15th business day of each month,
Management Company shall calculate the Receivables arising during the
previous calendar month. Subject to the terms and conditions of this
Agreement, PA and Midwest hereby sell and assign to Management Company
as absolute owner, and Management Company hereby agrees to purchase
from PA and Midwest all such Receivables following their calculation by
Management Company as above. All Receivables are sold on a full
recourse basis. PA and Midwest shall cooperate with Management Company
and execute all necessary documents in connection with the purchase and
assignment of such Receivables to Management Company or at Management
Company's option, to its lenders. All collections in respect of such
Receivables shall be deposited in a bank account at a bank designated
by Management Company. To the extent PA or Midwest comes into
possession of any payments in respect of such Receivables, PA and
Midwest shall direct such payments to Management Company for deposit in
bank accounts designated by Management Company.
7.2.2 Each month during the term of the Agreement, in
consideration for Providers' transfer and sale of the previous calendar
month's Receivables to Management Company in accordance with Section
7.2.1, Management Company shall pay to PA the sum of the Receivables
for the previous calendar month, less Compensation due Management
Company for the previous calendar month calculated in accordance with
Section 7.1 ("Monthly Net Income") on the first and third Friday of
each calendar month, with the first payment of each month to equal
$7,500 and the second payment of each month to equal Monthly Net Income
for the previous calendar month less $7,500. For the month of May 1999
only, both payments shall equal $7,500.
7.3 PRIOR DEBT AND COVENANT BY PHYSICIAN. PA and Management Company acknowledge
and agree that effective as the date hereof PA is indebted to Management Company
in the amount set forth on Exhibit 7.3(A) ("PA Debt") as a result of the Former
Agreements. Management Company acknowledges that it has no right to payment of
PA Debt from Midwest. PA hereby covenants and represents that the obligation for
payment of the PA Debt is PA's. PA and Management Company agree that the PA Debt
will be evidenced by a note (the "Note") in the form attached hereto as Exhibit
7.3(B).
7.3.1 On the anniversary date of this Agreement during the
term of the Agreement, Management Company will deduct $166,953.60 from
the PA Debt. This provision shall survive the termination of this
Agreement if Dr. Grimes continues to provide Infertility Services at
the Facilities.
7.3.2 In the event this Agreement terminates for any reason
prior to the satisfaction of the Note and Dr. Grimes no longer provides
Infertility Services at the Facilities, PA agrees to pay the unpaid
balance of the Note within 90 days of the termination.
ARTICLE 8
EXCLUSIVE MANAGEMENT RIGHT AND TERM
8.1 In consideration of the considerable investment of time and resources in PA
and Midwest expected by Management Company, PA and Midwest grant to Management
Company the exclusive right to manage PA and Midwest during the term of this
Agreement (the "Exclusive Management Right").
8.2 The term of this Agreement shall begin May 1, 1999 (the "Effective Date")
and shall expire May 1, 2004 (the "Term") unless earlier terminated pursuant to
Article 9, below. This Agreement may be renewed by either party, if within the
period of 180 days prior to the expiration date one party gives notice to the
other of its intention to continue this Agreement under the same terms and
conditions as set forth herein or under such different terms and conditions as
particularly set forth in the written notice and further providing that the
other party has 30 days from the date of notice to accept, reject or modify the
offer. If within 30 days, the other party does not respond or by written notice
accepts, this Agreement shall continue for an additional 10 years under the
terms and conditions as provided in the notice.
8.3 PA and Midwest acknowledge and agree that they have been advised by
Management Company, that Management Company is currently negotiating with other
parties, the names of which have been disclosed to them, that may result in such
other parties utilizing and having access to the Facilities. Although Management
Company has not finalized such negotiations, PA and Midwest understand that the
results of such negotiations may impact this Agreement. Management Company
intends to continue with such negotiations and will use its best efforts to
preserve the economic benefits anticipated by PA and Midwest hereunder.
ARTICLE 9
TERMINATION OF THE AGREEMENT
9.1 TERMINATION
Either party in the event of the following may terminate this
Agreement:
9.1.1 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 Management Company or
Providers may terminate this Agreement upon 10 days prior written
notice to the other parties.
9.1.2 MATERIAL BREACH. If either party shall materially breach
its obligations hereunder, then the other party may terminate this
Agreement by providing 30 days prior written notice to the breaching
party detailing the nature of the breach and providing the breaching
party with the opportunity to cure the breach. If the breach is not
cured within such 30-day period, this Agreement shall terminate,
provided that if the breach is not curable within such 30-day period
and the breaching party is making diligent efforts to cure the breach
during such 30-day period, this Agreement shall not terminate. If after
the exercise of diligent efforts, the breaching party shall be unable
to cure the breach within 60 days from the notice of breach from the
non-breaching party, the non-breaching party in its sole discretion may
extend the time in which to cure the breach, upon request of the
breaching party. In the event the non-breaching party does not extend
the time in which to cue the breach, this Agreement will terminate at
the expiration of 60 days from the original notice of breach from the
non-breaching party.
9.1.3 ILLEGALITY. Any party may terminate this Agreement
immediately upon receipt of notification by any local, state, or
federal agency or court of competent jurisdiction that the conduct
contemplated by this Agreement is forbidden by law; except that this
Agreement shall not terminate during such period of time as to any
party which contests such notification in good faith and the conduct
contemplated by this Agreement is allowed to continue during such
contest. If any governing regulatory agency asserts that the services
provided by Management Company under this Agreement are unlawful or
that the practice of medicine by PA as contemplated by this Agreement
requires a certificate of need, and any such assertion is not contested
(or if contested, the agency's assertion is found to be correct by a
court of competent jurisdiction and no appeal is taken, or if any
appeals are taken and the same are unsuccessful), this Agreement shall
thereupon terminate with the same force as if such termination date was
the date originally specified in this Agreement as the date of final
expiration of the terms of this Agreement.
9.2 TERMINATION BY MANAGEMENT COMPANY This Agreement may be terminated by
Management Company for the following reasons:
9.2.1 FOR PROFESSIONAL DISCIPLINARY ACTIONS. PA shall be
obligated to suspend a Physician-Employee whose license to practice
medicine in Missouri is suspended, revoked, or not renewed. Management
Company may terminate this Agreement upon 10 days prior written notice
to PA if a Physician-Employee's license to practice medicine is
suspended, revoked, or not renewed and PA has failed to suspend such
Physician-Employee; provided, however, such action may not be taken
until PA has been given 30 days to resolve such physician's
authorization to practice medicine in Missouri. PA shall notify
Management Company within five (5) days of a notice that a
Physician-Employee's license to practice medicine in Missouri is
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.
9.3 TERMINATION BY PA OR MIDWEST. PA or Midwest may terminate this Agreement in
the event that a Physician-Employee who is also a shareholder in PA and Midwest,
and is the only Physician-Employee, dies or becomes disabled.
9.4 TERMINATION WITHOUT CAUSE. Either party may terminate this Agreement without
cause by notifying the other party in writing 90 days before the effective date
of the termination.
ARTICLE 10
PURCHASE OF ASSETS - OBLIGATIONS AND OPTIONS
10.1 TERMINATION BY MANAGEMENT COMPANY. If Management Company terminates this
Agreement due to the insolvency of PA or Midwest (Section 9.1.1), for a material
breach by PA or Midwest (Section 9.1.2), or PA fails to suspend a
Physician-Employee whose license is suspended, revoked or not renewed (Section
9.2.1), PA and/or Midwest agree, within 90 days of the date of termination of
this Agreement, at Management Company's option, to purchase from Management
Company the Assets as more fully set forth in Sections 10.1.1 and 10.1.3 below
if there is no Co-Occupant.
10.1.1 The purchase price of the Assets will be the net book
value determined in accordance with GAAP, consistently applied, as at
the date of the termination.
10.1.2 In addition to purchasing the Assets, PA shall satisfy
any remaining obligations under the Note.
10.1.3 If a purchase is completed under Section 10.1, PA shall
assume all leases for offices and equipment used directly for the
management and operation of Providers' businesses and may hire such
employees from Management Company as Providers chose. In such event, PA
shall be obligated to indemnify Management Company for any and all
severance or termination obligations to Management Company employees
utilized directly in providing Management Services whom are not
subsequently hired by PA or Midwest.
10.2 TERMINATION BY PA. In the event PA terminates this Agreement as a result of
the insolvency of Management Company (9.1.1) or material breach by Management
Company (9.1.2), PA's obligations under the Note shall continue to be satisfied
in accordance with the Note.
ARTICLE 11
INSURANCE
11.1 Management Company shall use its best efforts to cause PA to be made an
additional insured under Management Company's professional liability coverage;
provided, however, conditions for being made an additional insured shall be (i)
PA utilizing patient informed consent forms supplied by Management Company,
provided such forms are consistent with law and any guidelines issued by the
American Society of Reproductive Medicine and (ii) PA complying with
requirements of Management Company's insurance company. Management Company shall
also carry a policy of public liability and property damage insurance with
respect to the Facilities under which the insurer agrees to indemnify Management
Company and PA against all cost, expense and/or liability arising out of or
based upon any and all claims, accidents, injuries and damages customarily
included within the coverage of such policies of insurance available for
Management Company. The minimum limits of liability of such insurance shall be
$1 million combined single limit covering bodily injury and property damage.
Certificates of Insurance evidencing such policies and additional insured status
shall be presented to PA within thirty (30) days after such coverage is
effected.
11.2 In the event Management Company is unable to cause PA to be made an
additional insured under Management Company's professional liability coverage,
PA shall procure and maintain throughout the Term of this Agreement,
professional liability insurance covering itself and its employees providing
Infertility Services pursuant to this Agreement in the minimum amount of $1
million per incident, $3 million in the aggregate. If possible under the terms
of such coverage, PA shall use its best efforts to cause Management Company to
be named an additional insured. Evidence of such coverage shall be presented to
Management Company within 30 days of the execution of this Agreement.
11.3 PA and Management Company 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 12
MISCELLANEOUS
12.1 INDEPENDENT CONTRACTOR. Management Company, PA and Midwest are independent
contracting parties. In this regard, the parties agree that:
12.1.1 The relationship between Management Company, and PA and
Midwest is that of an independent supplier of non-medical services and
a medical practice and provider of laboratory services, 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 Management Company and PA and
Midwest;
12.1.2 Notwithstanding the authority granted to Management
Company herein, Management Company and PA agree that PA shall retain
the full authority to direct all of the medical, professional, and
ethical aspects of its medical practices;
12.1.3 Any powers of Providers not specifically vested in
Management Company by the terms of this Agreement shall remain with
Providers;
12.1.4 PA shall, at all times, employ the (i)
Physician-Employees, and (ii) Other Professional Employees required by
law to be employees of PA. The parties 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 their respective employees;
12.1.5 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;
12.1.6 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
12.1.7 Matters involving the internal agreements and finances
of Providers, 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 Providers, and other employees of Providers, disposition of
Providers property and stock, accounting, tax preparation, tax
planning, and pension and investment planning (and expenses relating
solely to these internal business matters), hiring and firing of
Physician-Employees, decisions and contents of reports to regulatory
authorities governing Providers and licensing, shall remain the sole
responsibility of Providers and the individual Physician-Employees who
are Shareholders of Providers, except with respect to the number of
Physician-Employees the Providers hire which will be based upon
recommendations of the Joint Practices Management Board.
12.2 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.
12.3 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 Management Company to cause PA 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.
12.4 PRIOR AGREEMENTS; AMENDMENTS. This Agreement supersedes all prior
agreements and understandings, including the Former Agreements, between the
parties as to the subject matter covered hereunder, 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.
12.5 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 Management Company may assign this Agreement to
any affiliate, which for purposes of this Agreement, shall include any parent or
subsidiary of Management Company, without the consent of PA. 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.
12.6 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.
12.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri, 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
breach thereof, except for equitable relief sought pursuant to Section 6.4 or
Section 12.3 hereof, shall be determined by binding arbitration in the State of
Missouri, City of Kansas City (hereinafter "Arbitration"). The party seeking
determination shall subject any such dispute, claim or controversy to either (i)
JAMS/Endispute or (ii) the American Arbitration Association, and the rules of
commercial arbitration of the selected entity shall govern. The Arbitration
shall be conducted and decided by three (3) arbitrators, unless the parties
mutually agree, in writing at the time of the Arbitration, to fewer arbitrators.
In reaching a decision, the arbitrators 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 arbitrators. Any application to compel Arbitration, confirm or
vacate an arbitral award or otherwise enforce this Paragraph shall be brought in
the Courts of the State of Missouri or the United States District Court for the
District of Missouri, to whose jurisdiction for such purposes PA and Management
Company hereby irrevocably consent and submit.
12.8 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.
12.9 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.
12.10 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 Airborne Express, prepaid, and shall be
deemed given when postmarked or when placed with any such delivery service. Any
such notice or communication shall be sent to the address set forth below:
12.10.1 If for Management Company:
Gerardo Canet, President
IntegraMed America, Inc.
One Manhattanville Road
Purchase, New York 10577
With copies to:
Claude E. White, Esq.
General Counsel
IntegraMed America Inc.
One Manhattanville Road
Purchase, New York 10577
12.10.2
If for PA:
Elwyn M. Grimes, MD, President
Reproductive Endocrine & Fertility Consultants, P.A.
Two Brush Creek
Suite 500
Kansas City, Missouri 64112
With copies to:
Douglas M. Salaway, Esq.
Polsinelli, White, Vardeman & Shalton, P.C.
West 47th Street, Suite 1000
Kansas City, Missouri 64112
12.10.3 If for Midwest:
Elwyn M. Grimes, MD, President
Midwest Fertility Foundations & Laboratory, Inc.
Two Brush Creek
Suite 500
Kansas City, Missouri 64112
With copies to:
Douglas M. Salaway, Esq.
Polsinelli, White, Vardeman & Shalton, P.C.
West 47th Street, Suite 1000
Kansas City, Missouri 64112
Any party hereto, by like notice to the other parties, may designate
such other address or addresses to which notice must be sent.
12.11 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, whether oral or written, with respect
to such subject matter.
12.12 NO MEDICAL PRACTICE BY MANAGEMENT COMPANY. Management Company will not
engage in any activity that constitutes the practice of medicine, and nothing
contained in this Agreement is intended to authorize Management Company to
engage in the practice of medicine or any other licensed profession.
12.13 CONFIDENTIAL INFORMATION.
12.13.1 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.
12.13.2 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.
12.13.3 In order to minimize any misunderstanding regarding
what information is considered to be Confidential Information,
Management Company or Providers will designate at each other's request
the specific information which Management Company or Providers
considers to be Confidential Information.
12.14 INDEMNIFICATION.
12.14.1 Management Company agrees to indemnify and hold
harmless PA, 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 Management Company related
to the performance of its duties and responsibilities under this
Agreement. The obligations contained in this Section 12.14.1 shall
survive termination of this Agreement.
12.14.2 PA agrees to indemnify and hold harmless Management
Company, 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 PA related to the performance of its
duties and responsibilities under this Agreement. The obligations
contained in this Section 12.14.2 shall survive termination of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
INTEGRAMED AMERICA, INC.
By: /s/Donald S. Wood
---------------------------------------------
DONALD S. WOOD, PH.D., SENIOR VICE PRESIDENT
& CHIEF OPERATING OFFICER
REPRODUCTIVE ENDOCRINE & FERTILITY CONSULTANTS, P.A.
BY: /s/Elwyn M. Grimes
---------------------------------------------
ELWYN M. GRIMES, MD, PRESIDENT
MIDWEST FERTILITY FOUNDATIONS & LABORATORY, INC.
BY:/s/Elwyn M. Grimes
----------------------------------------------
ELWYN M. GRIMES, MD, PRESIDENT
EXHIBIT 3.2
OFFICE AND FACILITIES
TO BE PROVIDED BY MANAGEMENT COMPANY TO PA AND LAB
Two Brush Creek, Suite 500, Kansas City, Missouri 64112
EXHIBIT 7.4(A)
PA DEBT (AS OF DECEMBER 31, 1998)
$ 923,101 Advances balance as of December 31, 1998
175,000 Note Balance at December 31, 1998 ($250,000 Original Amount)
--------
$ 1,098,101 Balance Due IntegraMed America Inc. as of December 31, 1998
263,333 Unpaid Right to Manage Fees
=========
$ 834,768 Balance of PA Debt owed to IntegraMed America Inc.
EXHIBIT 7.4 (B)
PROMISSORY NOTE
[See attached]