MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT, dated as of March 5, 1998 (the
"Execution Date"), is by and among MICHAEL CAVENEE, M.D., P.A. ("MCPA"), KENNETH
TRIMMER, M.D., P.A. ("KTPA"), each a Texas professional association (KTPA and
MCPA are collectively, the "Company"), the shareholders of the Company listed on
Exhibit A (individually, a "Shareholder" and collectively, the "Shareholders"),
and SHERIDAN HEALTHCORP, INC., a Florida corporation ("Sheridan").
PRELIMINARY STATEMENTS
1. Sheridan is in the business of managing medical practices and providing
quality health care management services to individual physicians and physician
groups.
2. The Company desires to engage Sheridan and Sheridan is willing to be
engaged to provide the Company with quality health care management services upon
the terms and subject to the conditions contained in this Agreement.
3. On March 4, 1998, Dr. Cavenee and Sheridan Healthcare, Inc., a Delaware
corporation and the owner of all of the issued and outstanding shares of
Sheridan stock ("SHCR") have executed and delivered a Purchase Option Agreement
(the "OA") under which SHCR, its assignee or nominee has been given the right to
acquire all of Dr. Cavenee's shares of stock in MCPA. On March 4, 1998, Dr.
Trimmer and SHCR executed and delivered a Purchase Option Agreement (also the
"OA") under which SHCR, its assignee or nominee has been given the right to
acquire all of Dr. Trimmer's shares of stock in KTPA.
4. Simultaneously with the execution and delivery of the OAs each of the
Shareholders and SHCR have executed and delivered a Restrictive Covenant
Agreement (the "RCAs") in which the Shareholders have agreed to restrict certain
professional activities for five (5) years from the date of this Agreement.
5. Simultaneously with the execution and delivery of this Agreement Michael
Cavenee, M.D. has entered into a Physician Employment Agreement with MCPA;
Kenneth Trimmer, M.D. has entered into a Physician Employment Agreement with
KTPA;(collectively, the "PEAs").
6. The RCAs, the PEAs and the OAs, together with the documents,
instruments, schedules and exhibits delivered in connection with this Agreement,
are collectively the "Related Documents."
7. Without the covenants and agreements of the Shareholders contained in
this Agreement and the Related Documents, Sheridan would not enter into this
Agreement or consummate the contemplated transaction.
In consideration of the covenants contained in this Agreement Sheridan, the
Shareholders and the Company agree as follows:
AGREEMENT
Article I
Definitions.
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Section 1.1 Capitalized terms not defined in this Article have the meanings
given them in quotations elsewhere in this Agreement. The following terms have
the meanings given below:
(a) Affiliates. The term "Affiliates" for purposes of this Agreement
means an individual or entity (whether now existing or hereafter created) that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, another person or entity, and
includes: (1) a spouse, parent, brother, sister, child, aunt, uncle,
grandparent, niece, nephew, first cousin of an individual or an individual's
spouse (a "Relative"); (2) an officer, director, trustee, employee, shareholder
or partner of a person which is not a Relative of any such person; (3) a spouse
of any Relative; and (4) any individual or entity controlled by, controlling or
under common control with any individual or entity designated above. For
purposes of the foregoing, "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
an entity or individual, whether through the ownership of voting securities, by
contract, or otherwise.
(b) Commencement Date. This Agreement shall be effective as of the
closing (the "Closing") of the transactions contemplated by this Agreement, and
shall be deemed effective as of 12:01 a.m., Miami time, on March 5, 1998.
(c) Contract Year shall be defined as the twelve (12) month period
beginning on the Commencement Date of this Agreement (or on its anniversary in
subsequent years) and ending on the day before the anniversary of the
Commencement Date.
(d) Employment Agreement shall mean any employment agreement whether
now existing, or to be entered into in the future, by and between the Company
and any existing or future Shareholder, Physician Employee or Practice Employee.
(e) GAAP means generally accepted accounting principles expressed in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, and Statements of the
Financial Accounting Standards Board, and all other statements by any other
entity, or other practices and procedures as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of determination. For purposes of this Agreement, GAAP shall be
applied in a manner consistent with the historic practices used by Sheridan.
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(f) Government Health Programs shall mean the Medicare, Medicaid,
Maternal and Child Health Service Block Grant, Social Services Block Grant,
CHAMPUS and CHAMPVA programs.
(g) Government Health Program Receivables shall mean accounts
receivable generated with respect to items or services including ancillary
services performed by the Company and the Company's employees and agents,
rendered to patients (i.e., beneficiaries and recipients) of Government Health
Programs.
(h) Insurance Expenses means any expenses of Sheridan and the Company
in obtaining adequate professional liability coverage to provide liability
protection for all Shareholders and Physician Employees of the Practice for
their provision of medical services while acting in the scope of their
employment for the Practice, as determined and approved by the Company's Board
of Directors, in its absolute sole discretion.
(i) Lease Expenses shall mean all obligations under any leases or
subleases, including real and personal property leases, for the offices and
equipment used by the Practice, all as described on Exhibit B to this Agreement.
Any new leases entered into after the Commencement Date must have Sheridan's
prior written approval.
(j) Net Practice Collections shall mean all collected revenues (net of
refunds or overpayments) collected on or after the Commencement Date by or on
behalf of the Practice, the Company or their respective employees as a result of
professional medical services furnished to patients or as a result of
arrangements with any third party payor for the potential or actual provision of
services, and other fees or income generated by the Shareholders, the Physician
Employees and employees of the Company or the Practice, whether generated prior
to or after the Commencement Date, whether rendered in an inpatient or
outpatient setting and whether rendered to health maintenance organizations,
preferred provider organizations, Government Health Programs or other patients,
physicians or physician practices including, but not limited to, payments
received under any capitation arrangement or payments received under any
consulting, directorships, subsidies or similar arrangements, less the direct
costs of health care services delivered by third parties (other than the
Shareholders and the Physician Employees) pursuant to arrangements with
third-party payors under which the Practice is responsible for the cost of those
health care services. The term "Net Practice Collections" shall include any
ancillary services revenues of the Practice, the Company or the Shareholders,
the Physician Employees and employees of the Company collected after the
Commencement Date.
(k) Option Agreement shall mean the OAs.
(l) Option shall have the meaning given in Section 1 of each of the
OAs.
(m) Physician Employees shall mean (i) those individuals (other than
Shareholders) who are duly licensed to practice medicine in the State of Texas
and who are employees of the Company or are otherwise under contract, agreement
or arrangement with the Company to provide physician or medical services to
patients of the Practice, including non-Shareholder physicians, nurse
practitioners, physician assistants, nurse midwives and any other allied health
professionals; and (ii) those individuals, if any, (other than those described
in Section 1.1(m)(i)) who are required by law or regulatory authority to be
employees of the Company.
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(n) Practice means the medical business operations and services of the
Company and its employed or engaged physicians and allied health professionals,
anywhere those operations or services are rendered.
(o) Practice Employee shall mean those individuals who are employed by
the Company other than Physician Employees and the Shareholders.
(p) Practice Expenses means the operating and non-operating expenses
incurred in the operation of the Practice and the Offices (as defined below)
during the Term, except for the Practice Expense Exclusions (as defined below),
whether incurred by Sheridan or by the Company, including, but not limited to:
(i) depreciation (depreciation arising only out of existing and
subsequently acquired real and tangible property), amortization (not including
amortization arising out of Sheridan's obtaining the Options contemplated by the
OAs), salaries, benefits and other direct costs of all employees of the Practice
but excluding salaries (for Physician Employees and Shareholders) benefits and
other direct costs of all the Physician Employees and the Shareholders;
(ii) obligations under leases or subleases for the Offices, and
any equipment used by the Practice;
(iii) personal property and intangible taxes assessed against
assets used by the Practice;
(iv) utility expenses relating to the Offices;
(v) billing and collections services and accounts receivable and
accounts payable services provided to the Company by Sheridan; and
(vi) other deductible and partially deductible business expenses
of the Shareholders during each calendar year which do not aggregately exceed
Fifty Thousand Dollars ($50,000.00) (or the pro rata portion thereof for periods
less than a full calendar year).
(q) Practice Expense Exclusions means:
(i) any federal, state or local income taxes of the Company, or
the costs of preparing the Company's federal, state or local tax returns;
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(ii) any salaries, benefits and other direct costs of the
Physician Employees and any base salaries (excluding incentive compensation),
benefits and other direct costs of the Shareholders including, without
limitation, worker's compensation insurance and Insurance Expenses
(collectively, the "PE Salaries and Benefits");
(iii) license fees, medical staff dues, board certification fees,
journals and publications and costs of membership in professional associations
for the Physician Employees and the Shareholders (collectively, the
"Professional Fees and Publications");
(iv) costs of continuing professional education for the
Physician Employees and the Shareholders;
(v) costs associated with legal, accounting and professional
services incurred by or on behalf of the Company;
(vi) liability judgments assessed against the Company, the
Physician Employees or the Shareholders; or
(vii) any expenses of the Shareholders or the Physician Employees
including, but not limited to, car allowances, mobile phone, pagers, personal
postage, uniforms, costs of employees providing personal services to
Shareholders or the Physician Employees.
(r) Restricted Area shall have the meaning set forth in Section 3.7(a)
of this Agreement.
(s) Shareholders shall mean those individuals who are duly licensed to
practice medicine in the State of Texas and who are shareholders of the Company.
Article II
Obligations of Sheridan.
Section 2.1 Provision of Management Services. Sheridan shall provide to the
Practice the management services, personnel, equipment and supplies provided for
in this Article 2 (collectively, the "Management Services"). Sheridan shall
provide the Management Services at the medical offices, hospitals and other
health care facilities located at 8160 Walnut Hill Lane, Suite 001, Dallas,
Texas 75231, and at all other places which the parties shall mutually agree
(collectively, the "Offices").
Section 2.2 Offices. During the Term (as defined below), Sheridan shall pay
all rent due from the Commencement Date of this Agreement forward for the
Offices and all costs of routine repairs, maintenance and improvements,
telephone, electric, gas and water utility expenses, normal janitorial services,
refuse disposal and all other costs and expenses reasonably incurred in
connection with the operations of the Practice, including, but not limited to,
related real or personal property lease payments.
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Section 2.3 Furniture, Fixtures and Equipment. Sheridan agrees to provide
to the Practice those supplies and items of furniture, fixtures and equipment as
Sheridan reasonably determines after consultation with the Shareholders to be
necessary and/or appropriate for the Practice's operations at the Offices during
the Term (all those items of furniture, fixtures and equipment are collectively,
the "FFE") subject, however, to the following conditions:
(a) The Company shall have the use of the FFE only during the Term and
title to the FFE shall be and remain in Sheridan at all times during the Term.
(b) Sheridan shall be responsible for all repairs, maintenance and
replacement of the FFE, except for repairs, maintenance and replacement
necessitated by the negligence or willful actions of the Company, the Physician
Employees, Shareholders, or the Company's employees or agents, in which case the
Company and the Shareholders shall repair, maintain and replace that FFE to
Sheridan's reasonable satisfaction.
Section 2.4 Business Office Services. The Company appoints Sheridan as its
sole and exclusive manager and administrator of all business functions and
services related to the Company's services at the Practice during the Term.
Without limiting that appointment, in providing the Management Services during
the Term, to the fullest extent permitted by applicable law and regulations,
Sheridan shall perform the following functions:
(a) Sheridan shall evaluate, negotiate and administer all existing and
future managed care, integrated delivery system, PHO, IPA, sub-specialty
agreements and third party payor contracts on behalf of the Company, the
Physician Employees and the Shareholders and all professional or Practice
matters relating to those contracts.
(b) Sheridan shall provide ongoing assessment of the Practice's
business activity.
(c) After consultation with the Shareholders, Sheridan shall be
responsible for ordering and purchasing all medical and office supplies
reasonably required in the day-to-day operation of the Practice at the Offices.
(d) Except for Government Health Programs patients and as otherwise
restricted by applicable laws and regulations, Sheridan shall bill and collect
from patients all professional fees for medical services and for ancillary
services performed by the Company and the Company's employees and agents,
including, but not limited to, the Shareholders and the Physician Employees. The
Company and each of the Shareholders shall, and shall cause all existing and
future Shareholders, Physician Employees and Practice Employees to, appoint
Sheridan for the Term as their true and lawful attorney-in-fact with respect to
non-Government Health Programs for the following purposes:
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(i) to bill patients in the Company's name and on the Company's
behalf, and in the name and on behalf of all of the Shareholders, the Physician
Employees and the Practice Employees;
(ii) to collect accounts receivable generated by those billings
in the Company's name and on the Company's behalf, and in the name and on behalf
of all the Shareholders, the Physician Employees and the Practice Employees;
(iii) to receive, in a legally permissible manner on behalf of
the Company, the Practice Employees and any agents of the Company and all the
Shareholders and the Physician Employees, payments from patients, insurance
companies, and all other payors and third parties regarding services rendered by
the Company, the Shareholders, Physician Employees and the Practice Employees,
and the Company and each of the Shareholders covenants and shall cause each
Physician Employee and Practice Employee to covenant to immediately forward any
of those payments not paid directly to Sheridan, to Sheridan for deposit;
(iv) to receive, in a legally permissible manner, all accounts
receivable, compensation and any other form of remuneration due from or paid by
any source other than the Company or Sheridan attributable to (i) services
Practice Employees and any agents of the Company and all the Shareholders and
Physician Employees have rendered in his or her professional capacity on behalf
of the Company; (ii) services Practice Employees and any agents of the Company
and all the Shareholders and Physician Employees have rendered during the Term
in violation of the terms of this Agreement or any Employment Agreement,
including without limitation, a violation of Section 3.7 of this Agreement or
any non-competition or restrictive covenant provisions contained in any
Employment Agreement; or (iii) sums which come into the possession of Practice
Employees, the Shareholders and Physician Employees which are attributable to
the services of other employees of the Company or Sheridan, including, but not
limited to, fees for medical services, teaching, lecturing, consulting, court
testimony and publication of articles of a professional nature, except as set
forth on Schedule 2.4(d)(iv) of this Agreement..
(v) in a legally permissible manner, to take possession of,
execute, deliver and/or endorse in the name of the Company, or in the name of
any Shareholder or Physician Employee, any notes, checks, money orders,
insurance payments and any other instruments received as payment of those
accounts receivable and any other sums, compensation or remuneration;
(vi) to determine and implement a written policy for writing off
accounts receivable, which write-off policy shall be utilized in the
determination of the Net Practice Collections;
(vii) in a legally permissible manner, to collect in the
Company's name and on its behalf, and in the name and on behalf of all the
Shareholders and the Physician Employees, all revenues of the Practice and to
determine and implement all collection policies and procedures; and
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(viii) to execute, deliver and/or endorse applications for
payments, insurance claim forms or other instruments or documents, convenient or
required in the exclusive discretion of Sheridan to fully collect, secure and
realize all accounts receivables and any other sums, compensation or
remuneration due with respect to services provided on the Company's or
Sheridan's behalf.
This power of attorney is coupled with an interest, is irrevocable and
shall survive the expiration or termination of this Agreement for a time period
without limitation with respect to services rendered during the Term of this
Agreement.
(e) For Government Health Program patients Sheridan shall bill and
collect from patients all professional fees for medical services and for
ancillary services performed by the Company and the Company's employees and
agents, including, but not limited to, the Shareholders and the Physician
Employees. The Company and each of the Shareholders shall, and shall cause all
existing and future Shareholders, Physician Employees and Practice Employees to,
appoint Sheridan for the Term as their true and lawful attorney-in-fact with
respect to the Government Health Program patients for the following purposes:
(i) to bill patients in the Company's name and on the Company's
behalf using the Company's billing number and where appropriate, in the name and
on behalf of all of the Shareholders, the Physician Employees and the Practice
Employees;
(ii) to collect accounts receivable generated by those billings
in the Company's name and on the Company's behalf using the Company's billing
number, and where appropriate in the name and on behalf of all the Share
holders, the Physician Employees and the Practice Employees using their
respective billing numbers;
(iii) to receive, in a legally permissible manner, on behalf of
the Company, the Practice Employees and any agents of the Company and all the
Shareholders and the Physician Employees, payments from patients, insurance
companies, Government Health Programs and all other payors and third parties
regarding services rendered by the Company, the Shareholders, Physician
Employees and the Practice Employees, and the Company and each of the
Shareholders covenants and shall cause each Physician Employee and Practice
Employee to covenant to immediately forward any of those payments not paid
directly to Sheridan, to Sheridan for deposit;
(iv) to receive, in a legally permissible manner, all accounts
receivable, compensation and any other form of remuneration due from or paid by
any source other than the Company or Sheridan attributable to (i) services
Practice Employees and any agents of the Company and all the Shareholders and
the Physician Employees have rendered in his or her professional capacity on
behalf of the Company; (ii) services Practice Employees and any agents of the
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Company and all the Shareholders and the Physician Employees has rendered during
the Term in violation of the terms of this Agreement or any Employment
Agreement, including without limitation, a violation of Section 3.7 of this
Agreement or any non-competition or restrictive covenant provisions contained in
any Employment Agreement; or (iii) sums which come into the possession of
Practice Employees, the Shareholders and Physician Employees which are
attributable to the services of other employees of the Company or Sheridan,
including, but not limited to, fees for medical services, teaching, lecturing,
consulting, court testimony and publication of articles of a professional
nature.
(v) in a legally permissible manner, to take possession of,
execute, deliver and/or deposit in the name of the Company, or in the name of
any Shareholder or Physician Employee, any notes, checks, money orders,
insurance payments and any other instruments received as payment of those
accounts receivable and any other sums, compensation or remuneration;
(vi) to determine and implement a written policy for writing off
accounts receivable, which write-off policy shall be utilized in the
determination of the Net Practice Collections;
(vii) in a legally permissible manner to collect in the Company's
name and on its behalf, and in the name and on behalf of all the Shareholders
and the Physician Employees, all revenues of the Practice and to determine and
implement all collection policies and procedures; and
(viii) to execute, deliver and/or deposit applications for
payments, insurance claim forms or other instruments or documents, convenient or
required in the exclusive discretion of Sheridan to fully collect all accounts
receivables and any other sums, compensation or remuneration due with respect to
services provided on the Company's or Sheridan's behalf.
This power of attorney is coupled with an interest, is irrevocable and
shall survive the expiration or termination of this Agreement for a time period
without limitation with respect to services rendered during the Term.
Section 2.5 Deposit of Net Practice Collections. During the Term, all
revenues collected resulting from the operations of the Practice except for any
revenues derived from the Government Health Program Receivables, shall, to the
extent legally permissible, be deposited directly into a bank account (the "Bank
Account") at NationsBank, N.A. (South) or any other multi-state national bank
chosen by Sheridan (the "Bank"). Sheridan shall be the owner of the Bank Account
and Sheridan shall have the sole right to make withdrawals from the Bank
Account. Sheridan shall maintain its accounting records in a manner which
clearly segregates the Net Practice Collections from other funds of Sheridan.
The Company and each of the Shareholders appoints, and shall cause each future
Shareholder and future and existing Physician Employee and Practice Employee to
appoint, Sheridan as its true lawful attorney-in-fact to deposit in the Bank
Account all of the Practice's Net Practice Collections collected, except for the
Government Health Program Receivables. The Company and the Shareholders agree to
execute all documents and instructions required by the Bank as reasonably
determined by Sheridan.
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During the Term, all Government Health Program Receivables
collected shall, to the extent legally permissible, be deposited directly into a
bank account (the "MM Bank Account") at NationsBank, N.A. (South) or any other
multi-state national bank chosen by Sheridan (the "Bank"). The Company shall be
the owner of the MM Bank Account. The Company and each of the Shareholders
appoints, and shall cause each future Shareholder and future and existing
Physician Employee and Practice Employee to appoint, Sheridan as its true lawful
attorney-in-fact to deposit in the MM Bank Account all of the Government Health
Program Receivables collected. The Company shall, immediately after depositing
any collections from the Government Health Program Receivables to the MM Bank
Account, transfer those funds to the Bank Account for distribution in accordance
with the terms of this Agreement. The Company and the Shareholders agree to
execute all documents and instructions required by the Bank as reasonably
determined by Sheridan.
Section 2.6 Revenue Reports. Sheridan shall produce and maintain revenue
reports regarding the Practice. Revenue reports shall reflect the total gross
revenues and Net Practice Collections generated and/or collected by or on behalf
of the Practice. Sheridan shall provide the Company with periodic interim
revenue reports and shall provide a year-end revenue report for the Practice
within ninety (90) days after the end of the calendar year. The Company shall
have the right upon reasonable prior notice, in a reasonable manner, to inspect
the books and records of Sheridan relating to the Practice to verify the
information provided in those revenue reports.
Section 2.7 Support Services. Sheridan shall provide all reasonable and
necessary computer, bookkeeping, billing and collection services, accounts
receivable and accounts payable services, laundry, linen, janitorial and
cleaning services and management services to the Practice for its reasonably
efficient operation, as Sheridan shall reasonably determine.
Section 2.8 Personnel. After consultation with the Shareholders, Sheridan
shall provide non-physician personnel reasonably necessary for the effective
operation of the Practice at the Offices as Sheridan shall reasonably determine,
subject, however, to the following:
(a) Sheridan shall provide to the Company all non-Physician Employee
medical support personnel which are reasonably necessary for the operation of
the Practice at the Offices. As to non-Physician Employee medical support
personnel provided under this Section 2.8(a), Sheridan shall determine the
salaries and benefits of all these personnel. Sheridan shall also assign all
these personnel to perform services for the Practice at the Offices. Sheridan
shall, at the Company's reasonable request, reassign and replace personnel who
do not, in the Company's reasonable judgment, adequately perform required
professional services.
(b) Sheridan shall provide to the Company all business office
personnel, (e.g., all clerical, secretarial, bookkeeping and collection
personnel) reasonably necessary for the maintenance of patient records,
collection of accounts receivable and upkeep of the financial books of account
to the extent they are required for, and directly related to, the operation of
the Practice in conformity with Sheridan's obligations under this Agreement and
as Sheridan shall reasonably determine. As to the personnel provided under this
Section, Sheridan shall determine the salaries and fringe benefits of all these
personnel.
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(c) In all of its interactions with each other's personnel, Sheridan,
the Company and the Shareholders shall not, and shall cause all of their
employees and agents to not unlawfully discriminate against any of their
employees, agents or to treat these personnel in a manner which would be
unlawful if they were their own employees.
(d) Each party agrees that: (i) personnel provided to the Company
under this Agreement may perform services for others; (ii) this Agreement will
not prevent Sheridan or these personnel from performing similar or the same
services provided under this Agreement for others; and (iii) this Agreement will
not restrict Sheridan from using these personnel for others. Except for the
Company's rights specified in Section 2.8(a) regarding non-physician medical
support personnel, Subject to consultation with the Shareholders, Sheridan
retains the sole and exclusive decision making authority regarding all these
personnel assignments.
(e) The Company may request, in writing, secretarial, clerical,
bookkeeping, management or non-Physician Employee medical support personnel in
addition to personnel reasonably determined to be necessary and appropriate by
Sheridan, and these personnel and services shall be provided by Sheridan and all
Sheridan's costs and expenses incurred in providing additional personnel shall
be paid to Sheridan by the Company.
Section 2.9 Practice Professional Services. Sheridan shall arrange for or
render to the Company business and financial management consultation and advice
as the Company may reasonably require which is directly related to the Practice
operations. Sheridan shall not be responsible for any services requested by or
rendered to any individual, Shareholder, Physician Employee, employee or agent
of the Company not directly related to the operations of the Practice, nor shall
Sheridan be responsible for rendering any legal or tax advice or other services
or personal financial services to the Company or any employee, Shareholder,
Physician Employee or agent of the Company.
Section 2.10 Patient and Financial Records. The following provisions
shall apply to patient and financial records:
(a) Sheridan shall maintain all files and records relating to the
operation of the Practice, including, but not limited to, customary financial
records and patient files. The management of all files and records shall comply
with all applicable federal, state and local statutes and regulations, and all
files and records shall be located so that they are readily accessible for
patient care, consistent with ordinary records management practices. The Company
shall obtain any and all necessary consents to Sheridan's maintenance and access
to any of these files.
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(b) The Company shall supervise the preparation of, and direct the
contents of, patient medical records, all of which shall be and remain
confidential and the property of the Company, but Sheridan shall have reasonable
access to those records, and, subject to applicable laws and regulations,
Sheridan shall be permitted to retain true and complete copies of these records.
Sheridan agrees to preserve the confidentiality of these patient medical
records.
Section 2.11 Physician Recruitment. At the Company's request, Sheridan
shall recruit Physician Employees for the Practice. The Company shall determine
the need for additional Physician Employees in consultation with Sheridan. It
shall be the Company's responsibility to interview and select Physician
Employees for the Practice subject to Sheridan's prior written consent. All the
Physician Employees Sheridan recruits and which the Company hires or engages
shall be either shareholders, employees or agents of the Company and not of
Sheridan. The Company agrees not to hire, terminate or engage any Physician
Employee without Sheridan's prior written consent.
Section 2.12 Expansion of Practice. Sheridan may assist the Company in
adding additional office based procedures, and in developing relationships and
affiliations with physicians and other specialists, hospitals, networks, health
maintenance organizations, preferred provider organizations, etc. to assist in
the continued growth and development of the Practice. The Company will cooperate
with and assist Sheridan in those efforts. Neither the Company nor any of the
Shareholders shall enter into any agreements regarding any of these matters
without Sheridan's prior written consent.
Section 2.13 Performance of Business Office Services. Sheridan is expressly
authorized to perform its Management Services in whatever reasonable manner it
deems appropriate to meet the day-to-day requirements of the non-medical
business functions of the Practice. Sheridan may perform some or all of the
business office functions of the Company at locations other than at the Offices.
Section 2.14 Force Majeure. Neither Sheridan nor the Company and
Shareholders shall be liable to the other parties for failure to perform any of
the services required under this Agreement in the event of strikes, lockouts,
calamities, acts of God, unavailability of supplies or other events over which
the party suffering the disability does not have reasonable control for so long
as that event continues and for a reasonable period of time thereafter.
Article III Obligations of the Company.
Section 3.1 Non-Practice Expenses. Except as otherwise provided in Section
4.1, the Company shall be solely responsible for the payment of all costs and
expenses incurred in connection with the Company's operations that are not
Practice Expenses, including, but not limited to, insurance premiums for
policies of malpractice insurance, deductibles and self insured retention
amounts under those policies of malpractice insurance, any and all costs and
expenses incurred regarding claims under those policies of malpractice
insurance, and salaries and benefits, retirement plan contributions, health,
disability and life insurance premiums, payroll taxes, automobile expenses,
licenses, staff dues, mobile phone expenses, worker's compensation, pagers,
costs and expenses incurred prior to the Commencement Date and all expenses
incurred by or in connection with the employment of all the Shareholders and the
Physician Employees.
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Section 3.2 Professional Standards. All medical services provided at the
Offices shall be performed solely by physicians, duly licensed to practice
medicine in the State of Texas or their extenders or other Practice personnel
qualified and duly licensed to perform these services in the State of Texas. The
professional services provided by the Company, its Shareholders and the
Physician Employees shall at all times be provided in accordance with applicable
ethical standards, laws and regulations applying to the medical profession. The
Company, the Shareholders and the Physician Employees shall comply with
utilization review, quality assurance and improvement policies or other rules,
regulations or policies established jointly by Sheridan and the Company for the
Practice or imposed on the Practice by any managed care program, third party
payor program, PHO, IPA, health care facility or integrated delivery system. The
Company shall immediately notify Sheridan of any and all incidents, unfavorable
occurrences, notices, claims made, disciplinary actions or professional
liability actions, initiated against the Company or any Shareholder, Physician
Employee or Practice Employee (each an "Action"). The Company shall immediately
inform Sheridan of that Action and the underlying facts and circumstances and
follow the reasonable directions of Sheridan's risk management administrators.
The Company and the Shareholders shall, and shall cause all future Shareholders
and all future and existing Physician Employees and Practice Employees to
cooperate in any investigation and in the defense of any Action. The Company
agrees to implement and maintain a program to monitor the quality of medical
care provided by the Company, and Sheridan shall render reasonably necessary
administrative assistance to the Company on an as-requested basis to assist the
Company in implementing and maintaining that program.
Section 3.3 This section is intentionally omitted.
Section 3.4 This section is intentionally omitted.
Section 3.5 Physician Power of Attorney. The Company and its Shareholders
shall require all the Shareholders and the Physician Employees and any Practice
Employees to execute and deliver to Sheridan powers of attorney, satisfactory in
form and substance to Sheridan, appointing Sheridan as attorney-in-fact for each
Shareholder and Physician Employee for the purposes described in Section 2.4(d).
Prior to commencing employment with the Company, the Company and its
Shareholders shall require all future Shareholders, Physician Employees and any
Practice Employees or agents of the Practice to execute and deliver to Sheridan,
powers of attorney, substantially in the form and substance attached hereto as
Exhibit C, appointing Sheridan as attorney-in-fact for each new shareholder,
Physician Employee or Practice Employee for the purposes described in Section
2.4(d).
13
Section 3.6 Confidentiality.
(a) Confidential Information. The Company and the Shareholders each
acknowledges that as a result of his or her affiliation with Sheridan and its
Affiliates, it has and will necessarily become informed of, and have access to,
certain information which Sheridan and its Affiliates deem valuable and
confidential, including, without limitation, methods of doing business, trade
secrets, technical information, plans, lists of patients, data, records, fee
schedules, computer programs, manuals, processes, methods, intangible rights,
contracts, agreements, licenses, personnel information and the identity of
health care providers (collectively, and whether or not such information is
actually novel or unique or known to others, the "Confidential Information").
The Company and the Shareholders each also agrees that the Confidential
Information, even though it may be contributed, developed or acquired in whole
or in part by him or her, is Sheridan's and its Affiliates' exclusive property
to be held by the Company and the Shareholders each in trust and solely for
Sheridan's and its Affiliates' benefit. Accordingly, except as required by law,
the Company and the Shareholders each shall not, at any time, subsequent to the
date of this Agreement, use, reveal, report, publish, copy, transcribe, transfer
or otherwise disclose to any person, corporation or other entity, any of the
Confidential Information without the prior written consent of Sheridan, except
for information which legally and legitimately is or becomes of general public
knowledge from authorized sources other than the Company or the Shareholder.
(b) Return of Confidential Information. Upon the request of Sheridan,
the Company and the Shareholders shall promptly deliver to Sheridan all property
and possessions including, but not limited to, all drawings, manuals, letters,
notes, notebooks, reports, copies, deliverable Confidential Information and all
other materials relating to Sheridan's, its Affiliates' and/or the Company's
business which are in the Company's or any of the Shareholders' possession or
control.
(c) Remedies. The Company and each of the Shareholders acknowledges
that in the event that it or any of its Shareholders, employees or agents engage
in activities within the limitations of this Section 3.6, money damages shall be
an inadequate remedy, and the Company and each of the Shareholders agree that
Sheridan may be entitled to obtain, in addition to any other remedy provided by
law or equity, an injunction against the violation of the Company's or the
Shareholders' obligation to Sheridan under this Agreement.
Section 3.7 Restrictive Covenants.
(a) The Company and each of the Shareholders acknowledge and agree
that the services to be provided by Sheridan under this Agreement are feasible
only if the Company, the Shareholders and the Physician Employees operate a
medical practice to which the Shareholders and the Physician Employees devote
their full time and attention. The Company and each of the Shareholders also
acknowledge and agree that Sheridan has extensive knowledge, experience and
systems (the "Knowledge") which the Company and Shareholders do not presently
enjoy. The Company and the Shareholders are aware that Sheridan's willingness to
impart the Knowledge to them is predicated on Sheridan's being entitled to
provide the Management Services to the Company and Shareholders for the Term on
14
the terms and conditions contained in this Agreement. Accordingly, the Company
and each of the Shareholders agree that, during the Term of this Agreement, none
of them shall, without the prior written consent of Sheridan, establish, operate
or provide medical services at any medical office, clinic or other health care
facility providing services substantially similar to those offered by the
Company, Sheridan or any of their Affiliates. If this Agreement is terminated by
Sheridan under Section 5.2(a) for a period of twenty four (24) months following
the termination of this Agreement or termination of any of the Shareholders'
employment with the Company, none of them shall, without the prior written
consent of Sheridan, establish, operate or provide management of medical
services within twenty five (25) miles of any location where the Physician or
Shareholder provided medical services during the twenty four (24) months
immediately prior to the termination of that person's employment (the
"Restricted Area"). The Company and the Shareholders shall cause each new
Shareholder and each of the Physician Employees to enter into written
agreements, satisfactory in form and substance to Sheridan, pursuant to which
the Shareholders and the Physician Employees shall agree not to establish,
operate or provide management of medical services, without the prior written
consent of Sheridan within the Restricted Area. If a person shall cease to be a
Shareholder or Physician Employee during the Term, or if this Agreement is
terminated by Sheridan under Section 5.2(a), for a period of twenty four (24)
months following the termination of this Agreement, or the termination of the
professional relationship between that person and the Company, as the case may
be, that person shall agree not to establish, operate, or provide management of
medical services, without the prior written consent of Sheridan within the
Restricted Area. Sheridan shall be expressly named as a third party beneficiary
to those agreements between the Company and each Shareholder and Physician
Employee.
(b) During the Term, and if this Agreement is terminated by Sheridan
under Section 5.2(a) for a period of twenty four (24) months following the
termination of this Agreement, neither the Company nor any of the Shareholders
shall, without Sheridan's prior written consent employ, hire or contract for
services with any employee or former employee of Sheridan or its Affiliates, nor
shall the Company or any of the Shareholders solicit any person to leave the
employ of Sheridan or its Affiliates. For purposes of this Section 3.7(b), a
"former employee" shall be any person who was employed by Sheridan or its
Affiliates within twelve (12) months prior to the termination of this Agreement.
The Company and the Shareholders shall cause all of the existing and future
Shareholders, Physician Employees and Practice Employees to enter into written
agreements, satisfactory in form and substance to Sheridan, pursuant to which
those persons shall agree to be bound by the same restrictions as described in
this Section 3.7(b). Sheridan and its Affiliates shall be expressly named as a
third-party beneficiary to those agreements between the Company and each
Shareholder and Physician Employee.
(c) If this Agreement is terminated by Sheridan pursuant to Section
5.2(a), the Company and each of the Shareholders shall not, for a period of
twenty four (24) months following the effective date of that termination engage
or contract with any person, firm or entity (or group of affiliated entities)
for the provision of management services to the Practice similar to the kind
contemplated by this Agreement.
15
(d) Sheridan, the Company and each of the Shareholders acknowledges
and agrees that: (i) the event of a breach or threatened breach by the Company
or any Shareholder of the foregoing provisions of Section 3.7 may cause Sheridan
irreparable harm; and, (ii) monetary damages in an action at law would not
provide an adequate remedy in the event of a breach or threatened breach.
Accordingly, except as provided in Section 8.3 the Company and each of the
Shareholders jointly and severally agrees that, in addition to any other
remedies (legal, equitable or otherwise) available to Sheridan, Sheridan may
seek injunctive relief against the breach or threatened breach of the provisions
of Section 3.7 as well as all other rights and remedies available at law and
equity including, without limitation, specific performance. In addition, the
Company and each of the Shareholders covenants and agrees, jointly and
severally, to indemnify and hold Sheridan harmless from and against all claims,
damages, actions, suits whatsoever for a breach of this Section 3.7, in
accordance with Article VIII hereof, and for any period(s) of time required to
enforce the covenants in this Agreement, and the prevailing party in that action
shall be entitled to recover from the non-prevailing party all reasonable
attorneys' fees, expenses and costs incurred in enforcing any provisions of
Section 3.7, at pre-trial, trial and appellate levels. Nothing contained in this
Section 3.7(d) shall be construed as prohibiting Sheridan and all other injured
parties from pursuing all other remedies available to them for a breach or
threatened breach of the provisions of Section 3.7.
Each of the Shareholders and the Company further acknowledges and
agrees that the covenants contained in this Article III are necessary for the
protection of Sheridan's legitimate business and professional duties, ethical
obligations and interests, and are reasonable in scope and content. In the event
of any breach or violation by the Company or any of the Shareholders of any of
the provisions of Section 3.7, the running of that twenty four (24) month period
(but not the Company's and the Shareholder's obligations thereunder) shall be
tolled during the continuation of any breach or violation. Each of the Company
and the Shareholders further acknowledge and agree that the restrictions against
competition set forth in Section 3.7 are considered by the parties to be
reasonable for the purposes of protecting the legitimate business interests of
Sheridan, which interests, include, without limitation, trade secrets and other
valuable confidential business information that may not qualify as trade secrets
to be acquired and/or provided by Sheridan by virtue of the terms and conditions
of this Agreement and the consideration paid in connection with this Agreement
and the RCAs and the OAs, as well as the Management Services to be provided to
the Practice in the contemplated transaction and evidenced by the various
trademarks, trade names, service marks and trade dress acquired and/or provided
by Sheridan in the contemplated transaction, the Knowledge, information and
substantial management expertise of Sheridan imparted to the Company and the
Shareholders in connection with the Management Services, and the expected value
of this management expertise to be realized by the Company.
In the event that the duration, scope or geographic area contemplated
by the foregoing provisions is determined to be unenforceable by a court of
competent jurisdiction, the parties agree that duration, scope or geographic
area shall be deemed to be reduced to the greatest scope, duration or geographic
area which would be enforceable.
16
Section 3.8 Professional Dues and Education Expenses. The Company and its
Shareholders and the Physician Employees shall be solely responsible for all
costs and expenses associated with membership in professional associations and
continuing professional education. The Company shall ensure that each of its
Shareholders and the Physician Employees participates in continuing medical
education activities which enable physicians to remain current in their
respective specialties including, but not limited to, the minimum continuing
medical education requirements imposed by applicable laws and policies of
applicable specialty boards.
Section 3.9 Employment Agreements. Any Employment Agreement executed and
delivered after the Commencement Date of this Agreement, shall be satisfactory
in form and substance to Sheridan, and shall be subject to Sheridan's consent.
Section 3.10 Representations and Warranties. The Company represents
and warrants to Sheridan that:
(a) each Shareholder and Physician Employee employed or engaged by the
Company is a physician duly licensed to practice medicine under the laws of the
State of Texas;
(b) each Shareholder and to the best knowledge of the Company and the
Shareholders each Physician Employee employed or engaged by the Company has
complied with all laws, rules and regulations relating to the practice of
medicine and is able to enter into and perform all duties pursuant to any
Employment Agreement;
(c) except as disclosed on Exhibit D, no Shareholder or to the best
knowledge of the Company and the Shareholders no Physician Employee employed or
engaged by the Company has ever: (i) had his or her professional license, Drug
Enforcement Agency number, Medicare or Medicaid provider status or staff
privileges at any hospital or medical facility suspended, relinquished,
terminated or revoked; (ii) been reprimanded, sanctioned or disciplined by any
licensing board or any federal, state or local society or agency, governmental
body, hospital, third party payor or specialty board; (iii) had a final judgment
or settlement without judgment entered against him or her in connection with a
malpractice or similar action; or, (iv) had his or her medical staff privileges
at any hospital or medical facility suspended, terminated, restricted or
revoked; and,
(d) none of the representations or warranties made by any Shareholder
or Physician Employee in this Agreement, any Employment Agreement, or in any
resumes or curricula vitae submitted to the Company or in any insurance
applications or any staff membership applications submitted to any third party
in connection with this Agreement or any Employment Agreement, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary in order to make the statements or provisions in this
Agreement or the Employment Agreement not misleading or incomplete.
17
The Company and the Shareholders agree to immediately notify Sheridan
of any fact or circumstance which occurs or is discovered during the Term, which
in itself or with the passage of time and/or the combination with other
reasonably anticipated factors does render or will render any of these
representations and warranties to be untrue. The Company and each of the
Shareholders shall cause each future Shareholder and each existing and future
Physician Employee to make the foregoing representations and warranties to
Sheridan as of the date it commences employment or engagement with the Company.
Article IV
Collections.
Section 4.1 Net Practice Collections. During each Contract Year of the Term
(the "Relevant Contract Year"), to the extent permitted by law, the Net Practice
Collections shall be distributed in the following manner:
(a) Net Practice Collections shall first be distributed monthly to the
Company in an amount necessary to pay PE Salaries and Benefits, Professional
Fees and Publications and Insurance Expenses, except for any incentive
compensation due to Shareholders or Physician Employees under their employment
agreements (collectively, the "Company Payables");
(b) Net Practice Collections shall secondly be distributed
currently to Sheridan or the Company, as applicable, to pay all Practice
Expenses;
(c) to the extent that remaining Net Practice Collections are
available after paying the amounts payable under Section 4.1(a) and (b), a
monthly management fee (the "Management Fee") in the amount of Two Hundred Ten
Thousand Four Hundred Sixteen and 67/100 Dollars ($210,416.67), plus the
cumulative amount by which the payments under this Section 4.1(c) were less than
the monthly Management Fee per month, for all previous months since the
Commencement Date (the "Unpaid Management Fees"), if any, shall be paid to
Sheridan monthly. For periods less than a full calendar month, the monthly
Management Fee shall be pro rated. The monthly Management Fee along with any
Unpaid Management Fees shall be paid to Sheridan on or before the fifteenth
(15th) day of the following calendar month;
(d) after the end of each Contract Year, in the event the Net Practice
Collections exceed the amounts payable under Sections 4.1(a), (b) and (c), the
excess shall be paid to the Company up to a maximum of Two Hundred Thirty
Thousand Dollars ($230,000.00) in the aggregate (the "Additional Amount"). The
Additional Amount, if any, shall be paid by the Company to the Shareholders of
the Company as incentive compensation in amounts to be determined by the
Company's Board of Directors in accordance with the Shareholders' respective
employment agreements;
18
(e) after the end of each Contract Year, in the event the Net Practice
Collections exceed the amounts payable under Sections 4.1(a), (b), (c), and (d),
sixty percent (60%) of any excess Net Practice Collections will be distributed
to Sheridan as an additional Management Fee and forty percent (40%) shall be
paid by the Company to the Shareholders of record as incentive compensation.
Section 4.2 Assignment of Fees for Medical Services.
(a) Without limiting the generality of the foregoing, subject to the
distribution mechanism set forth in Section 4.1, excluding Government Health
Program Receivables, it is the intent of the parties that the assignment to
Sheridan of the rights described in Section 4.1(a) above shall be inclusive of
the rights of the Company, the Shareholders and the Physician Employees to
receive payment regarding any services rendered after the Commencem ent Date but
prior to the effective date of any expiration or termination of this Agreement.
Subject to the distribution mechanism set forth in Section 4.1, the Company and
each of the Shareholders agrees and shall cause the Physician Employees and each
future Shareholder and Physician Employee to agree, excluding Government Health
Program Receivables, that Sheridan shall retain the right to collect and retain,
for its own account, any accounts receivable relating to any of those services
rendered prior to the effective date of any expiration or termination (a
"Pre-Termination Accounts Receivable") and after the Commencement Date.
(b) The Company acknowledges that it is the intent of Sheridan to
grant a security interest in the Pre-Termination Accounts Receivable to its
lenders under its credit facilities (whether one or more, the "Credit Facility
Lender"), as in effect from time to time. The Company and each of the
Shareholders agree that the security interest of the Credit Facility Lender is
intended to be a first priority security interest and is superior to any right,
title or interest which may be asserted by the Company or any Shareholder or
Physician Employee regarding Pre-Termination Accounts Receivable or the proceeds
of any Pre-Termination Accounts Receivable. The Company and each Shareholder
further agrees, and shall cause the Physician Employees and each future
Shareholder and Physician Employee to agree, that, upon the occurrence of an
event which, under the terms of that credit facility, would allow the Credit
Facility Lender to exercise its right to collect Pre-Termination Accounts
Receivable and apply the proceeds of Pre-Termination Accounts Receivable toward
amounts due under that credit facility, the Credit Facility Lender will succeed
to all rights and powers of Sheridan under the powers of attorney provided for
in Sections 2.4 and 3.5 above as if that Credit Facility Lender had been named
as the attorney-in-fact in those Sections.
(c) Except to the extent otherwise provided in this Agreement, in the
event that, contrary to the mutual intent of Sheridan, the Shareholders and the
Company, the assignment of rights described in this Section 4.2 shall be deemed,
for any reason, to be ineffective as an outright assignment, the Company and
each Shareholder and Physician Employee shall, effective as of the Commencement
Date, be deemed to have granted (and the Company and each Shareholder does
grant, and shall cause the Physician Employees and each future Shareholder and
Physician Employee to grant) to Sheridan a first priority lien on and security
interest in and to any and all interests of the Company, the Shareholders and
the Physician Employees in any accounts receivable generated by the medical
practice of the Company, its Shareholders and the Physician Employees or
otherwise generated through the operations of the Practice, and all proceeds of
those accounts receivable, to secure the payment to Sheridan of all Net Practice
Revenues, and this Agreement shall be deemed to be a security agreement to the
extent necessary to give effect to the foregoing. The Company and each
Shareholder shall execute and deliver, and cause the Physician Employees and
each future Shareholder and Physician Employee to execute and deliver, all
financing statements as Sheridan may request in order to perfect that security
interest. The Company and the Shareholders shall not grant (and shall not suffer
any future Shareholder or Physician Employee to grant) any other lien on or
security interest in or to those accounts receivable or any proceeds of those
accounts receivable.
19
Article V
Term and Termination.
Section 5.1 Term. The initial term of this Agreement shall be for a period
of Forty (40) years commencing on March 5, 1998, and ending on March 4, 2038
(the "Term"). This Agreement shall be automatically extended for separate and
successive forty (40) year periods provided Sheridan shall have not been in
material default of its obligations under this Agreement, or in the event there
is a material default, that Sheridan shall have cured that material default on
or before the later of the expiration date of this Agreement, or the end of any
applicable cure period then in effect, (each forty (40) year period is an
"extended term" and each extended term shall automatically be included in the
definition of the Term), under terms and conditions as stated in this Agreement
regarding an extended term, and further provided that neither the Company nor
any of the Shareholders shall have not been in material default of their
obligations under this Agreement, or in the event there is a material default,
that the Company and the Shareholders shall have cured that material default on
or before the expiration date of this Agreement, or the end of any applicable
cure period then in effect. In the event either party is in material default of
this Agreement on the date of expiration of the Term or any extended term the
other party may waive that defaulting party's material default in their
discretion and thereby enable an additional extended term.
Section 5.2 Termination.
(a) Sheridan may terminate this Agreement, and have no further
liability or obligation under this Agreement, upon the occurrence of one or more
of the following events:
(i) The Company or any Shareholder ceases to perform its material
duties and responsibilities under this Agreement or materially breaches any
material term or condition of this Agreement, and that cessation or breach
continues uncured for a period of sixty (60) days after the Company's and the
Shareholders' receipt of written notice specifying that breach.
(ii) The Company or any Shareholder voluntarily files a petition
in bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under any federal or state bankruptcy, insolvency,
reorganization or moratorium statute, the Company or any Shareholder is the
subject of an involuntary petition in bankruptcy which is not set aside within
sixty (60) days of its filing, or the Company or any Shareholder becomes
insolvent.
20
(iii) The Company or any Shareholder materially breaches or
defaults under any other agreement with Sheridan or its affiliates, subject to
any applicable notice and cure periods provided in that agreement.
(iv) The representations and warranties made by the Company or
the Shareholders in this Agreement cease to be true and correct.
(b) The Company may terminate this Agreement, and have no further
liability under this Agreement, upon the occurrence of one or more of the
following events:
(i) Sheridan ceases to perform its material duties and
responsibilities under this Agreement or materially breaches any material term
or condition of this Agreement, and that cessation or breach continues uncured
for a period of sixty (60) days after Sheridan's receipt of written notice
specifying that breach.
(ii) Sheridan voluntarily files a petition in bankruptcy or makes
an assignment for the benefit of creditors or otherwise seeks relief from
creditors under any federal or state bankruptcy, insolvency, reorganization or
moratorium statute, Sheridan is the subject of an involuntary petition in
bankruptcy which is not set aside within sixty (60) days of its filing or
Sheridan becomes insolvent.
(iii) Sheridan materially breaches or defaults under any other
agreement with the Company or any of the Shareholders, subject to any applicable
notice and cure periods provided in that agreement.
Section 5.3 Remedies Upon Termination. Except for the Government Health
Program Receivables (which shall be collected and remitted as otherwise provided
in this Agreement, in the event of a termination, Sheridan will continue to
collect those receivables outstanding as of the date of termination and promptly
remit the funds it collects in accordance with this Agreement. If this Agreement
is terminated pursuant to Sections 5.2(a) and 5.2(b), the non-breaching party
may pursue all other legal or equitable relief.
Section 5.4 Repurchase of Equipment and Supplies. The Company and the
Shareholders agree that upon termination of this Agreement, if Sheridan
exercises the FFE Option described in Section 2.3(c), the Company and the
Shareholders shall purchase from Sheridan all of the FFE and all then unused
supplies located at the Offices or purchased for specific use at the Offices,
except pharmaceutical supplies, at the book value thereof as reflected by
Sheridan's books and records of account.
21
Section 5.5 Election Under Option Agreements. Notwithstanding the
provisions of this Article V, in the event this Agreement is terminated pursuant
to Section 5.2, and in the event that Sheridan desires to exercise its Option
under either or both of the Option Agreements, Sheridan shall promptly, but in
no event later than ninety (90) days from the termination date of this Agreement
(the "Option Deadline Period"), notify each of the Shareholders, or a
Shareholder's legal representative, if applicable, of its intent to exercise the
Options in the manner and upon the terms set forth in the Option Agreements.
This Agreement shall remain in full force and effect during the Option Deadline
Period. In the event Sheridan elects to exercise either or both of its Options,
this Agreement shall remain in full force and effect until such time as all of
the obligations of the parties under the Option Agreements have been satisfied
and all of the shares being purchased pursuant to the Options (the "Option
Shares") have been transferred to the Purchaser (as defined in the Option
Agreements) of the Option Shares. This Agreement shall immediately terminate (i)
upon transfer to the Purchaser of the Option Shares; or (ii) if Sheridan does
not elect to exercise either or both of its Options by the expiration of the
Option Deadline Period, upon expiration of the Option Deadline Period.
Article VI
Representations and Warranties of the Company and each of the Shareholders and
Sheridan.
The representations and warranties of the Company, each of the Shareholders
and Sheridan are incorporated from the OA by this reference and made a part of
this Agreement.
Article VII
This Article is not used in this Agreement.
Article VIII
Insurance and Indemnity.
Section 8.1 Insurance to be Maintained. The Company and the Shareholders
shall provide, or arrange for the provision of, and maintain throughout the
Term, professional liability insurance coverage (the "Professional Liability
Coverage") on the Company and each of the Company's employees and agents,
including, but not limited to, all the Shareholders, the Physician Employees,
Sheridan and its agents and employees, in the greater of $1,000,000.00 per
occurrence and $3,000,000.00 per year aggregate for each Physician. The terms
and conditions of the Professional Liability Insurance shall be acceptable to
Sheridan, in its reasonable discretion. The Professional Liability Insurance
shall be issued by an insurance carrier acceptable to Sheridan, in its
reasonable discretion. Upon termination of this Agreement, the Company shall
either procure tail coverage for Sheridan and its agents and employees or
22
procure Professional Liability Policies for the applicable statute of limitation
periods. Company shall provide to Sheridan, in a form acceptable to Sheridan,
written documentation evidencing its professional liability insurance coverage
and any change in that insurance shall be sent to Sheridan at least fifteen (15)
days prior to its effective date. The Company and the Shareholders shall, at
their sole cost and expense, pay the premium costs of all professional liability
insurance coverage during the Term. The Company and the Shareholders shall also
provide, or arrange for the provision of, and maintain throughout the Term,
workers' compensation coverage on the Company and each of the Company's
employees and agents, including, but not limited to, all the Shareholders and
the Physician Employees, in at least the amount required by law. The Company
shall provide to Sheridan, in a form acceptable to Sheridan, written
documentation evidencing its workers' compensation insurance coverage and any
change in that insurance shall be sent to Sheridan at least fifteen (15) days
prior to its effective date. The Company shall, at its sole cost and expense,
pay the premium costs of all workers' compensation insurance coverage during the
Term. Sheridan may replace the Company's, Shareholders' and Physician Employees'
professional liability insurance at any time, provided that the charge to the
Company by Sheridan for the coverage obtained is equal to the current cost of
the then existing entity's and the physicians' professional liability insurance,
the replacement insurance has the same retroactive dates of coverage, the
replacement insurance is written with a carrier with the same or better rating
as the existing insurer, the coverages are equal or better than the existing
policy.
Section 8.2 Indemnification by Sheridan. Sheridan agrees to indemnify, hold
harmless and defend the Company and the Shareholders from and against any and
all liability, loss, damages, claims, causes of action and expenses, including
reasonable attorneys' fees, costs and expenses (at trial and appellate levels)
proximately caused by or as a result of the performance of Management Services
by Sheridan, its employees or agents during the Term, including any of their
commissions and omissions (a "Loss"). The provisions of this Section 8.2 shall
survive the expiration or earlier termination of this Agreement. Any indemnity
under this Agreement shall only apply after exhaustion of all applicable
insurance policies' coverages.
Section 8.3 Indemnification by the Company. Except as otherwise provided in
this Section, the Company and each of the Shareholders jointly and severally
agree to indemnify, hold harmless and defend Sheridan and its affiliates, agents
and employees from and against any and all liability, loss, damages, claims,
causes of action and expenses, including reasonable attorneys' fees, costs and
expenses (at trial and appellate levels) proximately caused by or as a result of
the performance of medical services by any of them or their Physician Employees,
employees or agents during the Term, and for any breach of this Agreement by any
of the Shareholders or the Company or their Physician Employees, employees or
agents (other than Sheridan's employees and agents), including any of their
commissions and omissions (also, a "Loss"). The provisions of this Section 8.3
shall survive the expiration or earlier termination of this Agreement. Any
indemnity under this Agreement shall only apply after exhaustion of all
applicable insurance policies' coverages. Except as otherwise provided in this
section, all obligations for indemnity under this Agreement are the joint and
several obligations of the Shareholders. Except after a Departure (as defined
below), if a Loss is readily and reasonably identifiable as being derived from
either of the PAs or either Shareholder and the derivation of that Loss is not
at all reasonably attributable to the Company, the other PA or the other
Shareholder then the responsible Shareholder shall be severally responsible for
that Loss. Notwithstanding the immediately preceding two sentences (the
"Severability Instances"), if a Shareholder ceases his employment with the PA
with which he is employed (for any reason whatsoever) or if the Option Agreement
or this Agreement is terminated or materially altered (collectively, a
"Departure") other than by expiration then the Severability Instance as to the
Shareholders shall not apply and the affected persons shall in all events be
jointly and severally.
23
Section 8.4 Limitations on Indemnification. The right of indemnification
under this Agreement by any party to this Agreement shall be subject to a
limitation of Two Million Dollars ($2,000,000.00) except for any fraud,
intentional misrepresentation or a deliberate or willful breach by that party to
this Agreement.
Section 8.5 Notice; Defense of Claims.
Promptly after receipt by an indemnified party of notice of any claim,
liability or expense to which the indemnification obligations in this Agreement
would apply, the indemnified party shall give notice thereof in writing to the
indemnifying party, but the omission to so notify the indemnifying party
promptly will not relieve the indemnifying party from any liability except to
the extent that the indemnifying party shall have been prejudiced as a result of
the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement under which the liability or obligation is asserted. If within twenty
(20) days after receiving such notice the indemnifying party gives written
notice to the indemnified party stating that: (a) it would be liable under the
provisions hereof for indemnity in the amount of such claim if such claim were
successful; and, (b) that it disputes and intends to defend against such claim,
liability or expense at its own cost and expense, then counsel for the defense
shall be selected by the indemnifying party (subject to the consent of the
indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all Indemnifiable matters related to claims by third parties
which are susceptible to being settled provided its obligation to indemnify the
indemnifying party therefor will be fully satisfied. As reasonably requested by
the indemnified party, the indemnifying party shall keep the indemnified party
apprised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. Notwithstanding anything herein
stated to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party, provided, however,
that the separate counsel selected by the indemnified party shall be approved by
the indemnifying party, which approval shall not be unreasonably withheld. If no
such notice of intent to dispute and defend is given by the indemnifying party,
or if such diligent good faith defense is not being or ceases to be conducted,
the indemnified party shall, at the expense of the indemnifying party, undertake
the defense of (with counsel selected by the indemnified party), and shall have
the right to compromise or settle (exercising reasonable business judgment),
such claim, liability or expense. Provided however, before settling the
indemnified party shall first use reasonable efforts to obtain the consent to
that settlement from the indemnifying party, which consent shall not be
unreasonably withheld. after using reasonable efforts without success the
indemnified party may settle without the consent of the indemnifying party
without any prejudice to its claim for indemnity. If such claim, liability or
expense is one that by its nature cannot be defended solely by the indemnifying
party, then the indemnified party shall make available all information and
assistance that the indemnifying party may reasonably request and shall
cooperate with the indemnifying party in such defense.
24
Section 8.6 Use of Sheridan Healthcare, Inc. ("SHCR") Common Stock to Pay
Indemnification. In the event that the Company or the Shareholders shall be
liable for indemnification under this Agreement, they may satisfy their
obligations, in whole or in part by tendering shares of SHCR common stock, with
a value determined in accordance with the next succeeding sentence. The value of
the SHCR common stock tendered for payment in satisfaction of an indemnification
obligation shall be determined based upon the average of the last sale price per
share of Common Stock on the NASDAQ National Market for the last fifteen (15)
trading days immediately prior to date the SHCR common stock is tendered to the
indemnified party.
Section 8.7 Key Man Insurance. The Company agrees, and shall cause its
Shareholders and the Physician Employees to agree, that Sheridan may obtain at
its sole expense and for its sole benefit "key man" life insurance policies on
any or all the Shareholders and the Physician Employees of the Company. Neither
the Company, nor the Shareholders nor the Physician Employees shall have any
right, title or interest in or to the proceeds of any of those insurance
policies. The Company shall cause its Shareholders and the Physician Employees
to cooperate with Sheridan, as reasonably requested by Sheridan from time to
time, in obtaining any of those insurance policies, including, but not limited
to, causing those Shareholders and the Physician Employees to submit to physical
examinations and providing all information relating to insurability as Sheridan
may reasonably request from time to time.
Article IX
Assignment.
Section 9.1 Assignment. The parties agree that this Agreement shall not be
assigned or transferred by either party without the prior written consent of the
other, provided, however, that this Agreement may be assigned, in whole or in
part, by Sheridan, in its sole discretion, to any parent, subsidiary, successor
or affiliate of Sheridan (a "Successor") and this Agreement shall inure to the
benefit of, and be binding upon the Successor.
25
Article X
Practice of Medicine.
Section 10.1 Practice of Medicine. The parties to this agreement
acknowledge that Sheridan is not authorized under this Agreement to engage in
any activity which may be construed or deemed to constitute the practice of
medicine. To the extent any act or service in this Agreement required of
Sheridan or its agents or employees should be construed or deemed to constitute
the practice of medicine, the performance of that act or service by Sheridan or
its employees or agents shall automatically be deemed waived and be forever
unenforceable.
Article XI
Independent Relationship.
Section 11.1 Independent Contractor Status.
(a) It is acknowledged and agreed that the Company and Sheridan are at
all times acting and performing under this Agreement as independent contractors.
Sheridan shall have no exercise or control over the methods by which the Company
or its Physician Employees or Shareholders practice medicine. The sole function
of Sheridan under this Agreement is to provide all Management Services in a
reasonably competent manner. No party to this Agreement shall, by entering into
and performing its obligations under this Agreement, become liable for any of
the existing obligations, liabilities or debts of any other party to this
Agreement unless otherwise specifically provided for under the terms of this
Agreement. Sheridan will in its management role have only an obligation to
exercise reasonable care in the performance of the Management Services. No party
shall have any liability whatsoever for damages suffered on account of the
willful misconduct or negligence of any party to this Agreement, or any of their
employees, agents or independent contractors. Each party shall be solely
responsible for compliance with all state and federal laws including, without
limitation, those laws and regulations pertaining to employment taxes, income
withholding, unemployment compensation contributions and other employment
related statutes regarding their respective employees, agents and servants.
(b) In the event that any court, medical board or regulatory authority
shall determine that the business relationship among the parties established in
this Agreement violates any statutes, rules or regulations and that
determination is not stayed or appealed within ninety (90) days of that
determination (or in the event that Sheridan, in good faith, determines there is
a material risk of that determination being made by any court or regulatory
authority), the parties will negotiate in good faith to enter into an
alternative legally valid arrangement between Sheridan and the then current
Shareholders and the Physician Employees which substantially preserves for the
parties the relative economic benefits of this Agreement. If the parties cannot
reach agreement on the substance of an alternative legally valid arrangement,
then either party may terminate this Agreement upon thirty (30) days' prior
written notice to the other party.
26
Section 11.2 Referral Arrangements. The parties acknowledge and agree that
no benefits to the Company, Shareholders or Physician Employees under this
Agreement require nor are in any way contingent upon the admission,
recommendation, referral or any other arrangement for the provision of any item
or service offered by Sheridan or any of its affiliates, to any patients of the
Company, the Company's employees or agents.
Article XII
This Article is not used in this Agreement.
Article XIII
Miscellaneous.
Section 13.1 Amendment and Modification. This Agreement may not be modified
or terminated orally, and no modification or termination shall be binding unless
in writing and signed by the parties to this Agreement.
Section 13.2 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors, assigns, heirs,
estates, beneficiaries, executors and legal and personal representatives.
Section 13.3 No Waiver; Remedies Cumulative. This Agreement and the
Exhibits attached to this Agreement contain the entire agreement of the parties
with respect to the transactions contemplated in this Agreement, and merges and
supersedes all prior understandings and agreements among the parties with
respect to the subject matter of this Agreement. Failure of any party to enforce
one or more of the provisions of this Agreement or to require at any time
performance of any of the obligations under this Agreement shall not be
construed to be a waiver of any provisions by any party nor to in any way affect
the validity of this Agreement or any party's right to enforce any provision of
this Agreement nor to preclude any party from taking all other action at any
time which it would legally be entitled to take. Any party to this Agreement may
extend the time for or waive the performance of any of the obligations of the
other, waive any inaccuracies in the representations or warranties by the other,
or waive compliance by the other with any of the covenants or conditions
contained in this Agreement. Any extension or waiver shall be in writing and
signed by the parties. No waiver shall operate or be construed as a waiver of
any subsequent act or omission of the parties.
Section 13.4 Headings. The descriptive headings in this Agreement are
inserted for convenience of reference only and shall in no way restrict or
otherwise affect the construction of the terms or provisions of this Agreement.
Any references in this Agreement to Articles, Sections or Exhibits are the
Articles, Sections and Exhibits of this Agreement.
27
Section 13.5 Execution in Counterparts. This Agreement may be executed in
any number of multiple counterparts, each of which shall be deemed an original
and all of which together shall be deemed to be one and the same instrument.
Section 13.6 Notices. Whenever any notice, request, information or other
document is required or permitted to be given under this Agreement, that notice,
demand or request shall be in writing and shall be either hand delivered, sent
by United States certified mail, postage prepaid, delivered via overnight
courier or transmitted by telecopier to the addresses below or to any other
address that any party may specify by notice to the other parties. No party
shall be obligated to send more than one notice to each of the other parties and
no notice of a change of address shall be effective until received by the other
parties. A notice shall be deemed received upon hand delivery or telecopy
transmission, two days after posting in the United States mail or one day after
dispatch by overnight courier.
If to Sheridan: Sheridan Healthcorp, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn: Jay A. Martus, Esq.
Vice President and General Counsel
Telecopier: (954) 987-8359
If to the Company: Michael Cavenee, M.D., P.A.
8160 Walnut Hill Lane, Suite 001
Dallas, Texas 75231
Attn: Michael R. Cavenee, M.D.
Telecopier: (214) 696-5674
AND
Kenneth Trimmer, M.D., P.A.
8160 Walnut Hill Lane, Suite 001
Dallas, Texas 75231
Attn: Kenneth J. Trimmer, M.D.
Telecopier: (214) 696-5674
If to the Shareholders: Michael R. Cavenee, M.D.
5128 Corinthian Bay
Plano, Texas 75093
Kenneth J. Trimmer, M.D.
6628 Castle Pines Drive
Dallas, Texas 75093
With a copy to: Jenkens & Gilchrist, a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attn: Kenneth Gordon, Esq.
Telecopier: (214) 855-4300
28
Section 13.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
its conflicts of law principles.
Section 13.8 Expenses. All accounting, legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring those fees, costs and
expenses.
Section 13.9 Severability. The invalidity or unenforceability of any one or
more of the words, phrases, sentences, clauses, or sections contained in this
Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement or any part of any provision, all of which are
inserted conditionally on their being valid in law, and in the event that any
one or more of the words, phrases, sentences, clauses or sections contained in
this Agreement shall be declared invalid or unenforceable, this Agreement shall
be construed as if such invalid or unenforceable word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted or shall be enforced as nearly as possible according to their
original terms and intent to eliminate any invalidity or unenforceability. If
any invalidity or unenforceability is caused by the length of any period of time
or the size of any area set forth in any part of this Agreement, the period of
time or area, or both, shall be considered to be reduced to a period or area
which would cure the invalidity or unenforceability.
Section 13.10 Litigation; Prevailing Party. Except as otherwise required by
applicable law or as expressly provided in this Agreement, in the event of any
litigation, including appeals, with regard to this Agreement, the prevailing
party shall be entitled to recover from the non-prevailing party all reasonable
fees, costs, and expenses of counsel (at pre-trial, trial and appellate levels).
Section 13.11 No Breach and Consents. The parties agree that the execution
of this Agreement shall not be deemed to be an assignment of any contract where
consent to that assignment is required by the terms of that contract provided
that the foregoing shall not affect the Company's and the Shareholders'
obligations to obtain all consents necessary for Sheridan and its agents and
employees to perform their obligations and enjoy their rights under this
Agreement.
Section 13.12 Construction. This Agreement shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Agreement to be drafted, including any presumption of superior
knowledge or responsibility based upon a party's business or profession or any
professional training, experience, education or degrees of any member, agent,
officer of employee of any party. If any words in this Agreement have been
stricken out or otherwise eliminated (whether or not any other words or phrases
have been added) and the stricken words initialed by the party against whom the
words are construed, then this Agreement shall be construed as if the words so
stricken out or otherwise eliminated were never included in this Agreement and
no implication or inference shall be drawn from the fact that those words were
stricken out or otherwise eliminated.
29
Section 13.13 Survival of Representations and Warranties. All of the
respective representations and warranties of the parties to this Agreement or in
any certificate delivered by any party incident to the contemplated transactions
are material and may be relied upon by the party receiving the same and shall
survive the execution and delivery of the Agreement and the consummation of the
contemplated transactions for the time period equal to the applicable statutes
of limitations. All statements in this Agreement shall be deemed representations
and warranties. The due diligence investigations conducted by the parties to
this Agreement and the results thereof shall not diminish or otherwise affect
any of the representations and warranties set forth in this Agreement.
Section 13.14. Reformation Upon Change in or Violation of Health Laws.
(a) Reformation. In the event that subsequent to the Execution Date
(i) the contents or validity of this Agreement or any of the Related Documents
are successfully challenged by any Governmental Authority under the Health Laws
or (ii) any party determines, based upon advice received from legal counsel,
that a violation of a Health Law has occurred as a result of this Agreement or
the documents or contemplated transactions, or that there is a substantial risk
that a violation of a Health Law will occur as a result of this Agreement or the
Related Documents, that is reasonably expected to have a material adverse affect
on any of the parties, that party shall notify the other parties with respect
thereto. If the parties are unable to agree in good faith on the need for
reformation as contemplated in the foregoing sentence, then any party may
request and initiate a binding arbitration in Dallas, Texas, to be conducted
pursuant to the provisions of this Agreement. In the event the arbitrator shall
determine that reformation is necessary, the parties shall act in good faith and
use their reasonable efforts to analyze, revise, reform and, to the extent
necessary, restructure this Agreement and the Related Documents and the
contemplated transactions to fully comply with all applicable Health Laws in a
manner that is equitable to all parties in light of the intent of the parties
regarding the contemplated transactions by this Agreement and the Related
Documents as evidenced by this Agreement and the Related Documents. If SHCR, the
Company and the Shareholders cannot reach agreement on any term of such
revision, reformation or restructuring contemplated in this section within a
reasonable time, any of those parties may request and initiate a binding
arbitration in Dallas, Texas to be conducted pursuant to the provisions of this
Agreement to determine the extent and nature of any reformation or, if
reformation is not possible, recission.
(b) Failure to Reform; Recission of Agreement. If an event causing the
application of this section occurs within six (6) months of the Execution Date
and the parties in good faith are unable to modify the terms of this Agreement
30
in accordance with this section, the Parties shall rescind this Agreement, and
to the fullest extent possible, the Seller Shares shall be released to the
Shareholders, the Option Consideration (as defined in Schedule 1.1 in each of
the Option Agreements), if any, shall be returned to SHCR, and the parties shall
take such other reasonable actions as are necessary to place the parties as near
as reasonably possible to the positions of the parties prior to entering into
this Agreement. If an event causing the application of this section occurs after
six (6) months of the Execution Date and the parties in good faith are unable to
modify the terms of this Agreement in accordance with this section the Parties
shall rescind this Agreement, and to the fullest extent possible, the Seller
Shares shall be released to the Shareholders, and the Unrealized Percentage of
the Option Consideration and the Purchase Price, if any, shall be returned to
SHCR and Purchaser, and the parties shall take all other reasonable actions as
are necessary to place the parties as near as reasonably possible to the
positions of the parties prior to entering into this Agreement.
(c) Defined Terms. As used in this Section 13, the following terms
shall have the meanings provided below unless the context otherwise requires:
(i) "Governmental Authority" shall mean any and all federal,
Texas or local governments, governmental institutions, public authorities and
other governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted and/or existing.
(ii) "Health Laws" shall mean applicable provisions of the
federal Social Security Act (including the federal Medicare and Medicaid
Anti-Fraud and Abuse Amendments (42 U.S.C. §1320a-7, -7a and -7b) and the
federal Physician Anti-Self Referral Law (42 U.S.C. §1395nn, the "Stark
Bill")), the Texas Medical Practice Act (Article 4495b of the Texas Revised
Civil Statutes, the "TMPA"), and the Texas Illegal Remuneration Law (Texas
Health & Safety Code §161.091), as such laws may now exist or be amended
hereafter.
(iii) "Unrealized Percentage" shall mean the percentage which is
equal to 100 minus 4 for each 12 month calendar year (or the pro rata portion
thereof for periods less than a full calendar year) which has passed since the
six month anniversary of the date of this Agreement.
13.15. Corporate Practice of Medicine. Nothing contained herein is intended
to (a) constitute the use of a medical license for the practice of medicine by
anyone other than a licensed physician; (b) aid Sheridan or any other
corporation to practice medicine when in fact such corporation is not authorized
to practice medicine; or (c) do any other act or create any other arrangements
in violation of the TMPA. Any other provision of this Agreement to the contrary
notwithstanding, Sheridan shall not exercise any of its rights under this
Agreement to direct the medical, professional or ethical aspects of the practice
of medicine by the Company or its Physician Employees or to make credentialing,
quality assurance, utilization review or peer review policies for the Company,
all of which shall be left to the sole direction of the physicians on the
Company's board of directors and the physician or physicians having the right to
vote the shares of the Company.
31
13.16. Compliance with Health Laws. The parties enter into this Agreement
with the intent of conducting their relationship in full compliance with
applicable state, local and federal law, including, but not limited to, the
Health Laws. Notwithstanding any unanticipated effect of any of the provisions
herein, no party to this Agreement will intentionally conduct itself under the
terms of this Agreement in a manner to constitute a violation of the Health
Laws.
13.17. Referral Policy. Nothing contained in this Agreement shall require
(directly or indirectly, explicitly or implicitly) any of the Parties to refer
or direct any patients to any other party or to use another party's facilities
as a precondition to receiving the benefits set forth herein or in establishing
the valuation of the Options or the Sale Shares.
13.18. Arbitration; Jury Trial. THE PARTIES SHALL USE GOOD FAITH
NEGOTIATION TO RESOLVE ANY CONTROVERSY, DISPUTE OR DISAGREEMENT ARISING OUT OF,
RELATING TO OR IN CONNECTION WITH THIS AGREEMENT OR THE BREACH OF THIS
AGREEMENT. IN THE EVENT THE PARTIES ARE UNABLE TO RESOLVE ANY DISPUTE OR
CONTROVERSY BY NEGOTIATION, EITHER PARTY MAY SUBMIT SUCH DISPUTE TO BINDING
ARBITRATION WHICH SHALL BE CONDUCTED IN DALLAS, TEXAS. THE BINDING ARBITRATION
SHALL BE CONDUCTED IN ACCORDANCE WITH THE RULES OF PROCEDURE FOR ARBITRATION OF
THE NATIONAL HEALTH LAWYERS ASSOCIATION ALTERNATIVE DISPUTE RESOLUTION SERVICE.
JUDGMENT ON THE AWARD OR DECISION RENDERED BY THE ARBITRATOR MAY BE ENTERED IN
ANY COURT HAVING JURISDICTION. NOTWITHSTANDING THE TERMS OF THIS SECTION, IN THE
EVENT OF ANY BREACH OR DISPUTE OF THIS AGREEMENT OR ANY OF THE RELATED
AGREEMENTS FOR WHICH AN EQUITABLE REMEDY IS APPROPRIATE THE AGGRIEVED PARTY MAY
SEEK AND OBTAIN RELIEF IN A COURT OF COMPETENT JURISDICTION TO AVAIL ITSELF OF
THE EQUITABLE REMEDIES. IN THAT CASE SHOULD ANY PENDENT LEGAL CLAIMS ARISE,
THOSE CLAIMS SHALL BE SUBMITTED TO BINDING ARBITRATION, HOWEVER IF THE COURT
FAILS TO REMAND THOSE LEGAL CLAIMS TO ARBITRATION, THEN WITH RESPECT TO THOSE
CLAIMS, THE PARTIES WAIVE ALL RIGHTS TO ANY TRIAL BY JURY IN ALL LITIGATION
RELATING TO OR ARISING OUT OF THIS AGREEMENT.
32
The parties to this Agreement have caused this Agreement to be duly
executed as of the Execution Date.
SHERIDAN:
SHERIDAN HEALTHCORP, INC.,
a Florida corporation
By: --------------------------------
Jay A. Martus, Vice President
COMPANY:
MICHAEL CAVENEE, M.D., P.A.,
a Texas professional association
By: --------------------------------
Michael R. Cavenee, M.D.
President
KENNETH TRIMMER, M.D, P.A.,
A Texas professional association
By: --------------------------------
Kenneth J. Trimmer, M.D.
President
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
33
[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]
SHAREHOLDERS:
------------------------------------
Michael R. Cavenee, M.D.
------------------------------------
Kenneth J. Trimmer, M.D.
34
LIST OF EXHIBITS
----------------
Exhibit A - Shareholders of the Company
Exhibit B - Real and Personal Property Leases
Exhibit C - Form of Power-of-Attorney
Exhibit D - Prior Acts or Omissions
35
EXHIBIT A
NAME AND ADDRESS OF STOCKHOLDERS OF THE COMPANY
MICHAEL CAVENEE, M.D., P.A.
Michael R. Cavenee, M.D.
5128 Corinthian Bay
Plano, Texas 75093
KENNETH TRIMMER, M.D., P.A.
Kenneth J. Trimmer, M.D.
6628 Castle Pines Drive
Plano, Texas 75093