EXHIBIT 10.13
MEDICAL ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MONTEFIORE MEDICAL CENTER
AND
EVEREST DIALYSIS SERVICES, INC.
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THIS MEDICAL ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of this
17th day of July, 1998, is made by and between Montefiore Medical Center, a not-
for-profit corporation duly organized and validly existing under the laws of the
State of New York ("Seller"), and Everest Dialysis Services, Inc., a for-profit
corporation duly organized and validly existing under the laws of the State of
New York ("Buyer").
RECITALS:
WHEREAS, Seller currently operates chronic outpatient dialysis programs
located at (i) 3547 Webster Avenue, Bronx, New York (Dialysis Center I); (ii)
3547 Webster Avenue, Bronx, New York (Dialysis Center II); (iii) 1325 Morris
Park Avenue, Bronx, New York; and (iv) 1695 Eastchester Road, Bronx, New York
(the "Centers"), that currently provide hemodialysis, peritoneal dialysis, and
continuous renal replacement therapies (collectively, the "Business") together
with New York Dialysis Management, Inc. a New York corporation ("NYDM") under
that certain Agreement To Provide Management Services for Dialysis Facilities,
dated March 26, 1990, as amended to date including Amendment No. 3 dated the
date hereof ("Management Agreement" and "Amendment No. 3");
WHEREAS, Seller desires to sell certain of its medical and professional
assets directly related to the provision of professional medical services in
connection with the Business to Buyer, all as set forth herein;
WHEREAS, Buyer desires to purchase certain of Seller's medical and
professional assets directly related to the provision of professional medical
services in connection with the Business all as set forth herein; and
WHEREAS, simultaneously with the execution of this Agreement, Seller and
NYDM are entering into that certain Agreement to Amend and Not-to-Compete
("Agreement to Amend").
NOW, THEREFORE, in consideration of the premises and covenants as set forth
herein, and subject to the representations, warranties, and conditions contained
herein, the parties agree as follows:
ARTICLE 1.
PURCHASE OF ASSETS
AND ASSUMPTION OF LIABILITIES
SECTION 1.1. Incorporation of Recitals. The recitals set forth above are
incorporated herein by reference.
SECTION 1.2. Sale and Purchase of Medical Assets. Subject to the terms and
conditions of this Agreement, and in reliance on the representations,
warranties, and covenants contained herein, on the Closing Date (as defined
below), Seller shall sell, convey, assign, transfer, and deliver, or cause to be
sold, conveyed, assigned, transferred, and delivered, to Buyer, and Buyer shall
purchase and acquire from Seller, the Medical Assets (as defined below), free
and clear, except as provided herein, of any title defect, mortgage, assignment,
pledge, hypothecation, security interest, title or retention agreement, levy,
execution, seizure, attachment, garnishment, deemed trust, lien, easement,
option, right or claim of others, or charge or encumbrance of any kind
whatsoever, in exchange for the Purchase Price (as defined below). The term
"Medical Assets" shall mean generally, except as otherwise provided herein, all
of the following described properties and assets used or useful in connection
with the Business: (i) patient records and patient files; (ii) pharmaceutical
supplies and inventories to the extent not already owned by Buyer, an affiliate
of Buyer, or NYDM, and to the extent legally transferable by Seller; (iii) all
transferrable certificates and licenses, if any, relating to the provision of
professional medical services in New York; and (iv) temporary rights to the
Medicare provider numbers for the Centers, pending issuance of new numbers to
Buyer. The parties agree that assets may be added and removed from the date
hereof until the Closing Date in the normal course of conduct of the Business
consistent with the practices of Seller and NYDM as they have jointly conducted
the Business in the past ("Normal Course"). Specifically excluded from this
Agreement, the Medical Assets, and the purchase obligations herein are any and
all assets, whether tangible or intangible, not described above (subject to
addition and removal of assets by NYDM in the Normal Course), any tax refunds
due to Seller, and any bank accounts.
SECTION 1.3. Assumption of Liabilities. Buyer shall not assume any of
Seller's liabilities.
SECTION 1.4. Purchase Price. Buyer shall pay to Seller as consideration
for its sale of the Medical Assets the sum of six hundred thousand dollars
($600,000) (the "Purchase Price").
SECTION 1.5. Tax Allocation. The parties agree to allocate the Purchase
Price among the Medical Assets for all purposes (including financial accounting
and tax purposes) in accordance with the allocation set forth on Schedule A,
attached hereto and incorporated by reference herein, and shall make all
necessary filings (including those required under Internal Revenue Code Section
1060) in accordance with that allocation.
SECTION 1.6. Closing. The closing of the transactions contemplated by this
Agreement shall take place at the offices of Seller at 9:00 a.m. (EST) on the
first day of the month following Buyer's receipt of approval (the "NYPHC
Approval") from the New York Public Health Council to operate all of the Centers
(such closing being called the "Closing" and such date being called the "Closing
Date"). At the Closing, Seller shall deliver to Buyer the following:
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(a) Bills of sale and assignments transferring to Buyer all of the Medical
Assets, together with certificates or other evidence of title to the
Medical Assets, properly endorsed to Buyer; and
(b) A bring down certificate executed by Seller as to Seller's
representations and warranties contained in Article 4 of this
Agreement in accordance with Section 7.1 herein; and
(c) Cancellations and releases of assignments of the real estate leases
for the Centers previously delivered to Seller by NYDM; and
(d) The deliverables set forth in Article 2 below; and
(e) Such other items as are set forth elsewhere in this Agreement and as
Buyer and its counsel may reasonably request.
At the Closing, Buyer shall deliver to Seller the following:
(a) Certificates executed by Buyer certifying to Seller that each of their
representations and warranties in this Agreement are accurate in all
material respects as of the Closing Date, as if made on the Closing
Date; and
(b) The deliverables set forth in Article 2 below; and
(c) Such other items as are set forth elsewhere in this Agreement and as
Seller and its counsel shall reasonably request.
SECTION 1.7. Assignment Contracts. To the extent that the assignment of
any contract, lease, agreement, or permit shall require the consent of another
person, this Agreement shall not constitute an agreement to assign such
contract, lease, agreement, or permit if an attempted assignment of such
contract, lease, agreement, or permit would constitute a breach thereof. Seller
shall use its reasonable efforts to obtain the consent of any other party to a
contract, lease, or agreement, or the issuer of a permit, for the assignment
thereof to the Buyer. If any such consent is not obtained, to the extent
permitted by applicable law, Seller shall cooperate with Buyer to provide for
Buyer the benefits under such contract lease, agreement, or permit, including
enforcement for the benefit of Buyer of any and all rights of Seller against
such party.
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ARTICLE 2.
OTHER AGREEMENTS
SECTION 2.1. Operating Certificates/Administrative Services Agreement.
Seller shall surrender its operating certificates to the State of New York's
Public Health Council on the Closing Date in accordance with the approval by the
Public Health Council to operate all of the Centers.
SECTION 2.2. Medical Director Services and Administrative Agreement. At
the Closing, Buyer and Seller shall enter into and deliver to each other, as of
the Closing Date, a Medical Director Services and Administrative Agreement,
substantially in form and substance as set forth in Schedule B, attached hereto
and incorporated by reference herein.
SECTION 2.3. Operating Agreement. At the Closing, Buyer and Seller shall
enter into and deliver to each other as of the Closing Date, an Operating
Agreement, substantially in form and substance as set forth in Schedule C,
attached hereto and incorporated by reference herein.
SECTION 2.4. Abandonment Date. Notwithstanding anything herein to the
contrary, if the Closing does not take place by the close of business on the
date thirty (30) months from the date of this Agreement (the "Abandonment
Date"), either Buyer or Seller shall have the option to terminate this
Agreement, in which case this Agreement will terminate as to all parties hereto;
provided, however, that in the event the Closing has not occurred and the
application for the NYPHC Approval is pending and under consideration on the
date thirty (30) months from the date of this Agreement, then the Abandonment
Date shall be extended until sixty (60) days after the later of (i) the New York
Public Health Council grants the NYPHC Approval or (ii) the New York Public
Health Council denies and does not grant the NYPHC Approval and there are no
reasonable grounds, in the reasonable judgement of Buyer's special regulatory
counsel in New York, upon which to appeal such denial or modify this Agreement
and the transactions contemplated hereby in order to obtain such NYPHC Approval;
provided further, however, that in the event there are reasonable grounds, in
the reasonable judgement of Buyer's special regulatory counsel in New York, to
appeal such denial or modify this Agreement and the transactions contemplated
hereby in order to obtain such NYPHC Approval, then the Abandonment Date shall
be extended until sixty (60) days after the later of (i) the date the NYPHC
Approval has been granted, (ii) such appeals have been exhausted, or (iii) the
NYPHC Approval is once again denied. Nothing in this section shall be construed
as a commitment or covenant to modify this Agreement and the transactions
contemplated hereby in order to obtain such NYPHC Approval. The foregoing shall
not be construed to terminate or otherwise affect any claims any party may have
against any of the others for breach of any obligation arising out of this
Agreement, or any other agreement entered into in connection herewith, prior to
the Abandonment Date. The parties will seek and use their reasonable efforts to
obtain all governmental and regulatory approvals and third-party consents for
the consummation of the transactions contemplated by this Agreement, and the
parties will cooperate with each other and their respective agents with respect
to obtaining such governmental and regulatory approvals and third-party
consents.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to Seller that:
SECTION 3.1. Organization, Qualification, and Corporate Power of Buyer.
Buyer (i) is a corporation duly organized, validly existing, and in good
standing under the laws of the State of New York; (ii) has the corporate power
and authority to carry on its business as now conducted; and (iii) subject to
obtaining the consents referred to in Section 1.6(d) and the NYPHC Approval has
all requisite power and authority and licenses, permits, franchises,
certificates, authorizations, approvals, consents, and rights to own the
property which is the subject of this Agreement, and to be a party to the
contracts, leases, and other agreements which are the subject of this Agreement.
SECTION 3.2. Validity. Buyer has the full legal power and authority to
execute, deliver, and perform this Agreement and all other agreements and
documents necessary to consummate the contemplated transactions, and all
corporate actions of Buyer necessary for such execution, delivery, and
performance have been or will have been duly taken by Closing. This Agreement
and all agreements related to this transaction have been duly executed and
delivered to Buyer and constitute the legal, valid, and binding obligation of
Buyer enforceable in accordance with their terms (subject as to enforcement of
remedies to equitable principles and to the discretion of courts in awarding
equitable relief and to applicable bankruptcy, reorganization, insolvency,
moratorium, and similar laws affecting the rights of creditors generally). Any
other agreement contemplated to be entered into by Buyer in connection with this
Agreement and the transactions contemplated hereby, when executed and delivered,
will constitute the legal, valid, and binding obligation of Buyer enforceable in
accordance with its respective terms (subject as to enforcement of remedies to
equitable principles and to the discretion of courts in awarding equitable
relief and to applicable bankruptcy, reorganization, insolvency, moratorium, and
similar laws affecting the rights of creditors generally). The execution and
delivery by Buyer of this Agreement and the other agreements contemplated
hereby, and the performance of its obligations hereunder and thereunder, will
not violate any provision of law, the Articles of Incorporation or Bylaws of
Buyer, any order of any court or other agency of the government, or any
indenture, agreement, or other instrument to which Buyer, or any of its
properties or assets are bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement, or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim, or encumbrance of any nature
whatsoever upon any of the properties or assets of Buyer.
SECTION 3.3. Fees and Commissions. Buyer has not agreed to pay or become
liable to pay any broker's, finder's, or originator's fees or commissions by
reason of services alleged to have been rendered for, or at the instance of,
Buyer in connection with this Agreement and the transactions contemplated
hereby.
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SECTION 3.4. Other Approvals. Other than the NYPHC Approval and related
filings and landlord consents to the assignment of any leases, there are no
consents, approvals, qualifications, orders, or authorizations of, or filings
with, any governmental authority, including any court or other third party,
required in connection with Buyer's valid execution, delivery, or performance of
this Agreement, or the consummation of any transaction contemplated by this
Agreement.
SECTION 3.5. Disclosure. No representation or warranty by Buyer in this
Agreement, and no exhibit, schedule, or certificate furnished or to be furnished
by Buyer pursuant hereto, (i) contains any untrue statement of a material fact,
or (ii) omits to state a fact required to be stated therein or necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not materially misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller represents and warrants to Buyer that:
SECTION 4.1. Organization, Qualification, and Corporate Power of Seller.
Seller (i) is a duly organized and validly existing not-for-profit corporation
in good standing under the laws of the State of New York; (ii) has the requisite
power and authority to carry on its business as now conducted; and (iii) has all
requisite power and authority and licenses, permits, franchises, certificates,
authorizations, approvals and consents and rights to own the property which is
the subject of this Agreement, and to be a party to the contracts, leases, and
other agreements which are the subject of this Agreement.
SECTION 4.2. Validity. Seller has the full legal power and authority to
execute, deliver, and perform this Agreement and all other agreements and
documents necessary to consummate the contemplated transactions, and all actions
of Seller necessary for such execution, delivery, and performance have been or
will have been duly taken by Closing. This Agreement and all agreements related
to this transaction have been duly executed and delivered by Seller and
constitutes the legal, valid, and binding obligation of Seller enforceable in
accordance with its terms (subject as to enforcement of remedies to the
discretion of courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium, and similar laws affecting the rights of
creditors generally). Any other agreement contemplated to be entered into by
Seller in connection with this transaction, when executed and delivered, will
constitute the legal, valid, and binding obligation of Seller enforceable in
accordance with its respective terms (subject as to enforcement of remedies to
the discretion of courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium, and similar laws affecting
the rights of creditors generally). The execution and delivery by Seller of this
Agreement and the other agreements contemplated hereby, and the performance of
its obligations hereunder and thereunder, and the sale and delivery of the
Medical Assets do not require any action or consent of any party other than
Seller pursuant to any contract, agreement, or other undertaking of Seller,
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or pursuant to any order or decree to which Seller is a party or to which any of
its properties or assets are subject, and will not violate any provision of law,
the Articles of Incorporation or the Bylaws of Seller, any order of any court or
other agency of the government, or any indenture, agreement, or other instrument
to which Seller, or any of its properties or assets are bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement, or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim, or
encumbrance of any nature whatsoever upon any of the Medical Assets of Seller.
SECTION 4.3. Title to Properties. Seller has good and marketable title to
the Medical Assets and the Medical Assets are free and clear of any title
defect, mortgage, assignment, pledge, hypothecation, security interest, title or
retention agreement, levy, execution, seizure, attachment, garnishment, deemed
trust, lien, easement, option, right or claim of others, or charge or
encumbrance of any kind whatsoever, except as otherwise provided herein.
SECTION 4.4. Condition of Property. THE MEDICAL ASSETS ARE BEING CONVEYED
"AS IS," "WHERE IS," AND WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED.
SECTION 4.5. Litigation and Investigations. To the best knowledge of
Seller, with respect to the Business (except for matters as to which Buyer has
received any notice other than from Seller or its agents, for which matters
Seller gives no representations) there is no: (i) action, suit, claim,
proceeding, or investigation pending or threatened against or affecting Seller
or any of Seller's employees, by any private party or any federal, state,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality, domestic or foreign, or pending, threatened against, or
affecting persons or entities who perform professional services under agreement
with Seller before any professional self-governance, oversight, or regulatory
body; (ii) arbitration proceeding relating to Seller pending under collective
bargaining agreements or otherwise; or (iii) governmental or professional
inquiry pending or threatened against or directly or indirectly affecting Seller
(including without limitation any inquiry as to the qualification of Seller to
hold or receive any license or permit). Seller is not in material default with
respect to any order, writ, injunction, or decree known to or served upon it of
any court or of any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
SECTION 4.6. Approvals. Seller is in compliance in all material respects
with all laws, rules, regulations, and orders applicable to its Business and
Seller has all necessary permits, licenses, and other authorizations required to
conduct the Business as conducted (except for those matters which are the
obligations of Buyer under the Principal Management Agreement for which Seller
makes no representations). To the best knowledge of Seller, there is no existing
law, rule, regulation, or order, or proposed law, rule, regulation, or order,
whether federal, state, local, or professional, which would prohibit or restrict
Seller from, or otherwise adversely affect Seller in, conducting the Business in
any jurisdiction in which it is now conducting the Business. Except as set forth
in Schedule D, each Center is independently certified for participation in
Medicare
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and its provider number is set forth on Schedule D, attached hereto and
incorporated by reference herein.
SECTION 4.7. Fees and Commissions. Seller has not agreed to pay or become
liable to pay any broker's, finder's, or originator's fees or commissions by
reason of services alleged to have been rendered for, or at the instance of,
Seller in connection with this Agreement and the transactions contemplated
hereby.
SECTION 4.8. Other Approvals. Other than the NYPHC Approval and related
filings, landlord consents to the assignment of any leases, and the consent of
AECOM (as defined in Section 7.7), there are no consents, approvals,
qualifications, orders, or authorizations of, or filings with, any governmental
authority, including any court or other third party, required in connection with
Seller's valid execution, delivery, or performance of this Agreement, or the
consummation of any transaction contemplated by this Agreement.
SECTION 4.9. Disclosure. No representation or warranty by Seller in this
Agreement, and no exhibit, Schedule, or certificate furnished or to be furnished
by Seller pursuant hereto, (i) contains any untrue statement of a material fact
or (ii) omits to state a fact required to be stated therein or necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not materially misleading.
ARTICLE 5
COVENANTS OF BUYER
SECTION 5.1. Regulatory Approvals. Buyer shall, as soon as possible after
the execution of this Agreement, take all steps necessary for it to obtain all
required consents, approvals to the issuance of a certificate of need, if any is
required, the approval of the New York State Public Health Council to operate an
outpatient dialysis facility, or other necessary regulatory approvals.
SECTION 5.2. General Cooperation. Buyer covenants to Seller that Buyer
shall cooperate in good faith with Seller in addressing other details necessary
to consummate the transactions contemplated by this Agreement other than
obtaining necessary consents to contracts, which shall be the sole obligation of
Seller.
SECTION 5.3. Non-Contravention. Buyer covenants to Seller that it shall not
take any action or omit to take any action, which action or omission would have
the effect of materially violating any of the covenants of this Agreement or
warranties or representations of Buyer in this Agreement.
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ARTICLE 6
COVENANTS OF SELLER
SECTION 6.1. Operation of Business. Seller covenants to Buyer that Seller
shall operate and manage the Business until the Closing in the Normal Course and
shall maintain the physical condition of the Medical Assets, reasonable wear and
tear excepted.
SECTION 6.2. Liens on Medical Assets. Seller covenants to Buyer that apart
from transactions in the Normal Course, Seller shall not sell, assign, or create
any right, title, easement, or interest whatsoever in or to the Medical Assets
or create, or permit to exist, any lien, encumbrance, option, right, claim, or
charge thereon.
SECTION 6.3. Litigation. Seller covenants to Buyer that they shall advise
Buyer promptly upon notification to Seller of any pending or threatened
litigation or other legal or regulatory action affecting the Medical Assets or
the Business.
SECTION 6.4. Certificate of Need. Seller covenants to Buyer that Seller
shall cooperate from time to time as reasonably requested by Buyer in Buyer's
efforts to obtain the issuance of a Certificate of Need, if any is needed, the
approval of the New York Public Health Council, and other necessary regulatory
approvals for consummation of the transactions contemplated hereby. Subject to
the foregoing, Buyer shall have responsibility for obtaining all approvals,
permits, licenses, and Certificates of Need, as applicable, necessary for the
conduct of the Business following Closing and shall be responsible for its costs
in obtaining and maintaining same.
SECTION 6.5. General Cooperation. Seller covenants to Buyer that Seller
shall cooperate in good faith with Buyer in addressing other matters necessary
to consummate the transactions contemplated by this Agreement. In addition,
Seller shall use its reasonable efforts to obtain any landlord consents to the
assignment to Buyer of any rights that Seller has in the real estate leases for
the Centers under which NYDM is the tenant as may be required in order to obtain
the NYPHC Approval.
SECTION 6.6. Non-Contravention. Seller covenants to Buyer that it shall not
take any action or omit to take any action, which action or omission would have
the effect of materially violating any of the covenants of this Agreement or
warranties or representations of Seller in this Agreement or interfering with or
frustrating the closing of the transaction contemplated hereby.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligation of Buyer to purchase and pay for the Medical Assets on the
Closing Date, and consummate any other transactions contemplated by this
Agreement, is, at its option, subject to the satisfaction, on or before the
Closing Date, of the following conditions:
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SECTION 7.1. Representations and Warranties. Subject to the provisions of
this Agreement,
(i) the representations and warranties contained in Article 4 of this
Agreement, a breach of which would adversely affect Buyer's receipt of
good and marketable title to the Medical Assets, shall be true,
complete, and correct on and as of the Closing Date with the same
effect as though such representations and warranties have been made by
Seller on and as of such date, and Seller shall have certified to such
effect to Buyer in writing;
(ii) All other representations and warranties contained in Article 4 of
this Agreement shall be materially true, complete, and correct on and
as of the Closing Date with the same effect as though such
representations and warranties have been made by Seller on and as of
such date (which in the case of Section 4.5 shall mean that no
litigation, investigations, inquiries or proceedings are pending which
if adversely determined would materially adversely affect Buyer's
ability to own or operate the Business or its results of operation or
financial condition) and Seller shall have certified to such effect to
Buyer in writing.
SECTION 7.2. Compliance with Covenants. Seller shall have materially
performed and complied with all agreements contemplated herein that are required
to be performed or complied with by Seller prior to or at the Closing Date.
SECTION 7.3. Regulatory Approvals. All necessary regulatory approvals for
the transactions contemplated by this Agreement, including the approval from the
State of New York's Public Health Council for Buyer to operate the Business,
shall have been obtained and must be in full force and effect.
SECTION 7.4. Approvals. Seller shall have obtained all material approvals
and consents to be obtained by it necessary to consummate the transactions
contemplated hereby.
SECTION 7.5. Supporting Documents. Buyer and its counsel shall have
received copies of the Operating Agreement and the Medical Director Agreement
executed by Seller, and all other supporting documents reasonably requested by
them, including (i) resolutions of the Executive Committee of Seller's Board of
Trustees certified by an Assistant Secretary of Seller authorizing the
consummation of the transactions contemplated by this Agreement (unless such
resolutions already have been delivered under the Agreement to Amend and have
not been rescinded or modified since delivery under the Agreement to Amend) and
(ii) an opinion letter of Seller's in-house counsel, dated as of the Closing, in
substance as set forth in Schedule E, attached hereto and incorporated by
reference herein.
SECTION 7.6. Agreement to Amend. Seller shall have executed and delivered
all agreements and documents required to be executed and delivered to Buyer
(including any undertakings by third parties) under the Agreement to Amend.
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SECTION 7.7. Assignment of AECOM Affiliation Agreement. The consent of
Albert Einstein College of Medicine ("AECOM") to the transactions contemplated
by this Agreement as evidenced by an amendment and assignment of the Affiliation
Agreement dated July 1,1991, by and between AECOM and Seller in form and
substance reasonably acceptable to Buyer and Seller shall have been obtained. In
the event such consent is not obtained, Buyer may elect nonetheless to purchase
and pay for the Medical Assets on the Closing Date, and consummate any other
transactions contemplated by this Agreement, in which case Buyer shall not be
obligated to pay to Seller the Purchase Price as set forth in Section 1.4.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligation of Seller to sell the Medical Assets on the Closing Date,
and consummate any other transactions contemplated by this Agreement, is, at its
option, subject to the satisfaction, on or before the Closing Date, of the
following conditions:
SECTION 8.1. Representations and Warranties. Subject to the provisions of
this Agreement, the representations and warranties contained in Article 3 of
this Agreement shall be materially true, complete, and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made by Buyer on and as of such date, and Buyer shall have certified to
such effect to Seller in writing.
SECTION 8.2. Compliance with Covenants. Buyer shall have materially
performed and complied with all agreements contemplated herein that are required
to be performed or complied with by Buyer prior to or at the Closing Date.
SECTION 8.3. Regulatory Approvals. All necessary regulatory approvals for
the transactions contemplated by this Agreement, including the approval from the
State of New York's Public Health Council for Buyer to operate the Business,
shall have been obtained and must be in full force and effect.
SECTION 8.4. Approvals. Buyer shall have obtained all material approvals
and consents to be obtained by it necessary to consummate the transactions
contemplated hereby.
SECTION 8.5. Supporting Documents. Seller and its counsel shall have
received copies of the Operating Agreement and the Medical Director Agreement
executed by Buyer, and all supporting documents reasonably requested by them,
including (i) resolutions of the Buyer's Board of Directors certified by an
officer of Buyer authorizing the consummation of the transactions contemplated
by this Agreement (unless such resolutions already have been delivered under the
Agreement to Amend and have not been rescinded or modified since delivery under
the Agreement to Amend) and (ii) an opinion letter of Buyer's counsel in
substance as set forth in Schedule F, attached hereto and incorporated by
reference herein.
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ARTICLE 9
JOINT COVENANTS OF THE PARTIES
SECTION 9.1. Confidentiality of Business Information. The parties
heretofore have received and hereafter may receive various financial and other
information concerning its activities, business, assets, and properties. The
parties agree that:
9.1.1 all such information thus received by the parties shall not at
any time, or in any way or manner, be utilized by the parties for its respective
advantage or disclosed by the parties to others for any purpose whatsoever; and
9.1.2 the parties shall take all reasonable measures to assure that no
employee or agent under its respective control shall at any time use or disclose
any information described in this Section; and
9.1.3 this Section shall not apply to (i) any such information that
was known to the parties prior to its disclosure to the parties in accordance
with this Section or was, is, or becomes generally available to the public other
than by disclosure by the parties or any of its employees or agents in violation
of this Section; or (ii) any disclosure which such party makes to any regulatory
agency pursuant to that party's obligations of disclosure to such agency or
which is otherwise required by law.
SECTION 9.2. Confidentiality of this Agreement. The existence and contents
of this Agreement and its Schedules and the nature and status of the
transactions described herein and therein are confidential. Without the prior
written consent of the other party, no party will disclose to any person, other
than to its respective trustees, directors, officers, key employees, affiliates,
accounting, investment banking, and legal advisers, the existence and contents
of this Agreement and its Schedules and the nature and status of the
transactions described herein unless, in the opinion of counsel to the party
seeking to make the disclosure, such a disclosure is required by applicable
laws. The timing and content of any announcements, press releases, or other
public statements concerning the transactions contemplated by this Agreement
will occur upon, and be determined by, the mutual agreement and consent of the
parties, which shall not be unreasonably withheld if, in the opinion of counsel
to the party seeking to make the announcement, press release, or other public
statement, such a disclosure is required by applicable laws.
SECTION 9.3. Return of Information. In the event this Agreement is
terminated pursuant to Section 11.1, the parties agree that they shall promptly
return to the originating party the confidential information of the other.
ARTICLE 10
INDEMNIFICATION
SECTION 10.1 Indemnification and Payment of Damages by Seller. Seller will
indemnify and hold harmless Buyer, its officers, employees, agents, directors,
representatives,
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stockholders, controlling persons, and affiliates (collectively, the "Buyer
Indemnified Persons") for, and will pay to Buyer Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim, arising, directly or indirectly, from or in connection with:
(a) any material breach of any representation or warranty made by Seller
in this Agreement or any other certificate or document delivered by
Seller pursuant to this Agreement;
(b) any federal, state or local tax or fee incurred, accrued, or assessed
in connection with the Medical Assets or the Business with respect to
any period prior to the Closing;
(c) any liability or obligation related to or in connection with the
Medical Assets or the Business which are or were incurred with respect
to any period prior to the Closing or which relate to the operation of
the Business with respect to any period prior to the Closing;
(d) any claims brought by AECOM due to the failure to obtain the consent
of AECOM to the transactions contemplated by this Agreement as
contemplated by Section 7.7; or
(d) any material breach by Seller of any covenant or obligation of Seller
in this Agreement.
The remedies provided in this Section 10.1 will not be exclusive of or
limit any other remedies that may be available to Buyer or other Buyer
Indemnified Persons.
SECTION 10.2 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless Seller, its officers, employees, agents, trustees,
directors, representatives, controlling persons, and affiliates (collectively,
the "Seller Indemnified Persons") for, and will pay to Seller Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim, arising, directly or indirectly, from or in
connection with:
(a) any breach of any representation or warranty made by Buyer in this
Agreement or any other certificate or document delivered by Buyer
pursuant to this Agreement;
(b) any federal, state or local tax or fee incurred, accrued, or assessed
in connection with the Medical Assets or the Business relating thereto
as owned or operated by Buyer with respect to any period from and
after the Closing;
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(c) any liability or obligation related to or in connection with the
Medical Assets or the Business as owned or operated by Buyer, incurred
with respect to any period from and after the Closing or which relate
to the operation of the Business by Buyer with respect to any period
from and after the Closing; or
(d) any material breach by Buyer of any covenant or obligation of Buyer in
this Agreement.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Seller or other Seller
Indemnified Persons.
SECTION 10.3. Liability and Risk of Loss. Seller shall remain liable for
all obligations and liabilities, costs and expenses, fixed or contingent,
arising out of the operation or ownership of any of the Medical Assets or the
Business and out of the conduct of any business related to the Medical Assets or
the Business prior to the Closing, and shall remain liable for all such
obligations and liabilities not assumed by Buyer pursuant to this Agreement
following the Closing, except to the extent that Buyer is or was responsible for
any such liabilities or obligations under the Management Agreement or any
successor to the Management Agreement, including the Administrative Services
Agreement referenced in Amendment No. 3. All risk of loss of, and related to,
the Medical Assets or Business shall remain with Seller through the Closing.
SECTION 10.4. Procedure for Seller Indemnification - Third Party Claims.
(a) Promptly after receipt by a Buyer Indemnified Person under Section
10.1 of notice of the commencement of any proceeding against it, such
Buyer Indemnified Person will, if a claim is to be made against
Seller, give notice to Seller of the commencement of such claim, but
the failure to notify Seller will not relieve Seller of any liability
that he may have to any Buyer Indemnified Person, except to the extent
that Seller demonstrates that the defense of such action is prejudiced
by Buyer Indemnified Person's failure to give such notice.
(b) If any proceeding referred to in Section 10.1 is brought against a
Buyer Indemnified Person and Buyer Indemnified Person gives notice to
Seller of the commencement of such proceeding, Seller will be entitled
to participate in such proceeding and, to the extent that he wishes
(unless (i) Seller is also a party to such proceeding and Buyer
Indemnified Person determines in good faith that joint representation
would be inappropriate or (ii) Seller fails to provide reasonable
assurance to Buyer Indemnified Person of its financial capacity to
defend such proceeding and provide indemnification with respect to
such proceeding), to assume the defense of such proceeding with
counsel satisfactory to Buyer Indemnified Person and, after notice
from Seller to Buyer Indemnified Person of its election to assume the
defense of such proceeding, Seller will not, as long as it diligently
conducts such defense, be liable to Buyer Indemnified Person under
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this Section 10.1 for any fees of other counsel or any other expenses
with respect to the defense of such proceeding, in each case
subsequently incurred by Buyer Indemnified Person in connection with
the defense of such proceeding, other than reasonable costs of
investigation. If Seller assumes the defense of a proceeding, (i) it
will be conclusively established for purposes of this Agreement that
the claims made in that proceeding are within the scope of and subject
to indemnification; (ii) no compromise or settlement of such claims
may be effected by Seller without Buyer Indemnified Person's consent
unless (A) there is no finding or admission of any violation of legal
requirements or any violation of the rights of any person and no
effect on any other claims that may be made against Buyer Indemnified
Person, and (B) the sole relief provided is monetary damages that are
paid in full by Seller; and (iii) Buyer Indemnified Person will have
no liability with respect to any compromise or settlement of such
claims effected without its consent, such consent not to be
unreasonably withheld. If notice is given to Seller of the
commencement of any proceeding and Seller does not, within ten (10)
days after Buyer Indemnified Person's notice is given, give notice to
Buyer Indemnified Person of its election to assume the defense of such
proceeding, Seller will be bound by any determination made in such
proceeding or any compromise or settlement effected by Buyer
Indemnified Person which is approved by Seller, such approval not to
be unreasonably withheld.
(c) Notwithstanding the foregoing, if a Buyer Indemnified Person
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, Buyer Indemnified Person may, by
notice to Seller, assume the exclusive right to defend, compromise, or
settle such proceeding, but Seller will not be bound by any
determination of a proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
SECTION 10.5. Procedure for Buyer Indemnification - Third Party Claims.
(a) Promptly after receipt by a Seller Indemnified Person under Section
10.2 of notice of the commencement of any proceeding against it, such
Seller Indemnified Person will, if a claim is to be made against
Buyer, give notice to Buyer of the commencement of such claim, but the
failure to notify Buyer will not relieve Buyer of any liability that
it may have to any Seller Indemnified Person, except to the extent
that Buyer demonstrates that the defense of such action is prejudiced
by Seller Indemnified Person's failure to give such notice.
(b) If any proceeding referred to in Section 10.2 is brought against a
Seller Indemnified Person and Seller Indemnified Person gives notice
to Buyer of the commencement of such proceeding, Buyer will be
entitled to participate in such proceeding and, to the extent that it
wishes (unless (i) Buyer is also a party to such
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proceeding and Seller Indemnified Person determines in good faith that
joint representation would be inappropriate or (ii) Buyer fails to
provide reasonable assurance to Seller Indemnified Person of its
financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the
defense of such proceeding with counsel satisfactory to Seller
Indemnified Person and, after notice from Buyer to Seller Indemnified
Person of its election to assume the defense of such proceeding, Buyer
will not, as long as it diligently conducts such defense, be liable to
Seller Indemnified Person under this Section 10.2 for any fees of
other counsel or any other expenses with respect to the defense of
such proceeding, in each case subsequently incurred by Seller
Indemnified Person in connection with the defense of such proceeding,
other than reasonable costs of investigation. If Buyer assumes the
defense of a proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that proceeding are
within the scope of and subject to indemnification; (ii) no compromise
or settlement of such claims may be effected by Buyer without Seller
Indemnified Person's consent unless (A) there is no finding or
admission of any violation of legal requirements or any violation of
the rights of any person and no effect on any other claims that may be
made against Seller Indemnified Person, and (B) the sole relief
provided is monetary damages that are paid in full by Buyer; and (iii)
Seller Indemnified Person will have no liability with respect to any
compromise or settlement of such claims effected without its consent,
such consent not to be unreasonably withheld. If notice is given to
Buyer of the commencement of any proceeding and Buyer does not, within
ten (10) days after Seller Indemnified Person's notice is given, give
notice to Seller Indemnified Person of its election to assume the
defense of such proceeding, Buyer will be bound by any determination
made in such proceeding or any compromise or settlement effected by
Seller Indemnified Person which is approved by Buyer, such approval
not to be unreasonably withheld.
(c) Notwithstanding the foregoing, if a Seller Indemnified Person
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, Seller Indemnified Person may,
by notice to Buyer, assume the exclusive right to defend, compromise,
or settle such proceeding, but Buyer will not be bound by any
determination of a proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
SECTION 10.6. Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
SECTION 10.7. Time Limitations. If the Closing occurs, Seller will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or
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obligation to be performed and complied with on or prior to the Closing Date,
unless on or before a date two (2) years from the Closing Date, Buyer notifies
Seller of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Buyer. If the Closing occurs, Buyer will have
no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with on or prior to the Closing Date, unless on or before a date two
(2) years from the Closing Date, Seller notifies Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Seller. A claim for indemnification or reimbursement not based upon any
representation or warranty or any covenant or obligation to be performed and
complied with on or prior to the Closing Date, may be made at any time.
SECTION 10.8. Limitations on Amount. If the Closing occurs, Seller will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed or
complied with before the Closing Date, until the total amount of all damages
under this Agreement and Section 10(g) of the Agreement to Amend exceeds Five
Hundred Thousand Dollars ($500,000), and then only up to a maximum of eight
million four hundred sixty thousand dollars ($8,460,000) under both this
Agreement and the Agreement to Amend when considered in the aggregate.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Termination Events. This Agreement may be terminated after
the Consideration Payment Date, as defined in the Agreement to Amend, only in
accordance with Section 2.4 of this Agreement or in accordance with Amendment
No. 3 or the Administrative Services and Consulting Agreement by and between
Seller and NYDM, if that agreement is entered into, and shall continue in full
force and effect absent such termination. Termination of this Agreement shall be
without prejudice to any other right or remedy of any of the parties hereto.
Notwithstanding the above, the parties agree that Sections 9.1, 9.2, and 9.3
shall survive termination for any reason.
SECTION 11.2. Notice. Whenever notice must be given under the provisions
of this Agreement, such notice must be in writing and will be deemed to have
been duly given by (a) hand-delivery (with written confirmation of receipt)
addressed to the parties at their respective addresses set forth below; or (b)
certified mail, return receipt requested, postage prepaid, and addressed to the
parties at their respective addresses set forth below; or (c) telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, addressed to the parties at their respective
addresses set forth below, and provided further that notice shall be deemed
given under this subsection (c) when actually received by the recipient:
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If to Buyer:
101 North Scoville
Oak Park, IL 60302
Attn: Craig Moore
Fax: (708) 386-1711
with a copy to:
Katten Muchin & Zavis
525 West Monroe
Chicago, Illinois 60661-3693
Attn.: Alan Berry, Esq. and Matthew S. Brown, Esq.
Fax: (312) 902-1061
and
Hinman, Straub, Pigors & Manning, P.C.
121 State Street
Albany, New York 12207-1693
Attn: Ray Kolarsey, Esq.
Fax: (518) 436-4751
If to Seller:
111 East 210th Street
Bronx, New York 10467
Attn: Stanley L. Jacobson, Esq.
Fax: (718) 652-2161
with a copy to:
Green, Stewart, Farber & Anderson, P.C.
2600 Virginia Avenue, N.W.
Suite 1111
Washington, D.C. 30037
Attn: Philip D. Green, Esquire
Fax: (202) 342-8734
SECTION 11.3. Survival of Provisions. Except as limited by Section 10.7,
all warranties, representations, hold harmless, indemnity, and other obligations
and restrictions made, undertaken, and agreed to by Seller or Buyer under this
Agreement shall survive the Closing.
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SECTION 11.4. Amendment. No modification, waiver, amendment, discharge, or
change of this Agreement shall be valid unless in writing and signed by the
party against whom enforcement of such modification, waiver, amendment,
discharge, or change is sought.
SECTION 11.5. Assignment. This Agreement shall not be assignable by any
party without the prior written consent of the others. Except as noted above, no
other person or corporate entity shall acquire or have any rights under or by
virtue of this Agreement.
SECTION 11.6. Severability. If any one or more of the provisions of this
Agreement should be ruled wholly or partly invalid or unenforceable by a court
or other government body of competent jurisdiction, then: (a) the validity and
enforceability of all provisions of this Agreement not ruled to be invalid or
unenforceable shall be unaffected; (b) the effect of the ruling shall be limited
to the jurisdiction of the court or other government body making the ruling; (c)
the provision(s) held wholly or partly invalid or unenforceable shall be deemed
amended, and the court or other government body is authorized to reform the
provision(s), to the minimum extent necessary to render them valid and
enforceable in conformity with the parties' intent as manifested herein and a
provision having a similar economic effect shall be substituted; and (d) if the
ruling and/or the controlling principle of law or equity leading to the ruling,
is subsequently overruled, modified, or amended by legislative, judicial, or
administrative action, the provision(s) in question as originally set forth in
this Agreement shall be deemed valid and enforceable to the maximum extent
permitted by the new controlling principle of law or equity.
SECTION 11.7. Choice of Law. The interpretation of this Agreement and the
rights and obligations of Buyer and Seller hereunder shall be governed by the
laws of the State of New York, without regard to choice of law provisions.
SECTION 11.8. Binding Benefit. The provisions, covenants and agreements
herein contained shall inure to the benefit of, and be binding upon, the parties
hereto and its respective legal representatives, successors and assigns.
SECTION 11.9. Headings and Construction. All headings contained in this
Agreement are for reference purposes only and are not intended to affect in any
way the meaning or interpretation of this Agreement. All words used in this
Agreement shall be construed to be of such gender and number as the
circumstances require.
SECTION 11.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same agreement.
SECTION 11.11. Expenses. Each of the parties shall bear its own expenses
in connection with this Agreement.
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SECTION 11.12. Waiver. The waiver by any party of a breach or violation of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach of such provision or any other provision of this
Agreement.
SECTION 11.13. Construction. This Agreement shall not be construed more
strictly against any party hereto by virtue of the fact that the Agreement may
have been drafted or prepared by such party or its counsel, it being recognized
that all of the parties hereto have contributed substantially and materially to
its preparation and that this Agreement has been the subject of and is the
product of negotiations between the parties.
SECTION 11.14 Cumulative Remedies. Any right, power, or remedy provided
under this Agreement to any party hereto shall be cumulative and in addition to
any other right, power or remedy provided under this Agreement now or hereafter
existing at law or in equity, and may be exercised singularly or concurrently.
SECTION 11.15 Attorney's Fees. In the event that any party breaches this
Agreement in any respect, the prevailing party shall be entitled to recover, in
addition to any and all other remedies, which shall be cumulative, the
reasonable attorney's fees, expenses, and costs which it or she incurs as a
result thereof.
SECTION 11.16. Arbitration. In the event of a dispute between the parties
arising from or relating to this Agreement, including, but not limited to,
construction, interpretation, implementation, or enforcement of this Agreement
or the performance or breach of any provision in this Agreement, the parties
shall meet and confer in good faith to resolve such dispute. In the event such
efforts do not resolve the dispute within fifteen (15) days from the date the
dispute arises, either party may demand arbitration administered and conducted
in New York, New York, by the American Arbitration Association, before one (1)
arbitrator, under its Commercial Arbitration Rules, such arbitration to be
final, conclusive, and binding. Judgment on the award rendered by the arbitrator
may be entered by any court having proper jurisdiction. This provision shall
survive termination of this Agreement. Notwithstanding the foregoing, any party
may seek or assert entitlement to injunctive relief or specific performance in
court as an initial matter and shall have no prior obligation to establish in
arbitration the entitlement to injunctive relief or specific performance.
SECTION 11.17. Entire Agreement. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement among the parties with
respect to its subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MONTEFIORE MEDICAL CENTER EVEREST DIALYSIS SERVICES, INC.
/s/ Donald L. Ashkenase /s/ Craig W. Moore
- ------------------------------------ ------------------------------------
Signature Signature
Donald L. Ashkenase Craig W. Moore
- ------------------------------------ ------------------------------------
Print Name Print Name
Executive Vice President-Corporate Chief Executive Officer
- ------------------------------------ ------------------------------------
Office or Title Office or Title
[Signature Page for Medical Asset Purchase Agreement by and
between Montefiore Medical Center and Everest Dialysis Services, Inc.]
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LIST OF SCHEDULES
-----------------
SCHEDULE A TAX ALLOCATION
SCHEDULE B MEDICAL DIRECTOR AGREEMENT
SCHEDULE C OPERATING AGREEMENT
SCHEDULE D CENTER PROVIDER NUMBERS
SCHEDULE E OPINION LETTER OF SELLER'S IN-HOUSE
COUNSEL
SCHEDULE F OPINION LETTER OF BUYER'S COUNSEL
SCHEDULE A
TAX ALLOCATION
--------------
The Purchase Price shall be allocated to the tangible assets, if any, in
accordance with their fair market value. The remainder of the Purchase Price
shall be allocated to the CON and the patient lists.
SCHEDULE D
CENTER PROVIDER NUMBERS
-----------------------
- Units located on Webster Avenue - 333505
- Unit located on Morris Park Avenue - 333508
- Unit located on Eastchetser Road - no number has been issued, but all
filings necessary to obtain a number have been made.
Schedule B
----------
MEDICAL DIRECTOR AND ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
MONTEFIORE MEDICAL CENTER
AND
EVEREST DIALYSIS SERVICES, INC.
-------------------------------
THIS MEDICAL DIRECTOR AND ADMINISTRATIVE SERVICES AGREEMENT (the
"Agreement"), dated as of this ____ day of _________, _____ (the "Effective
Date"), is made and entered into by and between Montefiore Medical Center, a
not-for-profit corporation duly organized and validly existing under the laws of
the State of New York ("MMC"), and Everest Dialysis Services, Inc., a
corporation duly organized and validly existing under the laws of the State of
New York ("Vendor").
WHEREAS, Vendor owns and/or operates outpatient dialysis clinics at various
locations in New York State;
WHEREAS, Vendor desires to obtain the services of MMC, through
nephrologists employed or engaged by MMC or an Affiliate (as defined below) of
MMC, to provide certain administrative and medical director services with
respect to certain facilities operated by Vendor in the Region (as defined
herein);
WHEREAS, MMC desires to provide such administrative and medical director
services to Vendor with respect to certain outpatient dialysis clinics operated
by Vendor in the Region (as defined below).
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. General Duties and Responsibilities. MMC shall provide the
medical director and administrative services, as set forth herein, for the
Network Clinics (as defined herein) in return for the payment of the fees for
such services, all as set forth with more particularity herein.
SECTION 2. Defined Terms. The following terms shall be defined as herein
set forth:
2.1 Region: The term "Region" shall mean the geographic area within
the Borough of the Bronx, New York City and the geographic area within
Westchester County, New York, south of Route 287.
2.2. Network Clinic(s): The term "Network Clinic(s)" shall mean:
(a) the outpatient dialysis clinics located at (i) 3547 Webster
Avenue, Bronx, New York (Dialysis Clinic I); (ii) 3547
Webster Avenue,
Bronx, New York (Dialysis Clinic II); (iii) 1325 Morris Park
Avenue, Bronx, New York; and (iv) 1695 Eastchester Avenue,
Bronx, New York, including, as to each clinic, any successor
location;
(b) any dialysis facility developed pursuant to Section 2.0 of
the Operating Agreement of even date herewith between MMC
and Vendor; and
(c) any other dialysis facility in the Region owned and operated
by Vendor, or an Affiliate (as defined below) of Vendor,
that now or hereafter, during the term hereof, has a vacancy
for the position of medical director and to which such
position a physician who meets the qualifications set forth
in Section 3 below is recommended and approved pursuant to
Section 3 below, unless, (x) such vacancy was created by the
departure, death, resignation, retirement or disability of a
medical director from that position and such vacancy is able
to be filled by a physician with medical staff privileges at
that dialysis facility or a member of the departed medical
director's group practice or a purchaser of such practice;
or (y) the dialysis facility is acquired by Vendor and the
previous owner or medical director accepts the appointment
of medical director; or (z) Vendor develops a satellite
facility of an existing or acquired dialysis facility and
the current medical director of the existing or acquired
dialysis facility elects to serve as the medical director of
such satellite.
2.3 Affiliate: The term "Affiliate" shall mean a person or entity:
(a) which owns a fifty percent (50%) or more equity interest (or its equivalent)
in MMC or Vendor, as the case may be; (b) in which MMC or Vendor, as the case
may be, owns a fifty percent (50%) or more equity interest (or its equivalent);
(c) which controls the election of fifty percent (50%) or more of the Directors
of the Board of MMC or Vendor, as the case may be; or (d) of which the election
of fifty percent (50%) or more of the Board of Directors is controlled by MMC or
Vendor, as the case may be.
SECTION 3. MMC's Duties as Medical Director. MMC hereby agrees that it
shall provide the services of one or more physicians to serve as the medical
director of each of the Network Clinics (the "Medical Director(s)"), and as
Regional Medical Director in accordance with Section 3.5 hereof, which
physicians shall be appointed by MMC's President and subject to the approval of
Vendor, which approval shall not be unreasonably withheld. Notwithstanding the
above, Vendor may appoint a community nephrologist ("Non-MMC Medical Director")
to act as medical director of any of the Network Clinics other than the Clinics
set forth in Section 2.2(a)(i) to (iii) above, and MMC shall have no obligation
to compensate such medical directors. Notwithstanding the above, during such
time as the Affiliation Agreement by and between MMC and the Albert Einstein
College of Medicine ("AECOM") remains in effect, the Medical Director of the
facility commonly referred to as the Baumritter Facility shall be an employee of
AECOM, subject to the terms of the Affiliation Agreement to the extent required
by AECOM. One person
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may serve as the Medical Director for more than one of the Network Clinics,
except as mutually agreed by MMC and Vendor and subject to applicable laws and
regulations. The Medical Director(s) shall have the duties and responsibilities
described below. Each of the persons selected to serve as Medical Director shall
(i) be a licensed physician in the State of New York; (ii) be board certified or
board eligible in nephrology; and (iii) have a minimum of one (1) year
experience of training in the care of patients at ESRD treatment facilities, and
meet the requirements of a physician director under the Medicare End-Stage Renal
Disease Program regulations (42 C.F.R. (S) 405.2102 et seq.).
3.1 Specific Duties. The Medical Director(s) shall have the duties
and responsibilities relating to services as medical directors assigned to them
from time to time by Vendor's board of directors, as required by the Medicare
End-Stage Renal Disease Program and those duties and responsibilities required
of persons serving in such capacities under all applicable federal, state, and
local laws, rules, and regulations. Those duties and responsibilities shall
include those required under the Medicare End-Stage Renal Disease Program
regulations (42 C.F.R. (S) 405.2161) and, to the extent reasonably requested by
Vendor, other duties and responsibilities including, but not limited to,
participating with Vendor in:
(a) Formulating, selecting, and administering the Network
Clinics' patient care policies, and day-to-day
implementation of these policies;
(b) Supervising the daily operation and maintenance of dialysis
equipment and the procurement of supplies for the Network
Clinics;
(c) Assisting Vendor personnel in development, needs analysis,
implementation, and supervision of the Network Clinics'
training programs. The Medical Director(s) shall supervise
the nursing and social worker staff to determine that each
patient has access to appropriate training materials for
home dialysis, in addition to appropriate training supplies
and equipment;
(d) Directing Vendor personnel in maintaining the appropriate
content and current status of all records relating to the
care and treatment of patients in the Network Clinics in
accordance with the Network Clinics' policies and applicable
laws and regulations;
(e) Reviewing water analysis results and monthly culture
reports, and providing direction for appropriate remedial
steps as needed;
(f) Reviewing federal, state, and local survey reports and, as
needed, participating in the development and implementation
of an appropriate plan of correction;
(g) Reviewing all Network Clinics' incident reports and policy
and procedure manuals;
-3-
(h) Reviewing applications for physicians seeking privileges at
the Network Clinics and making recommendations to Vendor as
to which such applications for privileges should be
approved;
(i) Reviewing disciplinary action with regard to any member of
the medical staff or patient care personnel;
(j) Serving as a member of the oversight committee at each of
the Network Clinics, as such oversight committees are
contemplated by Vendor's operating procedures. For purposes
of this Agreement, the members of the oversight committee
for a Network Clinic shall consist of the Medical Director,
the Director of Nursing, and the Administrator of that
Network Clinic;
(k) Determining that there is adequate monitoring of patients
and the provision of dialysis services, including, for self-
dialysis patients, assuring periodic assessment of patient
performance of dialysis tasks;
(l) Determining that there is the availability of patient care
policy and procedures manuals and their implementation;
(m) For self-dialysis training and home dialysis training,
determining that patient teaching materials are available
for the use of all trainees during training and at times
other than during the dialysis procedure;
(n) Using best efforts in cooperation with the Vendor to
determine that the Network Clinics comply with all state and
federal regulations concerning the medical standards and
procedures required of dialysis clinics, including all
applicable standards and protocols regarding reuse
procedures;
(o) Assuring that proper medical coverage is provided for all
hours of the Network Clinics' operation, including a 24-hour
per day, 7 day per week on-call service, and assuring
compliance with all other aspects of the medical care
policies of the Network Clinics;
(p) Supervising the establishment, maintenance, review, and
implementation of quality assurance and utilization review
programs with respect to dialysis procedures and the
operation of the Network Clinics;
(q) Advising and providing recommendations as needed for Network
Clinics' renovation and improvement, including
recommendations relating to equipment maintenance, repair,
and replacement;
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(r) Assisting in the evaluation and coordination of laboratory
and other services ancillary to the Network Clinics'
operations; and
(s) Implementing the Network Clinics' clinical policies with
respect to the admission of new patients to the Network
Clinics.
3.2 Required Time Commitment. Each Physician approved to serve as
Medical Director shall devote his or her best efforts and so much of his or her
time and attention to the affairs and activities of the Network Clinics as may
reasonably be required to serve as Medical Director(s) of such Network Clinics.
3.3 Physician License. Each physician shall remain duly licensed and
qualified to act as Medical Director (under all applicable state, federal, and
local laws, regulations, and rules) of the Network Clinics during his or her
tenure as Medical Director of a Network Clinic.
3.4 Medical Director of the Regional Network. MMC and Vendor shall
have joint responsibility for evaluating and overseeing the integrity and
quality of Vendor's services in the Network Clinics. Vendor shall also make
available to MMC all information necessary as requested from time to time by MMC
to monitor compliance with the quality assurance standards set forth in this
Agreement, including, but not limited to, mortality and morbidity data with
respect to the entire Vendor network in the United States. The parties agree to
the following with respect to evaluating and overseeing the integrity and
quality of the network:
(a) The Regional Medical Director for the Network Clinics shall
be selected by the president of MMC. The Regional Medical
Director shall have the authority to monitor the quality of
and performance within the Regional Network. The Regional
Medical Director will not have any authority over the
medical directors at the Vendor Clinics or over the Vendor
Clinics other than through the procedure set forth below,
and, except as set forth in this Agreement, neither the
Regional Medical Director nor MMC shall be responsible for,
nor have any liability for, any matters related to the
Regional Network's quality assurance program or utilization
review. Notwithstanding anything herein to the contrary, the
full-time Medical Directors shall report to the Regional
Medical Director and non-full time Medical Directors shall
report to the Medical Director for Hemodialysis of Everest
Healthcare Corporation ("Everest"), who in turn shall report
to the Regional Medical Director.
(b) MMC and Vendor shall share all available data with respect
to utilization and quality assurance within the Regional
Network.
(c) Vendor's utilization review and quality assurance staff
(including Vendor's Department of Quality Assurance) shall
report to both MMC and Vendor as regards the development and
operation of the Regional Network. Vendor's utilization
review/quality assurance staff will provide reasonable
support services to the Regional
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Medical Director, as requested from time-to-time by him/her.
Utilization Review and Quality Assurance will continue to be
conducted/ reviewed at monthly or weekly meetings chaired by
the Medical Director of the individual unit. Representatives
of Everest may attend such meetings.
(d) Vendor and MMC shall create, within thirty (30) days after
execution of this Agreement, a Regional Vendor/MMC Joint
Committee which shall consist of the Administrative Chief of
Everest in New York, the Medical Director Hemodialysis of
Everest, the Vice President of Dialysis Services of Everest,
the Regional Medical Director, and the two Medical Directors
of the Baumritter and Webster Dialysis Unites, provided,
however, that in the event new units with full-time MMC
Medical Directors are constructed, the Regional Medical
Director shall select the two full-time MMC Medical
Directors who shall be members of the Vendor/MMC Joint
Committee.
(e) The Regional Medical Director for the Regional Network shall
have the authority to initiate procedures for enforcing
compliance with the quality assurance standards referenced
above, including the standards set forth in this Agreement,
and any additional standards, protocols, procedures
established by the Regional Vendor/MMC Joint Committee
(collectively, the "Quality Assurance Standards"). Quality
Assurance standards shall be based on ESRD Core Indicator
Project of the U.S. Department of Health and Human Services,
the National Kidney Foundation DOQI Guidelines ("Dialysis
Outcomes Quality Initiatives"), and the Centers for Disease
Control guidelines for dialysis units.
(f) In the event the Regional Medical Director determines any
irregularities or other problems with respect to compliance
with the Quality Assurance Standards, or any failure by
Vendor to comply with such standards, he/she will bring
these matters to the attention of the Administrative Chief
of Everest in New York. The Regional Medical Director and
the Administrative Chief of Everest in New York shall in
good faith attempt to resolve and remedy any such
deficiencies or irregularities. In the event the
deficiencies or irregularities are not resolved to the
satisfaction of the Regional Medical Director within ten
(10) business days of him/her notifying Vendor's Medical
Director of Hemodialysis of such deficiencies or
irregularities, then the Regional Medical Director shall
have the authority and right to meet with the Vice President
of Dialysis Services of Everest, which meeting shall take
place within five (5) business days, in order to discuss any
outstanding issues. If, after ten (10) additional business
days, the deficiency or irregularity has not been remedied
to the satisfaction of the Regional Medical
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Director, then the Regional Medical Director shall meet with
the Regional Vendor/MMC Joint Committee, which Committee
shall be required to act within ten (10) business days with
respect to the matter. Its determination regarding
resolution of the deficiency or irregularity shall be final
and binding on both Vendor and MMC. If the Regional
Vendor/MMC Joint Committee is unable to reach a decision
regarding the issue, an independent third party, jointly
selected by the parties and paid for by Vendor, will be
appointed to resolve the issue. Vendor shall take all steps
reasonably necessary to ensure that its personnel are
available for meetings and consultation with the Regional
Medical Director in order to comply with the provisions of
this Section.
SECTION 4. Obligations of Vendor. Except as specifically delegated by this
Agreement to MMC, the Vendor shall retain all management and administrative
prerogatives and responsibilities as would normally be assumed by the owner and
operator of a medical facility. Without limiting the foregoing, Vendor agrees as
follows:
(a) To operate the Network Clinics as renal dialysis facilities
under the Medicare ESRD Program and, if required, as a
properly licensed renal facility under state laws and
regulations.
(b) To provide all necessary equipment, personnel, supplies, and
services (other than medical services) required for the
operation of the Network Clinics including a business
manager or administrator under contract or otherwise.
(c) To establish, modify, and implement through contract or
otherwise non-clinical policies and procedures concerning
the administration of the Network Clinics including
purchasing, personnel staffing, inventory control, equipment
maintenance, accounting, legal, data processing, medical
record keeping, laboratory, billing, collection, public
relations, insurance, cash management, scheduling, and hours
of operation.
(d) To pay, or arrange to pay, all wages, salaries, and other
compensation, including social security, unemployment,
withholding, and all other taxes and payroll deductions for
any and all personnel of the Network Clinics.
(e) To maintain patient-to-staff ratios at the Network Clinics
consistent with national averages for academic medical
institutions that have outsourced their dialysis programs to
national vendors.
(f) To consult with the Medical Directors regarding the
employment or dismissal of key personnel of the Network
Clinics, including the Administrator, Director of Nursing,
Social Worker, Dietician, and
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Chief Technician ("Key Facility Personnel"). Vendor shall
provide the Medical Directors the opportunity to interview,
prior to employment, any candidate for any Key Facility
Personnel position.
(g) To conduct the Network Clinics' reprocessing of dialyzers in
accordance with all applicable Medicare, AAMI, FDA, and
other requirements.
(h) To consult with the Medical Directors regarding the
upgrading, acquisition, maintenance, and replacement of all
major medical equipment (defined to mean medical equipment
with a cost of $5,000 or more) at the Center, including any
dialysate delivery system.
(i) To maintain clean and sanitary conditions in the Network
Clinics and comply with all applicable laws, regulations,
and OSHA standards.
(j) To consult with the Medical Directors regarding the
expansion of any current Network Clinics and the location of
any additional Network Clinics.
(k) To consult with the Medical Directors regarding the closure
of any Network Clinic to new patients based upon the
capacity of such clinic to accept additional patients, and
the reopening of any closed Network Clinic to new patients.
(l) To consult with the Medical Directors regarding managed care
strategies and opportunities for the Network Clinics.
(m) To make available to the Medical Director and nephrologists
on a monthly basis, without charge, and in a timely manner,
a per-patient record of the hemodialysis treatments
performed, for the expressed purpose that these are to be
used by the physicians for their billing of the monthly
capitation payment.
SECTION 5. Term, Termination, and Replacement of Medical Director.
5.1 Term and Termination. The term of this Agreement shall commence as
of Closing Date of the Medical Asset Purchase Agreement and shall continue for
an initial term which shall be ten (10) years from the Consideration Payment
Date under the Agreement to Amend and Not-To-Compete between MMC and New York
Dialysis Management, Inc. dated July 17, 1998 (the "Initial Term"). This
Agreement shall be automatically extended for successive additional five (5)
year terms (the "Renewal Terms") until terminated hereunder. Either party may
terminate this Agreement effective at the end of the Initial Term or at the end
of any Renewal Term by giving the other party at least five (5) years prior
written notice to the other.
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5.2 Termination for Breach. In the event of any material breach of
this Agreement, the non-breaching party shall notify the breaching party in
writing of the specific nature of the breach. If the breaching party does not
(i) cure the breach within thirty (30) days of notice, or (ii) if the breach
cannot reasonably be cured within such period, commence best efforts to cure and
pursue such efforts to completion, then the non-breaching party shall have the
right to terminate this Agreement immediately by providing a second written
notice to the breaching party specifying the termination date; provided,
however, that in the event either party elects to challenge such termination in
a court of competent jurisdiction, then the terminating party shall be required
to continue to perform under this Agreement and all other agreements between the
parties until conclusion of such challenge, including all applicable appeals.
Such termination shall not preclude the non-breaching party from pursuing all
remedies available to it in law or at equity. The parties agree that the failure
to pay any sums due hereunder shall be considered a material default.
5.3 Miscellaneous Termination. Notwithstanding anything to the
contrary herein contained, in the event performance by either party hereto of
any term, covenant, condition, or provision of this Agreement or any of the
agreements referred to in the preamble of this Agreement shall (i) jeopardize
the licensure of either party, (ii) jeopardize either party's participation in
(a) Medicare, Medicaid, Blue Cross, or other governmental reimbursement or
payment programs, or (b) any other state or nationally recognized accrediting
organization, (iii) jeopardize MMC's tax exempt status, or (iv) be in violation
of any statute, ordinance, or be otherwise deemed illegal, or be deemed
unethical by any recognized body, agency, or association in the medical fields,
either party shall have the immediate right to initiate the renegotiation of the
affected term or terms of this Agreement, upon notice to the other party, to
remedy such condition. The parties shall thereafter use their best efforts to
negotiate in good faith to restructure this relationship so as to make the same
lawful and to the extent possible, to maintain the economic benefits to each
party as contemplated hereunder. Should the parties be unable to renegotiate the
term or terms so affected so as to bring it/them into compliance with the
statute, rule, regulation, principle or interpretation that rendered it/them
unlawful or unenforceable within ninety (90) days of the date on which notice of
a desired renegotiation is given, then either party shall be entitled, after the
expiration of said initial 90-day period, to terminate this Agreement
immediately, without penalty.
5.4 Termination of Other Agreements. This Agreement shall terminate
upon the termination of the Operating Agreement between the parties, dated as of
the date hereof.
5.5 Replacement of Medical Director. The following events shall
require replacement of a Medical Director by MMC upon receipt of written notice
from Vendor:
(a) death or disability of the Medical Director;
(b) fraud, embezzlement or misappropriation by the Medical
Director;
(c) the Medical Director's failure, neglect of, or refusal to
comply with the terms of this Agreement, the Vendor's
policies and procedures for the Network Clinics, or to
perform his or her duties as a Medical Director of a Network
Clinic;
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(d) revocation or suspension of the Medical Director's license
to practice medicine in the State of New York;
(e) the Medical Director being found guilty of unethical
professional conduct by the medical licensing board of the
State of New York; or
(f) the Medical Director being excluded or suspended from
participation in the Medicare or Medicaid Programs.
5.6 MMC Requirements to Replace Medical Director. MMC shall promptly
appoint a physician in accordance with Section 3 to replace any Medical Director
removed from serving as Medical Director pursuant to Section 5.5. In the event
(i) MMC fails to replace the Medical Director as necessary; or (ii) cannot cure
the event causing the need for a replacement, this Agreement may be terminated
by Vendor upon written notice to MMC provided MMC shall be given a reasonable
time to cure such event so long as a suitable Medical Director is appointed
during such period.
SECTION 6. Compensation.
6.1 Administrative Fees. In consideration of the services to be
performed by MMC pursuant to this Agreement, Vendor agrees to pay MMC an
administrative fee equal to Six Hundred Twenty Five Thousand Dollars ($625,000)
per year, payable in equal monthly installments of Fifty Two Thousand Eighty
Three Dollars ($52,083.33), payable in arrears on or before the twentieth (20th)
day of each month. In the event this Agreement does not commence on the first
day of the month, the administrative fee from the first day services are to be
performed hereunder until the last day of that month shall be paid on or before
the twentieth (20th) day of the following month and the amount to be paid shall
be determined as follows: Fifty Two Thousand Eighty Three Dollars ($52,083.33)
divided by the total number of days in the month in which the Agreement
commences multiplied by the number of calendar days from the first day services
are to be provided until the end of that month. The administrative fees set
forth herein shall be in consideration for services to be performed by MMC and
the physicians provided by MMC and AECOM only, and not for the services of any
other physician or entity under any existing or future arrangement at the
Network Clinics. MMC agrees that it shall be responsible for paying the AECOM
Medical Director fees which are currently payable in connection with in that
certain Affiliation Agreement by and between MMC and AECOM, whether or not the
Affiliation Agreement is assigned to Vendor.
6.2 Additional Administrative Fees. Vendor shall pay MMC an additional
administrative fee, which shall be equal to Thirty-Six Thousand Dollars
($36,000) per year, for each new Network Clinic established in the Region.
6.3 Annual Adjustments. All administrative fees payable hereunder
shall be adjusted annually, effective as of the anniversary of the execution of
this Agreement to the extent consistent with the fair market value of the
services provided herein, to give effect to increases
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in the cost of living determined by reference to the Consumer Price Index, All
Items, CPI-U (1982-1984 = 100) (the "Index") (and if such Index is discontinued,
then any successor index of the Bureau of Labor Statistics or successor agency
thereto shall be used) as follows:
(a) Each year, the Index for the month in which the anniversary
of the date of execution of this Agreement shall occur (the
"Current Index") less the Index for the month in which this
Agreement was executed (the "Base Index"), shall be divided
by the Base Index;
(b) The administrative fees payable as set forth in Sections 6.1
and 6.2 shall be multiplied by the number resulting from the
calculation described in Section 6.3(a) above;
(c) The result of the calculations of Sections 6.3(a) and 6.3(b)
shall be the administrative fees payable for the following
year; and
(d) The foregoing calculation shall be made as soon as the
Current Index is published and the resulting adjustment
shall be made retroactive to the anniversary date to which
such Current Index relates. In no event shall the
Administrative Fees be (i) reduced as a result of such
adjustment or (ii) increased by more than five percent (5%)
from the prior year.
SECTION 7. Quality Assurance Protocols.
7.1 Compliance. Vendor agrees that it shall take all steps necessary
and use its reasonable efforts to ensure that the Network Clinics and all other
facilities owned, managed, or operated by Vendor within the Region are at all
times operated in full compliance with (i) the standards established and
promulgated by the United States Department of Health and Human Services for
Conditions for Coverage of Suppliers and End-Stage Renal Disease Services,
currently set forth at 42 C.F.R Ch. IV, Subpart U as such standards may be
amended from time to time, (ii) the standards established for the ESRD Network,
as set forth in the aforementioned regulations, applicable to the geographic
area in which the Network Clinics are located, as such standards may be amended
from time to time, and (iii) the Vendor Network Clinic's Clinical Procedures, as
defined below, copies of which have been made available to MMC. Clinical
policies and procedures for the Network Clinics shall be developed by Vendor
within a reasonable period of time after the Effective Date and will be modified
and approved by Vendor subject to MMC's approval ("Network Clinic's Clinical
Procedures") which approval of MMC shall not be unreasonably withheld if such
procedures are in compliance with applicable laws, rules, and regulations.
Vendor shall have the authority to amend or modify the Network Clinic's Clinical
Procedures after consultation with the Medical Directors; provided, however,
that such amendments or modifications shall be made based upon Vendor's
reasonable determination that they are necessary for patient safety, compliance
with established Vendor's quality assurance procedures, or compliance with
applicable laws, rules, or regulations. All such amendments or changes shall be
in accordance with renal treatment standards prevalent in the local area in
which the particular Network Clinic is located. Failure to comply with the
aforementioned standards shall be deemed a material breach by Vendor of this
Agreement.
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7.2 MMC Right to Monitor. Vendor shall make available to MMC or its
Affiliates and the Medical Directors all reasonably available information
requested from time to time by MMC to monitor compliance with the quality
assurance standards, including, but not limited to, mortality and morbidity
data, with respect to the Network Clinics to the extent permitted by law and
provided such discovery will not jeopardize or destroy any privilege rights that
would otherwise attach to such information. Vendor will make data with respect
to its other facilities available in accordance with applicable laws and other
Vendor policies and procedures. Such data shall be treated and identified by the
parties as confidential and privileged peer review information and the parties
shall take all steps reasonably necessary to preserve the protected status
thereof. Vendor shall consult with MMC with respect to all quality assurance
matters affecting the Network Clinics, including, but not limited to, equipment
selection.
SECTION 8. Noncompetition and Confidentiality.
8.1 Noncompete. The covenant not to compete as set forth in Section
3(a) of the Agreement to Amend and Not-To-Compete between MMC and New York
Dialysis Management, Inc. dated July 17, 1998, is incorporated herein by
reference, and shall apply for the benefit of Vendor during the Initial Term
and, if renewed, each Renewal Term, or until earlier terminated in accordance
with Section 8.3 below.
8.2 Prior Activities. The parties agree that in the event that MMC
either acquires, or is acquired by, another corporation, person, or other entity
(whether by merger, sale of assets, change of membership interest, sale of
stock, or otherwise) that has been engaged in any of the activities otherwise
prohibited by this Section for a period of at least one hundred eighty (180)
days prior to the date such acquisition is consummated (the "Prior Activities"),
provided that the Prior Activities are not all or a substantial portion of the
business activities of such corporation, person or other entity, then Section
8.1 shall not apply to such Prior Activities so long as the surviving
corporation, person or other entity to such acquisition does not materially
increase the services included in such Prior Activities during the Restricted
Period.
8.3 Termination of Noncompetition. Notwithstanding anything to the
contrary contained herein, the covenant not to compete contained in Section 8.1
shall lapse and be of no further force or effect at the effective time of the
termination of this Agreement if this Agreement is terminated by MMC pursuant to
Sections 5.2 or 5.3 hereof, or at the effective time of the termination of the
Operating Agreement if the Operating Agreement is terminated (i) by either MMC
or Vendor pursuant to Sections 5.2 or 5.4 of the Operating Agreement or (ii) by
MMC pursuant to Sections 5.3 or 5.7 of the Operating Agreement. Except as
provided in this Section 8.3, Section 8.1 shall survive termination of this
Agreement in accordance with its terms.
8.4 Severability of Noncompetition Provision. If a court of competent
jurisdiction should declare the covenants contained in Section 8.1 unenforceable
because of any unreasonable restriction of duration and/or geographical area,
then the parties hereby acknowledge and agree that such court shall have the
express authority to reform the covenant to provide for reasonable restrictions
and/or grant Vendor such other relief at law or in equity reasonably necessary
to protect the interests of Vendor.
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8.5 MMC Confidentiality Requirement. Neither MMC, its Affiliates, or
its employees or agents will make any use for its/his own benefit, or for the
benefit of any person, firm, corporation, or other entity, other than Vendor, or
disclose to any person, firm, corporation, or other entity other than Vendor,
any Confidential Information (as defined below) pertaining to Vendor or the
Network Clinics to the extent acquired by it from Vendor at any time during the
term hereof and not generally known within the trade or as a matter of public
knowledge. For purposes of this Agreement, the term "Confidential Information"
shall include the terms of this Agreement, tax returns, financial statements,
loan documentation, investment information, cost and expense data, trade
secrets, marketing and patient data, employment agreements and policies,
employee benefits, contracts with patients and suppliers, manuals, policies and
procedures, contracts with independent contractors, business plans and
strategies and third party payer contracts. This Section shall not apply to
disclosures required by law, generally accepted accounting principles (GAAP), or
litigation, development by MMC of protocols, treatment plans, devices and
procedures based solely on patient data obtained by MMC in the performance of
its obligations under this Agreement and other agreements contemporaneously
entered into with Vendor, all of which shall be the sole property of MMC.
8.6 Vendor Confidentiality Requirement. Vendor agrees that during the
term of this Agreement and for a period of five (5) years thereafter, neither
Vendor, its Affiliates, its employees or agents will make any use for its/his
own benefit, or for the benefit of any person, firm, corporation or other
entity, other than MMC, or disclose to any person, firm, corporation or other
entity other than MMC, any Confidential Information pertaining to MMC, to the
extent acquired by it/him at any time during the term hereof and not generally
known within the trade or as a matter of public knowledge. This Section shall
not apply to disclosures required by law, generally accepted accounting
principles (GAAP), or litigation, development by Vendor of protocols, treatment
plans, devices and procedures based solely on patient data obtained by Vendor in
the performance of its obligations under this Agreement and other agreements
contemporaneously entered into with MMC, all of which shall be the sole property
of Vendor.
SECTION 9. Insurance and Indemnification.
9.1 Vendor Insurance. Vendor shall purchase and maintain malpractice
and liability insurance of not less than one million dollars ($1,000,000) per
occurrence and three million dollars ($3,000,000) per year in the aggregate to
insure against acts done by Vendor within the course and scope of the
performance of its duties under this Agreement. MMC shall be an additional
insured on all such policies. Vendor shall notify MMC in the event that Vendor
becomes aware of any adverse change in (i) the amount of insurance coverage or
(ii) any policy terms, or in the event of cancellation of such policies.
9.2 MMC Insurance. MMC represents that it maintains malpractice and
liability insurance, whether self-insured or purchased through an insurance
carrier, of not less than one million dollars ($1,000,000) per occurrence and
three million dollars ($3,000,000) per year in the aggregate to insure against
MMC's acts, respectively, done within the course and scope of the performance of
their respective duties under this Agreement. Vendor shall be an additional
insured on all such policies. MMC shall notify Vendor in the event that it
becomes aware of an adverse change in (i) the amount of insurance coverage or
(ii) any policy terms, or in the event of cancellation of such policies.
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9.3 Increase in Insurance. The parties each agree that they shall
consult with each other from time to time regarding the appropriate amounts of
coverage that should be maintained by entities which provide services similar to
MMC and Vendor hereunder, and the parties agree that they shall increase the
amount of their respective insurance coverages if the parties mutually determine
that sound or prudent business practices warrant such an increase.
9.4 Indemnification by MMC. MMC shall indemnify, defend and hold
Vendor and its officers, directors, shareholders, agents, employees,
representatives, successors and assigns, harmless from and against any act of
MMC (whether based in contract, tort, product liability, strict liability or
otherwise), including taxes, and all expenses (including interest, penalties,
and reasonable attorneys' fees and disbursements) incurred by any of the above-
referenced persons, resulting from or in connection with any one or more of the
following:
(a) Any performance or non-performance of MMC or a Medical
Director under this Agreement;
(b) Any misrepresentation, breach, or failure to perform any
covenant or agreement made or undertaken by MMC in this
Agreement; or
(c) Any action, suit, proceeding, or claim incident to any of
the foregoing.
Notwithstanding the foregoing, MMC shall not indemnify or hold Vendor harmless
for any intentional or negligent act of Vendor (or any agent, employee or
contracted party of Vendor other than MMC).
9.5 Indemnification by Vendor. Vendor shall indemnify, defend and hold
MMC and its officers, trustees, directors, shareholders, agents, employees,
representatives, successors and assigns, harmless from and against any act of
Vendor (whether based on contract, tort, product liability, strict liability or
otherwise), including taxes, and all expenses (including interest, penalties and
reasonable attorneys' fees and disbursements) incurred by any of the
above-referenced persons, resulting from or in connection with any one or more
of the following:
(a) Any performance or non-performance of Vendor under this
Agreement;
(b) Any misrepresentation, breach, or failure to perform any
covenant or agreement made or undertaken by Vendor in this
Agreement; or
(c) Any action, suit, proceeding, or claim incident to any of
the foregoing.
Notwithstanding the foregoing, Vendor shall not indemnify or hold MMC harmless
for any intentional or negligent act of MMC (or any agent, employee or
contracted party of MMC).
9.6 Notice of Claims. If any claim is made against a party hereto
that, if sustained, would give rise to a right of indemnification under this
Section 9, the party having the
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claim made against it ("Indemnitee") shall give the other party ("Indemnitor")
notice thereof (specifying the nature and amount of the claim and giving
Indemnitor the right to contest the claim) within as soon as possible after
becoming aware of such claim ("Notice of Claim").
9.7 Right to Contest. Indemnitee shall afford Indemnitor the
opportunity, at Indemnitor's own expense, to assume the defense or settlement of
any such claim, with its own counsel. In connection therewith, the Indemnitee
shall cooperate fully to make available all pertinent information under its
control and shall have the right to join in the defense, at its own expense,
with its own counsel. If Indemnitor does not elect to undertake the defense of a
claim on the terms provided below, Indemnitee shall be entitled to undertake the
defense or settlement of the claim at the expense of and for the account and
risk of Indemnitor. Indemnitor shall have the right to assume the entire defense
of a claim hereunder provided that: (a) Indemnitor gives written notice of such
desire (the "Notice of Defense") to Indemnitee as soon as possible after
Indemnitor's receipt of the Notice of Claim; (b) Indemnitor's defense of such
claim shall be without cost to Indemnitee or prejudice to Indemnitee's rights
under this Section 9; (c) counsel chosen by Indemnitor to defend such claim
shall be reasonably acceptable to Indemnitee; (d) Indemnitor shall bear all
costs and expenses in connection with the defense and settlement of such claim;
(e) Indemnitee shall have the right to receive periodic reports from Indemnitor
and Indemnitor's counsel; and (f) Indemnitor will not, without Indemnitee's
written consent, settle or compromise any claim or consent to any entry of
judgment unless the settlement or compromise or entry of judgment (i) includes
an unconditional release of Indemnitee by claimant or plaintiff of all liability
with respect to the claim subject to indemnification hereunder and (ii) does not
include any admission of wrongdoing by Indemnitee.
9.8 Payment of Indemnity. If the parties hereto agree or if a court of
competent jurisdiction determines that any claims may give rise to a right to
indemnification, the amount for which Indemnitee is to be indemnified shall be
paid by the Indemnitor by delivery of a certified check or cashier's check
within thirty (30) days after the date such determination is made.
9.9 Additional Remedies. The rights of indemnification contained in
this Section 9 shall be in addition to any other rights or remedies which any
party may have at law or equity.
SECTION 10. Access to Records. MMC and Vendor agree that if it is
ultimately determined that this Agreement is a subcontract for services, the
value of which is $10,000 or more during a twelve-month period, within the
meaning of Section 952 of the Omnibus Reconciliation Act of 1980 (Pub. L. 96-
499), and 42 C.F.R. Part 420, then MMC and Vendor, until the expiration of four
(4) years after the furnishing of services pursuant to this Agreement, shall
make available, and MMC and Vendor shall cause their physicians or other
personnel to make available, upon written request, to the Secretary of Health
and Human Services or, upon written request, to the Comptroller General, or any
of their duly authorized representatives, the Agreement, and the books,
documents and records of MMC and Vendor that are necessary to evaluate the
nature and extent of such costs. If either MMC or Vendor carries out any of the
duties of this Agreement through a subcontract, with a value or cost of $10,000
or more over a twelve-month period, with a related organization, such
subcontract shall contain a clause to the effect that until the expiration of
four (4) years after the furnishing of such services pursuant to
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such subcontract, the related organization shall make available, upon written
request, to the Secretary of Health and Human Services or, upon written request,
to the Comptroller General, or any of their duly authorized representatives, the
subcontract, and books, documents and records of such organization that are
necessary to verify the nature and extent of such costs.
SECTION 11. Amendments. No modification, waiver, amendment, discharge, or
change of this Agreement shall be valid unless in writing and signed by the
parties against whom enforcement of such modification, waiver, amendment,
discharge, or change is subject.
SECTION 12. Waiver. The waiver by any party of a breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver of
subsequent breach of such provision or any other provision of this Agreement.
SECTION 13. Notices. Whenever notice must be given under the provisions of
this Agreement, such notice must be in writing and will be deemed to have been
duly given by (a) hand-delivery (with written confirmation of receipt) addressed
to the parties at their respective addresses set forth below; or (b) certified
mail, return receipt requested, postage prepaid, and addressed to the parties at
their respective addresses set forth below; or (c) telecopier (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, addressed to the parties at their respective addresses
set forth below, and provided further that notice shall be deemed given under
this subsection (c) when actually received by the recipient:
If to Vendor:
101 North Scoville
Oak Park, IL 60302
Attn: Craig W. Moore
Fax: (708) 386-1711
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Alan Berry, Esq. and Matthew Brown, Esq.
Fax: (312)902-1061
If to MMC:
111 East 210th Street
Bronx, New York 10467
Attn: Stanley L. Jacobson, Esquire
Fax: 718-652-2161
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with a copy to:
Green, Stewart, Farber & Anderson, P.C.
Suite 1111
2600 Virginia Avenue, N.W.
Washington, D.C. 20037
Attn: Philip D. Green, Esquire
Fax: 202-342-8734
SECTION 14. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same agreement.
SECTION 15. Governing Law and Venue. This Agreement shall be construed in
accordance with the laws of the State of New York, without taking into account
any choice of law provisions. Any action brought by either party pursuant to
this Agreement shall be brought only in the courts located in the State of New
York and shall be proper only in such courts, and each party hereto consents to
the jurisdiction of the courts located in the State of New York.
SECTION 16. Section Titles. The titles of the sections have been inserted
as a matter of convenience and reference only and shall not control or affect
the meaning or construction of this Agreement.
SECTION 17. Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned or delegated by either of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party; provided, however, that either party may
assign or delegate its duties under this Agreement or all or part of this
Agreement to an Affiliate of such party or another corporation or entity that is
owned or controlled by, owns or controls, or is under common ownership and
control with, the assigning entity; provided, further, however, that in the
event either party assigns or delegates this Agreement pursuant to this
sentence, the assigning party shall remain jointly and severally liable for all
of the duties and obligations assigned hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective successors and assigns.
SECTION 18. Expenses. Each party hereto will pay its own legal, accounting,
and other fees and expenses incident to the transactions contemplated hereby,
whether or not such transactions shall be consummated. Each party will be
responsible for its own costs relative to the negotiations of such agreements
and the preparation of any schedules or ancillary documents and agreements
applicable to such party and required by this Agreement.
SECTION 19. Brokerage. Each party hereto will indemnify and hold the others
harmless against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements, or understandings made or claimed to have
been made by such party with any third party.
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SECTION 20. Parties in Interest. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
SECTION 21. Cumulative Remedies. Any right, power, or remedy provided under
this Agreement to any party hereto shall be cumulative and in addition to any
other right, power, or remedy provided under this Agreement now or hereafter
existing at law or in equity, and may be exercised singularly or concurrently.
SECTION 22. Third Parties. Except as specifically provided herein, this
Agreement does not and is not intended to create any rights in any person or
entity which is not a party to this Agreement.
SECTION 23. Representations. The parties represent and warrant to each
other that the execution of this Agreement and performance of their respective
duties under this Agreement will not violate as of the date hereof: (i) any law,
statute, regulation, or rule, including without limitation, requirements
relating to conflicts of interest or fiduciary duty owed by the party making the
representation to a third party; or (ii) any agreement, judgment, court order,
or similar restriction to which the party making the representation may be a
party or by which any such person is or may be bound.
SECTION 24. Independent Contractor. The relationship between Vendor and MMC
is, and shall remain, one of independent contractors. Nothing in this Agreement
shall be deemed to constitute the parties hereto as partners, joint venturers,
or acting as other than independent contractors. Nothing in this Agreement shall
be deemed to constitute any party as the agent of the other parties, nor shall
any party have the right to bind any other party or make any promises or
representations on behalf of any other party. In this regard, the parties
further agree that Vendor shall not be responsible for the payment or
withholding of payroll and related taxes or benefits for MMC and the Medical
Directors resulting from services rendered hereunder, and MMC will indemnify
Vendor for any claims for payment made by a Medical Director directly against
Vendor.
SECTION 25. Entire Agreement. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement among the parties with
respect to its subject matter.
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INTENDING TO BE LEGALLY BOUND, the parties hereto have duly executed this
Agreement to be effective as of the day and year first written above.
MONTEFIORE MEDICAL CENTER EVEREST DIALYSIS SERVICES, INC.
- ------------------------- -------------------------------
Signature Signature
- ------------------------- -------------------------------
Print Name Print Name
- ------------------------- -------------------------------
Title Title
[Signature Page for Medical Director Agreement by and between
Montefiore Medical Center and Everest Dialysis Services, Inc.]
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Schedule C
----------
OPERATING AGREEMENT
BY AND BETWEEN
MONTEFIORE MEDICAL CENTER
AND
EVEREST DIALYSIS SERVICES, INC.
-------------------------------
THIS OPERATING AGREEMENT (the "Agreement"), dated as of this ____ day of
___________, _____, (the "Effective Date"), by and between Montefiore Medical
Center, a non-profit corporation duly organized and validly existing under the
laws of the State of New York ("MMC"), and Everest Dialysis Services, Inc., a
corporation duly organized and validly existing under the laws of the State of
New York ("Vendor").
WHEREAS, Vendor and MMC are parties to (i) that certain Medical Asset
Purchase Agreement; and (ii) that certain Medical Director and Administrative
Services Agreement;
WHEREAS, MMC and Vendor desire to agree to certain other terms and
conditions applicable to the transactions between MMC and Vendor and their
continuing operations in the Region, as defined herein;
NOW, THEREFORE, in consideration of the promises and mutual agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. The following terms shall be defined as follows:
1.1 Region. The term "Region" shall mean the geographic area within
the Borough of the Bronx, New York City, and the geographic area within
Westchester County, New York, south of Route 287.
1.2 Network Clinics. The term "Network Clinics" shall mean:
(a) the chronic dialysis facilities currently located at: (i)
3547 Webster Avenue, Bronx, New York (Dialysis Clinic I);
(ii) 3547 Webster Avenue, Bronx, New York (Dialysis Clinic
II); (iii) 1325 Morris Park Avenue, Bronx, New York; and
(iv) 1695 Eastchester Road, Bronx, New York;
(b) any facility developed pursuant to Section 2 of this
Agreement;
(c) any other dialysis facility in the Region owned and operated
by Vendor, or an Affiliate of Vendor (as defined below),
that now or hereafter, during the term hereof, has a vacancy
for the position of medical director and to which such
position a physician who meets the qualifications set forth
in Section 3 of that certain
Medical Director and Administrative Services Agreement and
is recommended and approved pursuant to Section 3 of the
Medical Director and Administrative Services Agreement;
unless, (x) such vacancy was created by the departure,
death, resignation, retirement, or disability of a medical
director from that position and such vacancy is able to be
filled by a physician with medical staff privileges at that
dialysis facility or a member of the departed medical
director's group practice or a purchaser of such practice;
or (y) the dialysis facility is acquired by Vendor and the
previous owner or medical director accepts the appointment
of medical director; or (z) Vendor develops a satellite
facility of an existing or acquired dialysis facility and
the current medical director of the existing or acquired
dialysis facility elects to serve as the medical director of
such satellite.
1.3 Affiliate. The term "Affiliate" shall mean a person or entity: (i)
which owns a fifty percent (50%) or more equity interest (or its equivalent) in
MMC or Vendor, as the case may be; (ii) in which MMC or Vendor, as the case may
be, owns a fifty percent (50%) or more equity interest (or its equivalent);
(iii) which controls the election of fifty percent (50%) or more of the
Directors of the Board of MMC or Vendor, as the case may be; or (iv) of which
the election of fifty percent (50%) or more of the Board of Directors is
controlled by MMC or Vendor, as the case may be.
SECTION 2. Development of Dialysis Facilities and Noncompete. Vendor, at
its expense, shall operate the Network Clinics described in Sections 1.2(a) and
1.2(b) during the term of this Agreement. Vendor, at its expense, subject to
receipt of all necessary approvals from the New York State Health Department and
New York Public Health Council, hereby commits to acquire, develop, and
thereafter operate two (2) Medicare certified dialysis facilities, with a
minimum of twenty (20) dialysis stations per facility, in the Region within four
(4) years of the Effective Date. In addition, Vendor hereby commits to open one
(1) Medicare certified dialysis facility in each of the three (3) years
following the calendar year during which utilization at the facilities acquired
pursuant to this section is at eighty percent (80%) of capacity assuming six (6)
patient shifts per station per week; provided, however, that Vendor's obligation
to open a facility pursuant to this sentence shall cease upon the receipt by
Vendor of a notice of termination pursuant to Section 5.2 or 5.7 hereof or if
Vendor terminates due to MMC's breach. Vendor shall use its best efforts to
obtain all such necessary approvals. For so long as this Agreement is in effect,
neither Vendor nor any Affiliate of Vendor shall provide, or own or control any
person or entity that provides, directly or indirectly, any vascular surgery
services within the Region. Vendor shall take all actions necessary to cause its
Affiliates to agree to and be bound by the restriction imposed by the prior
sentence. MMC and Vendor or its affiliates, as part of a managed care dialysis
program, shall negotiate in good faith and enter into an agreement whereby MMC
shall cause vascular surgeons employed by MMC to provide certain vascular
surgery services at the Network Clinics. MMC agrees to use its reasonable
efforts to cause its non-employed, affiliated vascular surgeons to enter into
agreements with Vendor to provide certain vascular surgery services at the
Network Clinics.
SECTION 3. Managed Care Contracts. This Section sets forth the parties'
agreements concerning managed care contracts. As used in this Section the term
"Managed Care Contract"
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means any payment arrangement other than a fee-for-service payment arrangement
based on charges or discounts from charges. For purposes of this Section 3,
references to MMC shall be limited to MMC, and shall not include or otherwise
bind MMC IPA, Inc. or MMC North IPA No. 1., Inc. However, MMC will use all
reasonable efforts to persuade MMC IPA, Inc. and MMC North IPA No. 1, Inc. to
adhere to the commitments made by MMC (where appropriate) in this Section 3.
3.1 Inpatient/Outpatient Services. For all of Vendor's managed care
arrangements and contracts with self-insured employers within the Region, MMC
shall be Vendor's exclusive site for all hospital-related inpatient and
outpatient dialysis services and products (i.e., medical services that are not
normally provided at Vendor's outpatient dialysis clinics as of the date of this
Agreement). In this regard, MMC will be Vendor's exclusive site for inpatient
care, vascular surgery (including, but not limited to, vascular access surgery),
transplants, etc., for all of Vendor's managed care contracts or for renewals of
Vendor's existing contracts within the Region. To the extent that Vendor's
contracts with insurance carriers, managed care companies, third-party
administrators, or self-insured employees, MMC reserves the right to approve all
such contracts which obligate MMC to provide services. A formula will be agreed
upon as part of the contract as to how prices will be set by MMC and Vendor for
such managed care products.
3.2 Managed Care Strategies. It is understood and agreed that MMC and
Vendor will, to the maximum extent possible, attempt to coordinate their managed
care strategies. However, it is agreed that Vendor will have the authority to
market its outpatient clinics to third-party payors and others without MMC's
prior permission; that Vendor must have secured MMC's prior written permission
before Vendor markets any of MMC's inpatient or outpatient hospital services;
and that MMC, without Vendor's prior permission, can market a full range of
inpatient and outpatient dialysis services, including services to be provided at
Vendor's outpatient dialysis clinics, provided that (i) Vendor approves the
terms and conditions of agreements which require Vendor to provide services at
Vendor outpatient dialysis centers and (ii) Vendor is paid at a level
commensurate with the best favored price Vendor offers to any third-party in the
Region, but in no event more than the average price paid to other dialysis
companies similar to Vendor for similar services in the Region. If the parties
cannot agree on this average price, an independent third party shall be retained
to make the determination.
Notwithstanding the foregoing, it is specifically agreed that MMC's and
Vendor's representatives, at least once a month, will meet to confer regarding
potential targets for managed care contracts, and for purposes of coordinating
the parties' respective managed care strategies. As and when Vendor identifies
specific targets for managed care contracts, Vendor agrees that it will provide
MMC with written notice identifying that target, and will provide details to MMC
concerning the contractual negotiations and fee schedules being discussed with
the target company. It is further agreed that once MMC receives this written
notice, for a period of thirty (30) days, Vendor and MMC will work
collaboratively to develop an inpatient and outpatient dialysis-related managed
care product which can be presented to the targeted company. If the parties are
unable to develop this product, or the product is developed but the targeted
company is not interested, Vendor will be free to contract with that company for
outpatient dialysis services only. In the event that MMC identifies specific
targets for a stand alone dialysis product for managed care companies, MMC
agrees that it will provide Vendor with written notice identifying that target,
and will provide details to Vendor concerning the contractual negotiations
-3-
and fee schedules being discussed with that target company. It is further agreed
that once Vendor receives its written notice, for a period of thirty (30) days,
MMC and Vendor will work collaboratively to develop a dialysis related managed
care product which can be presented to the targeted company. If the parties are
unable to develop this product, or the product is developed but the targeted
company is not interested in such a product, then, subject to the non-
competition restrictions which are referenced in Section 2.2 of the Asset
Purchase Agreement and Section 8.1 of the Medical Director Agreement, MMC will
be free to contract with that company for the stand alone dialysis product.
3.3 Existing Managed Care Contracts. MMC acknowledges that Vendor has
submitted, or will submit, an application to the New York State Department of
Health seeking approval to become the established operator of the network
clinics listed in section 1.2(a) of this Agreement. MMC agrees to cooperate with
Vendor to jointly develop a transition plan designed to permit Vendor -- by the
date upon which Vendor becomes the operator of such clinics -- to have
contractual arrangements in place with all payors with which MMC currently
contracts to provide outpatient dialysis services, either through assignment of
existing contracts, subcontracts with Vendor, or other arrangements.
SECTION 4. Outpatient Dialysis and Related Services.
4.1 Services.
(a) Subject to Section 3, for all contracts that MMC enters into
pursuant to which MMC, or an Affiliate, will arrange for the
provision of dialysis services ("Contracts"), subject to
customary terms and conditions, Vendor agrees, if requested
by MMC, to provide all the outpatient dialysis treatments to
persons entitled to receive such dialysis services in the
Region pursuant to the Contracts in the Region. Vendor also
agrees, if requested by MMC, to provide all outpatient
dialysis-related services (subject to customary terms and
conditions) related to the provision of the outpatient
dialysis treatments, including, but not limited to, routine
laboratory services (e.g., blood cultures), non-routine
laboratory services and prescription drugs related to
dialysis services (e.g., epogen and Calcijex), bone
densitometry and nerve conduction tests, EKGs and Doppler
flow studies and other necessary supplies required by the
Contracts, if and to the extent such services are typically
provided by Vendor, at a payment level for such services
that is commensurate with the average price Vendor then-
currently is receiving from all third-party payors in the
Region.
(b) Vendor also agrees, subject to customary terms and
conditions reasonably acceptable to Vendor for such
services, including its charges for such services (which
shall be commensurate with average Vendor prices in the
Region), to enter into good faith negotiations with third
party payers with which MMC has managed care arrangements to
provide such services.
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4.2 Non-Discrimination; Quality of Care. Vendor shall be responsible
for and agrees to provide the outpatient dialysis and related services in
accordance with generally accepted prevailing medical and professional practices
and standards. Vendor agrees to provide the outpatient dialysis and related
services to persons covered under the Contracts without regard to race,
religion, sex, color, disability, national origin, economic status (except in
accordance with uniformly applied policies and procedures reasonably approved by
MMC) or health status.
4.3 Payment. MMC shall be solely responsible for payment of all such
fees to Vendor pursuant to Section 4.1. MMC shall pay Vendor no later than
forty-five (45) days from the date Vendor submits its claim for services. Vendor
agrees that in no event, including but not limited to nonpayment by MMC of
amounts due Vendor under this Agreement, insolvency of MMC under any Contract or
any breach of this Agreement by MMC, shall Vendor or its assignees or
subcontractor have any recourse against any beneficiary under a Contract. The
requirements of this clause shall survive any termination of this Agreement for
services rendered prior to such termination, regardless of the cause of such
termination.
4.4 Contracts. MMC shall provide Vendor on a timely basis all
pertinent information on any new or amended Contracts pursuant to which Vendor
is providing services. MMC shall provide Vendor with a list of all patients
under the Contracts pursuant to which Vendor is providing services who are
eligible to receive the services.
SECTION 5. Term and Termination.
5.1 Term. The term of this Agreement shall commence as of the Closing
Date of the Medical Asset Purchase Agreement and shall continue for an initial
term which shall be ten (10) years from the Consideration Payment Date under the
Agreement to Amend and Not-To-Compete between MMC and New York Dialysis
Management, Inc., dated July 17, 1998 (the "Initial Term"). This Agreement shall
be automatically extended for successive additional five (5) year terms (the
"Renewal Terms") until terminated hereunder.
5.2 Termination at End of Initial Term or Renewal Term. Either party
may terminate this Agreement effective at the end of the Initial Term or at the
end of any Renewal Term by giving the other party at least five (5) years prior
written notice.
5.3 Termination for Breach. In the event of any material breach of any
provision of this Agreement, the non-breaching party shall notify the breaching
party in writing of the specific nature of the breach. If the breaching party
does not (i) cure the breach within thirty (30) days of notice, or (ii) if the
breach cannot reasonably be cured within such period, commence best efforts to
cure and pursue with all diligence such efforts to completion, then the non-
breaching party shall have the right to terminate this Agreement immediately by
providing a second written notice to the breaching party specifying the
termination date; provided, however, that in the event either party elects to
challenge such termination in a court of competent jurisdiction, then the
terminating party shall be required to continue to perform under this Agreement
and all other agreements between the parties until the conclusion of such
challenge, including all applicable appeals. Such termination shall not preclude
the non-breaching party from pursuing all remedies available to it in law or at
equity. The parties agree that the failure to pay any sums due hereunder shall
be considered a material breach.
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5.4 Miscellaneous. Notwithstanding anything to the contrary herein
contained, in the event performance by either party hereto of any term,
covenant, condition, or provision of this Agreement or any of the agreements
referred to in the preamble of this Agreement shall (i) jeopardize the licensure
of either party, (ii) jeopardize either party's participation in (a) Medicare,
Medicaid, Blue Cross, or other governmental reimbursement or payment programs,
or (b) any other state or nationally recognized accrediting organization, (iii)
jeopardize MMC's tax exempt status or the exempt status of any MMC financing, or
(iv) be in violation of any statute, ordinance, or be otherwise deemed illegal,
or be deemed unethical by any recognized body, agency, or association in the
medical fields, either party shall have the immediate right to initiate the
renegotiation of the affected term or terms of this Agreement, upon notice to
the other party, to remedy such condition. The parties shall thereafter use
their best efforts to negotiate in good faith to restructure this relationship
so as to make the same lawful and to the extent possible, to maintain the
economic benefits to each party as contemplated hereunder. Should the parties be
unable to renegotiate the term or terms so affected so as to bring it/them into
compliance with the statute, rule, regulation, principle or interpretation that
rendered it/them unlawful or unenforceable within ninety (90) days of the date
on which notice of a desired renegotiation is given, then either party shall be
entitled, after the expiration of said initial 90-day period, to terminate this
Agreement immediately, without penalty.
5.5 Termination of Other Agreements. This Agreement shall terminate
upon the termination of that certain Medical Director and Administrative
Services Agreement between the parties, dated as of the date hereof.
5.6 Effect of Termination on Managed Care Commitment.
5.6.1 If MMC terminates this Agreement either without cause in
accordance with Section 5.2 or with cause pursuant to Sections 5.3 or 5.4, or if
this Agreement is terminated pursuant to Section 5.5 because MMC terminates the
Medical Director and Administrative Services Agreement, Vendor shall nonetheless
remain bound by the managed care commitment set forth in Section 3 of this
Agreement until such time as MMC engages in any activity which would be
prohibited by the noncompetition provisions referenced in Section 8.1 of the
Medical Director and Administrative Services Agreement and/or Section 3 of that
certain Agreement to Amend And Not-to-Compete by and between MMC and New York
Dialysis Management, Inc. assuming such non-competition provisions were in
effect.
5.6.2 If Vendor terminates the Agreement without cause (pursuant
to Section 5.2) or if this Agreement is terminated pursuant to Section 5.5
because Vendor terminates the Medical Director and Administrative Services
Agreement without cause, Vendor shall nonetheless remain bound by the managed
care commitment set forth in Section 3 of this Agreement until such time as MMC
engages in any activity which would be prohibited by the non-competition
provisions referenced in Section 8.1 of the Medical Director and Administrative
Services Agreement and/or Section 2.2 of the Asset Purchase Agreement assuming
such non-competition provisions were in effect. If Vendor terminates this
Agreement with cause pursuant to Sections 5.3 or 5.4, or if this Agreement is
terminated pursuant to Section 5.5 because Vendor terminates the Medical
Director and Administrative Services Agreement with cause, Vendor shall not be
bound thereafter by the managed care commitment set forth in Section 3.
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5.7 Termination Due to Change of Control. In the event that control or
ownership of either party or any direct or indirect owner of either party
changes materially at any time during the term of this Agreement, the other
party shall have the right to terminate this Agreement upon eighteen (18) months
prior written notice to the party subject to the change; provided, however, that
this provision shall apply to a change of control of Vendor and its Affiliates
only if the acquiring company is Fresenius Medical Care AG, or Fresenius'
successor in interest; provided further, however, that no change of control of
either party shall be deemed to have occurred by reason of (i) the merger of
either party into or with any other corporation or entity that is owned or
controlled by, owns or controls, or is under common ownership and control with,
such party; or (ii) the control or ownership of Vendor is vested in an entity
affiliated with Vendor or Everest Health Services Corporation.
SECTION 6. Non-Solicitation.
6.1 Vendor Non-Solicitation. Vendor covenants and agrees that at all
times during the term of this Agreement, Vendor will not directly or indirectly,
as principal, agent, owner, partner, stockholder, officer, director, employee,
independent contractor, or consultant, or in any representative capacity for it
or on behalf of any business, firm, corporation, partnership, association, or
proprietorship, solicit, or directly or indirectly cause others to solicit, the
employment of any officer, agent, or employee of MMC or its Affiliates for the
purpose of causing said officer, agent, or employee to terminate his/her
employment with MMC or its Affiliates; provided, however, that nothing herein
shall be construed to prohibit Vendor from engaging any person whose employment
with MMC or its Affiliates was terminated by MMC or its Affiliates, so long as
such person does not provide any services within the Region without the prior
consent of MMC.
6.2 MMC Non-Solicitation. MMC covenants and agrees that at all times
during the term of this Agreement, MMC will not directly or indirectly, as
principal, agent, owner, partner, stockholder, officer, director, employee,
independent contractor, or consultant, or in any representative capacity for it
or on behalf of any business, firm, corporation, partnership, association, or
proprietorship, solicit, or directly or indirectly cause others to solicit, the
employment of any officer, agent, or employee of Vendor or its Affiliates for
the purpose of causing said officer, agent, or employee to terminate his/her
employment with Vendor or its Affiliates; provided, however, that nothing herein
shall be construed to prohibit MMC from engaging any person whose employment
with Vendor or its Affiliates was terminated by Vendor or its Affiliates, so
long as such person does not provide any services within the Region without the
prior consent of Vendor.
SECTION 7. Insurance and Indemnification.
7.1 Vendor Insurance. Vendor shall purchase and maintain malpractice
and liability insurance of not less than one million dollars ($1,000,000) per
occurrence and three million dollars ($3,000,000) per year in the aggregate to
insure against acts done by Vendor within the course and scope of the
performance of its duties under this Agreement. MMC shall be an additional named
insured on all such policies. Vendor shall notify MMC in the event that Vendor
becomes aware of an adverse change in (i) the amount of insurance coverage or
(ii) any policy terms, or in the event of cancellation of the policy.
7.2 MMC Insurance. MMC represents that it maintains malpractice and
liability insurance, whether self-insured or purchased through an insurance
carrier, of not less than three million dollars ($3,000,000) per occurrence and
five million dollars ($5,000,000) per year in the aggregate to insure against
MMC's acts done within the course and scope of the performance of its duties
under this Agreement. Vendor shall be an additional named insured on all such
policies. MMC shall notify Vendor in the event that MMC becomes aware of an
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adverse change in (i) the amount of insurance coverage, (ii) the value of the
assets set aside for such coverage, or (iii) any policy terms, or in the event
of cancellation of the policy.
7.3 Increase in Insurance. The parties each agree that they shall
consult with each other from time to time regarding the appropriate amounts of
coverage that should be maintained by entities which provide services similar to
MMC and Vendor hereunder, and the parties agree that they shall increase the
amount of their respective insurance coverages if the parties reasonably
determine that sound or prudent business practices warrant such an increase.
7.4 Indemnification by MMC. MMC, shall indemnify, defend and hold
Vendor and its officers, directors, shareholders, agents, employees,
representatives, successors and assigns, harmless from and against any act of
MMC (whether based in contract, tort, product liability, strict liability or
otherwise), including taxes, and all expenses (including interest, penalties,
and reasonable attorneys' fees and disbursements) incurred by any of the above-
referenced persons, resulting from or in connection with any one or more of the
following:
(a) Any misrepresentation, breach, or failure to perform any covenant
or agreement made or undertaken by MMC in this Agreement; or
(b) Any action, suit, proceeding, or claim incident to any of the
foregoing.
Notwithstanding the foregoing, MMC shall not indemnify or hold Vendor harmless
for any intentional or negligent act of Vendor (or any agent, employee or
contracted party of Vendor).
7.5 Indemnification by Vendor. Vendor shall indemnify, defend and
hold MMC and its officers, directors, shareholders, agents, employees,
representatives, successors and assigns, harmless from and against any act of
Vendor (whether based on contract, tort, product liability, strict liability or
otherwise), including taxes, and all expenses (including interest, penalties and
reasonable attorneys' fees and disbursements) incurred by any of the above-
referenced persons, resulting from or in connection with any one or more of the
following:
(a) Any misrepresentation, breach, or failure to perform any covenant
or agreement made or undertaken by Vendor in this Agreement; or
(b) Any action, suit, proceeding, or claim incident to any of the
foregoing.
Notwithstanding the foregoing, Vendor shall not indemnify or hold MMC harmless
for any intentional or negligent act of MMC (or any agent, employee or
contracted party of MMC).
7.6 Notice of Claims. If any claim is made against a party hereto
that, if sustained, would give rise to a right of indemnification under this
Section 7, the party having the claim made against it ("Indemnitee") shall give
the other party ("Indemnitor") notice thereof (specifying the nature and amount
of the claim and giving Indemnitor the right to contest the claim) within
fifteen (15) days of becoming aware of such claim ("Notice of Claim").
7.7 Right to Contest. Indemnitee shall afford Indemnitor the
opportunity, at Indemnitor's own expense, to assume the defense or settlement of
any such claim, with its own counsel. In connection therewith, the Indemnitee
shall cooperate fully to make available all
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pertinent information under its control and shall have the right to join in the
defense, at its own expense, with its own counsel. If Indemnitor does not elect
to undertake the defense of a claim on the terms provided below, Indemnitee
shall be entitled to undertake the defense or settlement of the claim at the
expense of and for the account and risk of Indemnitor.
Indemnitor shall have the right to assume the entire defense of a
claim hereunder provided that: (a) Indemnitor gives written notice of such
desire (the "Notice of Defense") to Indemnitee within fifteen (15) days after
Indemnitor's receipt of the Notice of Claim; (b) Indemnitor's defense of such
claim shall be without cost to Indemnitee or prejudice to Indemnitee's rights
under this Section 7; (c) counsel chosen by Indemnitor to defend such claim
shall be reasonably acceptable to Indemnitee; (d) Indemnitor shall bear all
costs and expenses in connection with the defense and settlement of such claim;
(e) Indemnitee shall have the right to receive periodic reports from Indemnitor
and Indemnitor's counsel; and (f) Indemnitor will not, without Indemnitee's
written consent, settle or compromise any claim or consent to any entry of
judgment unless the settlement or compromise or entry of judgment (i) includes
an unconditional release of Indemnitee by claimant or plaintiff of all liability
with respect to the claim subject to indemnification hereunder and (ii) does not
include any admission of wrongdoing by Indemnitee.
SECTION 8. Nonreferral. Nothing in this Agreement, nor in any other
agreement entered into by the parties, is intended or shall be construed as
payment for any referral of any patient to any entity, and no party shall be
required to refer or cause the referral of any patient under this or any other
agreement between the practice.
SECTION 9. Marketing; Use of Name; Public Announcements. MMC and Vendor
acknowledge that they may engage in marketing efforts regarding current and
prospective services offered at the Network Clinics. Any and all such marketing,
advertising, or promotional materials, and any materials that bear or use the
name (or associated marks symbols) of either MMC or Vendor (or any Affiliates or
subdivisions thereof), shall be subject to the prior written approval of Vendor
and MMC, as applicable. The parties agree to promptly review all such materials
and either approve or disapprove of such materials within ten (10) business
days. Except as otherwise required by law, MMC and Vendor shall jointly prepare
and issue all announcements to the public and/or press releases relating to this
Agreement, any of the other agreements entered into by the parties and
referenced herein, or the Network Clinics. Except as may be required by law,
there shall be no public or press releases unless the contents of such releases
are first approved by both Vendor and MMC.
SECTION 10. Miscellaneous.
10.1 Amendment. No modification, waiver, amendment, discharge, or
change of this Agreement shall be valid unless in writing and signed by the
parties against whom enforcement of such modification, waiver, amendment,
discharge, or change is subject.
10.2 Waiver. The waiver by any party of a breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver of
subsequent breach of such provision or any other provision of this Agreement.
This Agreement may not be amended or modified without the written consent of the
parties hereto.
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10.3 Notices. Whenever notice must be given under the provisions of
this Agreement, such notice must be in writing and will be deemed to have been
duly given by (a) hand-delivery (with written confirmation of receipt)
addressed to the parties at their respective addresses set forth below; or (b)
certified mail, return receipt requested, postage prepaid, and addressed to the
parties at their respective addresses set forth below; or (c) telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, addressed to the parties at their respective
addresses set forth below, and provided further that notice shall be deemed
given under this subsection (c) when actually received by the recipient:
If to Vendor:
101 North Scoville
Oak Park, IL 60302
Attn: Craig W. Moore
Fax: 708-386-1711
with a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60616
Attention: Alan Berry, Esq. and Matthew Brown, Esq.
Fax: 312-902-1061
If to MMC:
111 East 210th Street
Bronx, New York 10467
Attn: Stanley L. Jacobson, Esquire
Fax: 718-652-2161
with a copy to:
Green, Stewart, Farber & Anderson, P.C.
Suite 1111
2600 Virginia Avenue, N.W.
Washington, D.C. 20037
Attn: Philip D. Green, Esquire
Fax: 202-342-8734
10.4 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same agreement.
10.5 Governing Law and Venue. This Agreement shall be construed in
accordance with the laws of the State of New York without taking into account
any choice of law provisions. Any action brought by either party under this
Agreement shall be brought only in
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the courts located in the State of New York and shall be proper only in such
courts, and each party hereto consents to the jurisdiction of the courts located
in the State of New York.
10.6 Section Titles. The titles of the sections have been inserted as
a matter of convenience and reference only and shall not control or affect the
meaning or construction of this Agreement.
10.7 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned or delegated by either of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party; provided, however, that either party may
assign or delegate its duties under this Agreement or all or part of this
Agreement to an affiliate of the party or another corporation or entity that is
owned or controlled by, owns or controls, or is under common ownership and
control with, the assigning entity; provided, further, however, that in the
event either party assigns or delegates this Agreement pursuant to this
sentence, the assigning party shall remain jointly and severally liable for all
of the duties and obligations assigned hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective successors and assigns.
10.8 Expenses. Each party hereto will pay its own legal, accounting
and other fees and expenses incident to the transactions contemplated hereby,
whether or not such transactions shall be consummated. Each party will be
responsible for its own costs relative to the negotiations of such agreements
and the preparation of any schedules or ancillary documents and agreements
applicable to such party and required by this Agreement.
10.9 Survival of Agreements. All covenants agreements,
representations, and warranties made herein or in any other agreement,
certificate, or instrument delivered to any party pursuant to or in connection
with this Agreement shall survive the execution and delivery of this Agreement.
10.10 Brokerage. Each party hereto will indemnify and hold the other
harmless against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements, or understandings made or claimed to have
been made by such party with any third party.
10.11 Parties in Interest. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
10.12 Cumulative Remedies. Any right, power, or remedy provided under
this Agreement to any party hereto shall be cumulative and in addition to any
other right, power, or remedy provided under this Agreement now or hereafter
existing at law or in equity, and may be exercised singularly or concurrently.
10.13 Third Parties. Except as specifically provided herein, this
Agreement does not and is not intended to create any rights in any person or
entity which is not a party to this Agreement.
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10.14 Representations. The parties represent and warrant to each
other that the execution of this Agreement and performance of their respective
duties under this Agreement will not violate as of the date hereof: (i) any law,
statute, regulation, or rule, including without limitation, requirements
relating to conflicts of interest or fiduciary duty owed by the party making the
representation to a third party; or (ii) any agreement, judgment, court order,
or similar restriction to which the party making the representation may be a
party or by which any such person is or may be bound.
10.15 Further Assurances. The parties hereby agree that they shall
negotiate in good faith and execute any other documents or agreements which are
reasonably required in order to effectuate the transactions contemplated by this
agreement and the other agreements referenced in the preamble of this Agreement,
and to effectuate the intent of the parties pursuant to such agreements.
10.16 Entire Agreement. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement among the parties with
respect to its subject matter.
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INTENDING TO BE LEGALLY BOUND, the parties hereto have duly executed this
Agreement to be effective as of the day and year first written above.
MONTEFIORE MEDICAL CENTER EVEREST DIALYSIS SERVICES, INC.
- -------------------------------- --------------------------------
Signature Signature
- -------------------------------- --------------------------------
Print Name Print Name
- -------------------------------- --------------------------------
Title Title
[Signature Page for Operating Agreement by and between
Montefiore Medical Center and Everest Dialysis Services, Inc.]
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Schedule E
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Proposed Language for Second Closing MMC Legal Opinion
------------------------------------------------------
Define Transaction Documents as (i) Operating Agreement and (ii) Medical
Director Agreement.
1. The Company is a not-for-profit corporation duly organized, existing
and in good standing under the laws of the State of New York.
2. The Company has all requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents.
3. The Transaction Documents have been duly executed and delivered by the
Company.
Please also add a confirmation that, to your knowledge, there are no
actions or proceedings against the Company pending or overtly threatened in
writing, before any court, governmental agency or arbitrator with respect to the
Business, the Programs or the transactions contemplated under the Transaction
Documents.
Schedule F
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Proposed Language for Second Closing Everest Legal Opinion
----------------------------------------------------------
Define Transaction Documents as (i) Operating Agreement and (ii) Medical
Director Agreement.
1. The Company is a for-profit corporation duly organized, existing and
in good standing under the laws of the State of New York.
2. The Company has all requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents.
3. The Transaction Documents have been duly executed and delivered by the
Company.
Please also add a confirmation that, to your knowledge, there are no
actions or proceedings against the Company pending or overtly threatened in
writing, before any court, governmental agency or arbitrator with respect to the
Business, the Programs or the transactions contemplated under the Transaction
Documents.