EXHIBIT 10.1
RuiAn Hospital
Agreement to Assign Management
Assignor: RuiAn City Department of Health ("RuAn")
Assignee: Shanghai DeAn Joint Venture ("DeAn")
Scope of Management Assignment: Right to manage the hospital operations, human
resources and financials.
Principles of Management Assignment: Provide health care services to the
community based on social needs as top priority instead of economic gains. The
hospital's organization structure and mission remains unchanged.
Goals of Management Assignment: To improve the hospital organization structure,
operations and health care services to satisfy the needs of the community. To
elevate the hospital's health care standard equal to the grade 2 general acute
care hospital (grade 1 being the highest possible grade) within ten years.
To add at least two medical specialty services to the hospital. To recruit and
train a second generation of health care givers and leaders. To complete the
first phase of construction of a new hospital before October of 2009.
Term of Management Assignment: 15 years
Rights and responsibilities:
Rights of RuiAn: owns the right to the hospital assets; is responsible for major
investments, borrowings, expansions, personnel reassignments and compliance with
laws, regulations and inspections; has the right to audit the hospital's
operations, health care services and management performance.
Responsibilities of RuiAn: provides guidance and support for operations of the
hospital; provides friendly policies for the hospital in purchase of equipments
and pharmaceuticals; will facilitate resolutions of disputes arising from
operations and management.
Rights of DeAn: has the right to make independent decisions on the operation,
personnel and financial matters of the hospital within the laws and regulations;
can make decisions on the purchase of medical equipment, pharmaceuticals and
medical supplies except that the price cannot be higher than those paid by
similar hospitals of the same grade; has the right to the profits of the
hospital.
Responsibilities of DeAn: be responsible for the liabilities incurred during
management; to improve the quality of health care services of the hospital; to
strictly enforce the fee charged to patients for medical services, medications
and medical supplies; to protect the assets of the hospital; to protect hospital
employees' rights, wages and benefits; to be responsible for the hospital's
operation deficits and liabilities; to be responsible for legal disputes of the
hospital.
Personnel management:
Personnel relationship: personnel of the hospital will be rehired by DeAn
according to need; laid off of existing personnel cannot be more than two per
cent and DeAn is responsible to retrain those unqualified existing personnel to
qualify for new assignments; DeAn is responsible for terminating all personnel
upon expiration of the management assignment; hospital administrator to be
nominated by DeAn subject to the approval of and appointment by RuiAn.
Personnel wages and benefits: personnel wages to be determined by applicable
employment contracts, if any; for those personnel without employment contracts:
during the first six months, wages cannot be lower than seventy per cent of
existing wages, during the second six months, wages cannot be lower than ninety
per cent of existing wages, starting the second year, wages cannot be below the
existing wages; retirement benefits, housing allowance, health insurance,
workers compensation insurance and unemployment insurance will be enforced in
accordance with applicable laws; personnel's performance review and promotion
will follow the hospital policy.
New Hospital construction:
Phase I
DeAn oversees the construction; RuiAn to resolve any issue regarding
construction.
Construction budget is RMB $25,500,000; any change to the construction requires
the approval of RuiAn; RuiAn will fund RMB $9,100,000 in 2008 and RMB $2,000,000
in 2009. The remaining construction balance of RMB $14,400,000 will be borrowed
from DeAn; DeAn will loan the construction cost of RMB $14,400,000 based on
percentage of completion and transfer the loan proceeds to RuiAn's construction
bank account.
Phase II
If there is need for additional construction for expansion, DeAn must obtain
approval from RuiAn, which will fund Phase II construction.
Equipment purchase:
RuiAn is responsible for RMB $5,000,000 worth of equipment expenditures and DeAn
will fund the RMB $5,000,000 as a loan advance to RuiAn; equipment purchases in
excess of RMB $5,000,000 will be the responsibility of DeAn; DeAn has the
authority to purchase any equipment that is below RMB $50,000 each, equipment
purchases in excess of RMB $50,000 each require the approval of RuiAn.
Repairs and maintenance:
DeAn is responsible for all repairs and maintenance.
Government subsidiary:
The funding of RMB $14,400,000 of the Phase I construction and the RMB
$5,000,000 of equipment purchases by DeAn as loan advances will accrue interest
at a rate equal to the commercial bank interest rate and to be paid to DeAn
annually; at least RMB $5,000,000 of the loan advance will be repaid to DeAn
within five years, and the balance of the loan advance of RMB $14,400,000 will
be repaid to DeAn before the management assignment expires.
Existing debt and liabilities:
DeAn is responsible for paying off RMB $4,300,000 of the existing
debt/liabilities within ten years; RuiAn is responsible for paying off the
remaining balance of the existing debt/liabilities of RMB $1,000,000; new
debt/liabilities incurred during the management assignment period are the
responsibility of DeAn; should the management assignment terminate before
expiration, DeAn is responsible for paying off RMB $30,000 in debt/liabilities
per year; DeAn cannot use the hospital assets as collateral for a loan; DeAn
cannot use the hospital as a guarantor for any reason.
Valuation of government assets at expiration of the management assignment:
Government assets is defined as: the fair value of the hospital assets before
management assignment starts, plus capital expenditures by RuiAn (not including
interest payments to DeAn for the loan advance), and plus the debt/liabilities
paid off by RuiAn during the management assignment period.
Upon expiration of the management assignment, the fair value of the hospital
assets will be determined and subtracted from the value of the government assets
(as defined above); any surplus or deficit belongs to DeAn.
Upon expiration of the management assignment, DeAn is responsible for that
equipment bought in excess of RMB $50,000 each; the rest of the equipment and
medical supplies will be purchased by RuiAn from DeAn at fair value.
Amendments:
Any changes or amendments to the management assignment have to be mutually
agreed upon and in writing signed by both RuiAn and DeAn.
During the management assignment period, DeAn has the right to ask for early
termination due to huge operation deficits. In case of natural disasters, war,
major changes in the environment, or government rules and regulations that
render a hardship for DeAn to continue managing the hospital, either DeAn or
RuiAn can request early termination of the agreement.
The management assignment agreement may be renewed provided that a request to
renew is submitted by DeAn at least three months prior to expiration of the
agreement.
Default:
DeAn and RuiAn cannot unilaterally terminate the agreement without the consent
of the other. Otherwise, the defaulting party has to pay a fine equal to five
per cent of the hospital asset fair value.
Should DeAn not fulfill its duties in managing the hospital or not safeguard the
hospital assets, RuiAn can unilaterally terminate the agreement and ask for
damages from DeAn.
Should RuiAn not fulfill its obligations, DeAn can ask for damages.
Either party can sue in the local Peoples District Courts for unresolved
disputes.
RuiAn City Department of Health
/s/ Zheng Shun Kun Dated: April 23, 2008
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Zheng Shun Kun, Director General
Shanghai DeAn Joint Venture
/s/ Chiu Chan Dated: April 28, 2008
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Chiu Chan, President
RuiAn City Third Peoples Hospital
/s/ Lin Min Dated: April 23, 2008
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Lin Min, Dean