<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION CENTER
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 1997.
COMMISSION FILE NO.: 333-15595-02
THE CORVALLIS CLINIC, P.C.
FORMERLY "PHYSICIAN PARTNERS CORVALLIS, P.C."
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OREGON 93-1221257
- --------------------------------------------- ------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER ID NO.)
OR ORGANIZATION)
444 NW ELKS DRIVE
CORVALLIS, OREGON 97330
- ---------------------------------------- ------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (541) 754-1374
------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports ), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
As of May 15, 1997, 64 shares of the Registrant's Common Stock, no par
value, were outstanding.
<PAGE> 2
THE CORVALLIS CLINIC, P.C.
--------------------------
BALANCE SHEETS -- AS OF MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
------------------------------------------------------------------------
(All dollar amounts are expressed in thousands)
-----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1 $ 187
Patient accounts receivable, net of allowances for contractual discounts and
uncollectible accounts of $0 and $2,544 at March 31, 1997 and December 31,
1996, respectively -- 4,232
Healthcare and other receivables -- 2,089
Inventories of drugs and supplies -- 219
Prepaid expenses and deposits 152 196
-------- --------
Total current assets 153 6,923
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation and amortization of $0
and $9,221 at March 31, 1997 and December 31, 1996, respectively -- 18,914
-------- --------
OTHER ASSETS:
Investments in affiliates -- 654
-------- --------
-- 654
-------- --------
Total assets $ 153 $ 26,491
======== ========
LIABILITIES, REDEEMABLE STOCK, COMMON STOCK AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt and capital and direct
financing lease obligations $ -- $ 899
Line of credit -- 3,330
Accounts payable and accrued expenses -- 1,748
Payable to PPI 152 --
Accrued healthcare costs -- 3,058
Accrued compensation and related expenses -- 1,114
Deferred revenue -- 339
-------- --------
Total current liabilities 152 10,488
-------- --------
LONG-TERM DEBT, net of current portion -- 1,388
CAPITAL AND DIRECT FINANCING LEASE OBLIGATIONS, net of
current portion -- 13,959
DEFERRED COMPENSATION AND OTHER -- 1,755
COMMITMENTS AND CONTINGENCIES
REDEEMABLE STOCKS -- 6,959
COMMON STOCK -
No par value; 500 shares authorized; 64 shares issued and outstanding 1 --
ACCUMULATED DEFICIT -- (8,058)
-------- --------
Total liabilities, redeemable stock, common stock and
accumulated deficit $ 153 $ 26,491
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
<PAGE> 3
THE CORVALLIS CLINIC, P.C.
--------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
(All dollar amounts are expressed in thousands, except for earnings per share)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
REVENUES:
<S> <C> <C>
Fee-for-service, net $ 5,113 $ 4,650
Prepaid healthcare, net 5,542 5,648
--------- --------
Net revenues 10,655 10,298
Less Provider compensation and benefits 2,462 2,718
--------- --------
Net revenues less provider
compensation and benefits 8,193 7,580
--------- --------
EXPENSES:
Clinic salaries, wages and benefits 3,417 3,321
Purchased medical services 1,442 1,584
Medical and office supplies 979 1,109
General and administrative expenses 711 738
Lease and rent expense 69 28
Provision for uncollectible accounts 348 283
Depreciation and amortization 428 383
--------- --------
Total operating expenses 7,394 7,446
--------- --------
Operating income 799 134
OTHER INCOME (EXPENSE):
Interest income 8 11
Interest expense (457) (294)
Management fee (300) 0
Other 174 120
--------- --------
Net income (loss) before provision for
Income taxes 224 (29)
--------- --------
PROVISION FOR INCOME TAXES 0 0
--------- --------
NET INCOME (LOSS) $ 224 $ (29)
========= ========
INCOME (LOSS) PER SHARE $3,500.00 $(426.47)
========= ========
WEIGHTED AVERAGE SHARES OUTSTANDING 64 68
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 4
THE CORVALLIS CLINIC, P.C.
--------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
(All dollar amounts are expressed in thousands)
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------- ------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 224 $ (29)
Adjustment to reconcile net income (loss) to net cash used in operating activities-
Depreciation and amortization 144 383
Equity in income of affiliates (63) (154)
Changes in operating assets and liabilities (excluding asset and liabilities
assigned to Physician Partners, Inc.):
Patient accounts receivable, net (179) (452)
Healthcare and other receivables 252 233
Inventories of drugs and supplies 97 20
Prepaid expenses and deposits (144) 166
Accounts payable and accrued expenses (293) (421)
Payable to PPI 152 --
Accrued healthcare costs (413) 77
Accrued compensation and related expenses 3 (563)
Deferred revenue -- (3)
Deferred compensation and other (68) 165
----- -----
Net cash used in operating
Activities (288) (578)
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (24) (338)
----- -----
Net cash used in investing activities (24) (338)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) from borrowings under line of credit agreement (30) 906
Principal payments on long-term debt and direct financing lease obligation (97) (156)
Proceeds from repayments of notes receivable from stockholders 8 --
Drafts payable assumed by PPI 330 --
Costs incurred related to Physician Partners, Inc transaction (85) --
----- -----
Net cash provided by financing activities 126 750
----- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (186) (166)
CASH AND CASH EQUIVALENTS, beginning of period 187 177
----- -----
CASH AND CASH EQUIVALENTS, end of period $ 1 $ (11)
===== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 528 $ 410
Cash paid for income taxes -- 20
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In February 1997, Corvallis assigned all assets and liabilities to Physician
Partners, Inc. as part of the reorganization and merger transaction. The book
value of Corvallis' assets and liabilities, including $330 of cash, at the date
of the transaction are presented below:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 6,230
Property, plant and equipment 18,792
Other long-term assets 717
Current liabilities 9,691
Long-term liabilities 17,001
Contributed Equity (953)
</TABLE>
<PAGE> 5
THE CORVALLIS CLINIC, P.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial reporting
and in accordance with Rule 10-01 of Regulation S-X.
In the opinion of the management of the Corvallis Clinic, P.C. (Corvallis), the
unaudited interim financial statements contained in this report reflect all
adjustments, consisting of only normal recurring accruals, which are necessary
for a fair presentation of the financial position and the results of operations
for the interim periods presented. The results of operations for any interim
period are not necessarily indicative of results for the full year.
These financial statements, footnote disclosures and other information should be
read in conjunction with the financial statements and the notes thereto included
in Corvallis' special filing under Form 10-K for the thirteen month period ended
December 31, 1996.
2. REORGANIZATION AND MERGER AGREEMENT:
On February 1, 1997, certain reorganization and merger transactions (the
"Transactions") contemplated by the Amended and Restated Agreement and Plan of
Reorganization and Merger, dated as of September 19, 1996, as amended on
November 4, 1996, November 29, 1996 and December 31, 1996 (the "Reorganization
and Merger Agreement") among Medford Clinic, P.C. ("Old Medford"), HealthFirst
Medical Group, P.C. ("Old HealthFirst"), The Corvallis Clinic, P.C. ("Old
Corvallis," and, together with Old Medford and Old HealthFirst, referred to
herein, collectively as "Old PC's"), and Physician Partners, Inc. ("PPI"), were
consummated. Pursuant to the terms of the Reorganization and Merger Agreement,
each Old PC affected (a) a reorganization of its corporate structure by (i)
incorporating a wholly-owned professional corporation subsidiary ( a "New PC"),
(ii) transferring to the New PC certain assets and liabilities relating to the
provider professional services business, (iii) making a pro rata distribution to
its shareholders of all of the capital stock of the New PC, (iv) converting such
Old PC from a professional corporation to a business corporation and (v)
entering into a 40 -year management agreement (the "Management Agreement") with
PPI and (b) a merger with and into PPI, resulting in consolidation of the
operations (other than the provider professional services businesses) of Old
PC's. Corvallis is the New PC incorporated by Old Corvallis pursuant to the
Reorganization and Merger Agreement.
The Transactions resulted in a separation of operations of Old Corvallis between
medical professional services activities (i.e., providers of medical services),
which were transferred to Corvallis, and the physician practice management
activities of the business, which were transferred to PPI. In addition,
substantially all of the assets and liabilities of the three Old PC's, i.e.,
cash, receivables, inventories, prepaids, property, plant and equipment,
payables, accruals, debt, and certain contractual commitments, were transferred
to PPI. As consideration, the shareholders of Old PC's received stock of PPI.
Under the management agreement, PPI provides physician practice management
services to Corvallis. Services provided include management and administrative
services, capital resources, facilities, equipment and supplies. As
consideration, PPI is entitled to (a) reimbursement of all managerial costs and
expenses (Manager's Expenses) incurred by PPI and (b) a management fee equal to
16% of (i) net revenues relating to services provided by Corvallis less (ii)
Manager's Expenses. In the accompanying financial statements, the reimbursement
of Manager's Expenses is identified by the various types of expenses. Corvallis
is responsible for providing medical services and the related costs for provider
compensation and benefits.
The parties to the Transactions have received an opinion from tax counsel that
for federal income tax purposes, it is more likely than not that the merger will
be a tax-free transaction. No ruling was requested from the Internal Revenue
Service (IRS) regarding the tax consequences of the Transactions. If the IRS or
tax court were to determine that the merger was not tax free, there would be
significant adverse tax consequence to the parties to the Transactions and their
respective shareholders.
<PAGE> 6
In connection with the Transactions, the three Old PC's entered into an Expense
Sharing Agreement, which establishes the basis upon which certain costs incurred
in connection with the Transactions are to be allocated between the three Old
PC's. Corvallis and other New PC's have assumed the obligations under the
Expense Sharing Agreement. Corvallis' share of such costs are reflected as a
charge to retained earnings.
3. EARNINGS PER SHARE:
All share and per share data have been retroactively restated to give effect to
the recapitalization resulting from the Transactions.
4. EQUITY ROLLFORWARD:
The Transactions resulted in the Old Corvallis' Common Stock being retired and
new shares being issued by Corvallis. In addition, Old Corvallis' equity at the
date of the Transactions was assumed by PPI.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion includes some forward-looking statements that involve a
number of risks and uncertainties. Future results may differ materially from
historical results or from results or outcomes currently expected or sought by
Corvallis.
OVERVIEW
Corvallis, an Oregon professional corporation, is a multi-specialty medical
clinic. Corvallis was founded in 1997 pursuant to certain reorganization and
merger transactions ("Transactions") contemplated by the Amended and Restated
Agreement and Plan of Reorganization and Merger, dated as of September 19, 1996,
as amended on November 4, 1996, November 29, 1996 and December 31, 1996 (the
"Reorganization and Merger Agreement") among Medford Clinic, P.C. ("Old
Medford"), HealthFirst Medical Group, P.C. ("Old HealthFirst"), The Corvallis
Clinic, P.C. ("Old Corvallis," and, together with Old Medford and Old
HealthFirst, referred to herein, collectively as "Old PC's"), and Physician
Partners, Inc. ("PPI"). Old Corvallis was founded in 1947. Pursuant to the terms
of the Reorganization and Merger Agreement, each Old PC affected (a) a
reorganization of its corporate structure by (i) incorporating a wholly-owned
professional corporation subsidiary ( a "New PC"), (ii) transferring to the New
PC certain assets and liabilities relating to the provider professional services
business, (iii) making a pro rata distribution to its shareholders of all of the
capital stock of the New PC, (iv) converting such Old PC from a professional
corporation to a business corporation and (v) entering into a 40 -year
management agreement (the "Management Agreement") with PPI and (b) a merger with
and into PPI, resulting in consolidation of the operations (other than the
provider professional services businesses) of Old PC's. Corvallis is the New PC
incorporated by Old Corvallis pursuant to the Reorganization and Merger
Agreement.
Corvallis consists of 93 professional providers who offer a wide range of
primary and specialty care services. In addition, Corvallis offers ancillary
services such as physical therapy, optical, pharmacy, laboratory and imaging.
Corvallis' operations are located in and around Corvallis, Oregon.
Corvallis believes that group practice offers the best means of promoting and
maintaining the highest standard of medical care. Corvallis' strategy is to
position itself in a competitive network as the healthcare industry develops.
Corvallis' relationship with PPI enhances its capacity to provide a high quality
of clinical care and to compete economically in both managed care and
fee-for-service markets.
To increase revenue, Corvallis will work with PPI to recruit additional
physicians and merge other physician groups in the area into their clinic. PPI
is working on initiatives to reduce the Manager's Expenses of Corvallis (which
are paid by PPI and reimbursed by Corvallis) through regional purchasing and
insurance contracts, and through the consolidation of various services.
RESULTS OF OPERATIONS
1997 Compared to 1996
Net fee-for-service revenue increased from $4.7 million for the first quarter of
1996 to $5.1 million for the first quarter of 1997, an increase of 8%. The
increase was directly related to providers added in late 1995 who were not fully
productive in first quarter 1996 and increased pharmacy sales. Prepaid
healthcare revenue remained relatively stable.
In aggregate, operating expenses remained relatively stable. Purchased medical
services decreased $140,000 from the first quarter of 1996 to the same period in
1997 which was due to lower hospital rates in 1997. Medical and office supplies
decreased $130,000 from the first quarter of 1996 to the same period in 1997.
This decrease was due to better management of inventory levels. These decreases
were offset by slight increases in clinic salaries, wages, and benefits,
provision for uncollectible accounts, lease and rent expense, and depreciation
and amortization.
Interest expense increased from $295,000 for the first quarter of 1996 to
$460,000 for the first quarter of 1997, an increase of 56%. The increase is due
to higher borrowings on the line of credit. The management fee of $300,000
represents the management fee paid to PPI for February and March 1997. There was
no such management fee in 1996 as the Management Agreement was not effective
until February 1, 1997.
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations used $290,000 of cash for the first quarter of 1997,
compared to $580,000 for the first quarter of 1996. The first quarter of 1997
includes only one month of activity due to the Transactions on February 1, 1997.
As a result of the Transactions, PPI assumed all financing activities relating
to the working capital needs of Corvallis and will purchase the necessary
capital equipment for Corvallis. In the Transactions, all debt of Corvallis
became debt of PPI.
<PAGE> 9
THE CORVALLIS CLINIC, P.C.
PART II--OTHER INFORMATION
ITEM 1: Legal Proceedings
None.
ITEM 2: Changes in Securities
None.
ITEM 3: Defaults Upon Senior Securities
None.
ITEM 4: Submission of Matters to a Vote of Security Holders
On March 10, 1997, the annual meeting of shareholders
of Corvallis was held. Two new directors, Nick C.
Benton, M.D. and Surinder M. Vasdev, M.D., were elected
to the Board of Directors of Corvallis at such annual
meeting. (Dr. Vasdev subsequently resigned, and the
Board of Directors of Corvallis will appoint a new
director to fill the vacancy in accordance with the
Bylaws of Corvallis.) Darrel D. Bibler, M.D., Jess W.
Hickerson, M.D., John R. Ladd, M.D. and Christopher P.
Swan, M.D. continued as directors after Corvallis'
March 10 annual meeting of shareholders. The following
chart tabulates the number of votes cast for and
against each director nominated for election at such
annual meeting; there were no abstentions.
<TABLE>
<CAPTION>
For Against
<S> <C> <C>
Nick C. Benton, M.D. 36 21
Markham S. Giblin, Ph.D 29 28
Pamela E. Turner, M.D. 19 38
Surinder M. Vasdev, M.D. 30 27
</TABLE>
On April 14, 1997, at a regular monthly meeting of shareholders of
Corvallis, such shareholders adopted a revised form of Master Employment
Contract for Shareholder Employees, which agreement governs the terms of
shareholder physician employment with Corvallis. Such form of agreement was
approved, with 49 votes cast for such form of agreement and 10 votes cast
against such form of agreement. Five shareholders abstained from voting.
ITEM 5: Other Information
None.
ITEM 6: Exhibits and Reports on Form 8-K
<PAGE> 10
(a) Exhibits
10.1 - Form of Master Employment Contract for
Shareholder Employees of Corvallis
27 - Financial Data Schedule (for SEC use
only)
(b) Reports on Form 8-K
None.
<PAGE> 11
THE CORVALLIS CLINIC, P.C.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CORVALLIS CLINIC, P.C.
(Registrant)
Date: May 15, 1997 By: /S/ John R. Ladd, M.D.
----------------------
John R. Ladd, M.D.,
President
Date: May 15, 1997 By: /S/Gunnar Hansen
----------------
Gunnar Hansen,
Chief Financial Officer and
Controller
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits
--------
<S> <C>
10.1 - Form of Master Employment Contract for Shareholder
Employees of Corvallis
27 - Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits
--------
<S> <C>
10.1 - Form of Master Employment Contract for Shareholder
Employees of Corvallis
27 - Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 2
MASTER EMPLOYMENT CONTRACT
FOR
SHAREHOLDER EMPLOYEES
THE CORVALLIS CLINIC, P.C.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. Definitions............................................................................................. 1
2. License................................................................................................. 1
3. Charges; Prohibition on Entry Into Agreements With Payors............................................... 1
4. Maintenance of Competency; Peer Review.................................................................. 1
5. Equipment, Supplies and Quarters........................................................................ 2
6. Professional Expenses................................................................................... 2
7. Financial Responsibility................................................................................ 2
8. Relationship Between Employer and Shareholder........................................................... 2
9. Shareholder Employment Compensation..................................................................... 3
10. Retirement.............................................................................................. 3
11. Pre-Physician Partners, Inc. Merger Retirement Benefit.................................................. 3
12. Sick Leave Compensation................................................................................. 4
13. Shareholder Return From Disability...................................................................... 4
14. Senior Colleague, Part-time, or Leave of Absence Status................................................. 4
15. Termination............................................................................................. 5
16. Non-Competition Agreement and Liquidated Damages........................................................ 6
17. Confidentiality, Nondisclosure, and Nonsolicitation..................................................... 9
18. Right of First Refusal..................................................................................11
19. Malpractice Insurance Reporting Endorsement............................................................ 12
20. Waiver of Breach........................................................................................12
21. Binding Effect..........................................................................................12
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
22. Amendments............................................................................................. 12
23. Assignment............................................................................................. 12
24. Attorney's Fees........................................................................................ 12
25. Applicable Law..........................................................................................13
26. Survival................................................................................................13
27. Arbitration.............................................................................................13
28. Invalidity..............................................................................................13
29. Supersedure.............................................................................................13
30. Date....................................................................................................13
31. Time of Essence........................................................................................ 13
</TABLE>
<PAGE> 5
MASTER EMPLOYMENT CONTRACT
FOR
SHAREHOLDER EMPLOYEES
This Master Employment Contract has been adopted by a vote of the
holders of two-thirds of the outstanding Common Stock of The Corvallis Clinic,
P.C., and shall be incorporated in the terms of any Employment Contract entered
into between The Corvallis Clinic, P.C., as Employer ("Clinic" or "Employer"),
and any physician or health care specialist employed by The Corvallis Clinic,
P.C. who is also a Shareholder of the corporation.
1. Definitions. As used herein, the term "Shareholder" or
"Shareholders" refers only to a physician or health care specialist employee of
Employer who is a Shareholder of Employer. It does not refer to an Associate
Physician, or any other employee. In computing the period of time a Shareholder
has been a Shareholder under this contract, there shall be added to the actual
period of time under this contract the period of time the Shareholder was a
partner in The Corvallis Clinic, a partnership.
2. License. During the term of a Shareholder's employment under this
Agreement, a Shareholder must be licensed to practice medicine in the State of
Oregon or to render any other professional service for which the Clinic is
organized, must be in good standing with the State of Oregon Board of Medical
Examiners or other regulatory board in the State of Oregon, and must not be
disqualified, for any reason, to practice medicine or such other professional
service.
3. Charges; Prohibition on Entry Into Agreements With Payors.
Shareholder agrees to submit to the business office of the corporation a true
account of all charges and collections made for all of Shareholder's
professional services. Without the consent of Employer, Shareholder shall not
enter into any other employment or services contract, including any contract
with any payor, during the term of Shareholder's employment hereunder and shall
not have the authority to bind Employer to any payor under any such employment
or services contract. Notwithstanding the foregoing, however, all revenues to
which Shareholder may be entitled under any employment or services contract
entered into by Shareholder in contravention of the foregoing shall be the
property of Employer, and Shareholder shall arrange for their payment directly
to Employer unless otherwise directed by Employer.
4. Maintenance of Competency; Peer Review. Shareholder agrees to
maintain competency by keeping abreast of progress in the Shareholder's area of
practice by constant study, planned courses of reading, and other forms of
continuing education approved by the Board of Directors of Employer. Shareholder
has received and reviewed a copy of the Corvallis Clinic Peer Review Policy and
Procedures (the "Peer Review Policy") and acknowledges that peer review,
including the annual Professional Standards assessment of each Shareholder
provided for therein, plays an integral role in the assurance and
<PAGE> 6
improvement of competency and quality patient care. Shareholder acknowledges
that the processes and procedures described in the Peer Review Policy (including
the informal dispute resolution mechanisms, hearing procedures, board review for
certain matters and the mechanisms for amendment of the Peer Review Policy) are
fair and appropriate. In the mutual interest of resolution of professional
matters in a professional forum, the Clinic and Shareholder agree that Clinic
will maintain a Peer Review Policy consistent with the mandatory requirements of
the Health Care Quality Improvement Act (as it may be amended from time to
time), with revision of the Peer Review Policy from time to time, approved in
the same manner as the Clinic's bylaws are amended, and that Shareholder will
exhaust the administrative remedies made available by the Clinic in the
then-current Peer Review Policy before seeking any external remedy for matters
within the scope of that Policy.
5. Equipment, Supplies and Quarters. Employer shall furnish or
contract for all of the equipment, supplies, personnel and facilities which the
Board of Directors deems necessary to enable the Shareholder to efficiently and
successfully conduct the practice of medicine and surgery or other professional
service.
6. Professional Expenses. All professional expenses incurred by
Shareholder, reimbursement for which is not provided for in the contract, by
custom of Employer, or by policy hereafter adopted by Employer, shall be borne
by the Shareholder incurring the expense. Examples of such expenses are the
expenses of attending professional meetings over and above any allowance
provided by Employer, the expense of professional books and journals used by a
Shareholder in Shareholder's home, entertainment expense, or any other expense
which, in the opinion of the Shareholder incurring the expense is necessary, but
which has not been paid or reimbursed by Employer.
7. Financial Responsibility. Shareholder agrees to pay
Shareholder's individual just debts and obligations and to keep free from claims
of creditors and any embarrassment arising from such claims.
8. Relationship Between Employer and Shareholder. Employer and
Shareholder agree that the Board of Directors of Employer, in accordance with
the rules and regulations promulgated by the State of Oregon Board of Medical
Examiners, shall manage the business and professional affairs of Employer, and
that the relationship between Employer and Shareholder is that of
Employer-employee only. Shareholder agrees that in the rendition of professional
services and in all aspects of his/her employment pursuant to this Agreement,
Shareholder shall comply with the Bylaws of Employer and the reasonable
policies, standards, and regulations of the Employer from time to time
established by the Board of Directors. Shareholder shall have no authority to
enter into any contracts binding upon Employer or to create any obligations on
the part of Employer, except such as shall be specifically authorized by the
Board of Directors of Employer or by an executive officer of Employer acting
pursuant to authority granted by said Board of Directors. Shareholder shall have
no interest either in the physical assets of Employer, including patient records
and files, or the accounts receivable of Employer. Shareholder recognizes,
however, that even though
<PAGE> 7
Shareholder is practicing medicine or rendering other professional service as an
employee of Employer, this relationship shall not be deemed to modify or in any
way affect the doctor-patient privilege or any other applicable professional
privilege, whether established by statute or by common law. Employer will
maintain personnel files with respect to the employment relationship between
Employer and Shareholder that will contain the final annual Professional
Standards rating made by the Professional Standards Review Subcommittee of the
Peer Review Committee with respect to Shareholder (as such rating may be
modified by hearing) as well as other personnel information and materials.
9. Shareholder Employment Compensation.
Each Shareholder will be paid a salary determined by a pay plan which may be
modified from time to time by the Board of Directors in close consultation with
the Shareholders. This pay plan will be administered by a Compensation Committee
and the Board of Directors.
A. Definitions.
Average Shareholder Income (ASI) - shall be the total
salaries and bonuses payable to Shareholders
(including retirement plan contributions and stock
bonuses) after deduction for Retained Earnings, plus
the cost of Shareholder group insurance benefits and
payroll taxes, divided by the number of full-time
equivalent (FTE) Shareholders.
Compensation Committee - shall be a committee
appointed by the Board of Directors, whose duties
shall be to review and advise the Board on
determining and administering salaries.
10. Retirement. After twenty and one-half (20 1/2) years of service as
an employee, partner or Shareholder (or any combination thereof) of The
Corvallis Clinic and/or The Corvallis Clinic, P.C., a Shareholder may retire
upon giving Employer twelve (12) months' prior written notice. In its sole
discretion the Board of Directors may waive the requirement of twelve (12)
months' prior written notice.
11. Pre-Physician Partners, Inc. Merger Retirement Benefit. Physicians
and other health care specialists who were Shareholders prior to the January 31,
1997, PPI merger are vested in a retirement fund administered by PPI. Each
qualified Shareholder will have a document of guarantee of his/her fund amount
attached as an addendum to this Contract. Upon retirement in accordance with the
requirements contained in Section 10 of this Contract said Shareholder may
request payment of his/her fund amount. In its sole discretion, the Board of
Directors may waive the requirement of twelve (12) months' prior notice.
<PAGE> 8
12. Sick Leave Compensation. The Board of Directors may from
time to time establish policies for the payment of compensation to Shareholder
during times of illness or disability.
13. Shareholder Return From Disability.At such time as a
Shareholder who has been on leave for illness or disability of more than six (6)
months wishes to return to practice, the Shareholder shall first apply for such
return to practice. The application shall be in writing and shall include a full
description of the percentage of full-time which the Shareholder proposes to
work. "Full Time" shall be defined as the average amount of time which other
members of the same department or persons of similar specialties devote to their
practice including but not necessarily limited to: a) time spent in the office
seeing scheduled patients; b) time spent providing professional care (such as
surgical as well as medical care to hospital patients); and c) participation in
evening and weekend emergency call coverage. The application shall be
accompanied by a written statement from the Shareholder's attending physician
certifying the Shareholder's ability to return to the level of practice which
has been proposed, the nature and duration of any restrictions that might apply,
and the time of return to work. The application shall be submitted to, and
recommendations of approval or disapproval received from the following:
A. The Department in which Shareholder practices
identifying: 1) "call" coverage; 2) percentage of
full-time approved.
B. Peer Review Committee stating recommended monitoring.
C. Compensation Committee stating compensation.
D. Board of Directors.
If the returning Shareholder has been on leave for more than
one (1) year, Shareholder shall then attend a review course approved by the Peer
Review Committee before returning to work. After all the above-described
recommendations have been given, the Common Shareholders, at a regular or
special meeting, shall vote upon the application, which shall require the same
approval as is required for the admission of a Common Shareholder not formerly
employed by the Clinic.
14. Senior Colleague, Part-time, or Leave of Absence Status. A
Shareholder may become eligible for Senior Colleague, Part-time, or Leave of
Absence Status according to policies adopted by the Board of Directors from time
to time. The Board may grant such status to a Shareholder who applies therefore
on such terms and conditions as the Board determines.
15. Termination. The employment of a Shareholder by Employer
shall terminate upon the occurrence of any one of the following events:
<PAGE> 9
A. if the Shareholder retires in accordance with
Paragraph 10.
B. if the Shareholder withdraws from employment by
Employer, which a Shareholder may do as of the end of
any calendar month by giving the Board of Directors
at least ninety (90) days' prior notice in writing.
C. if the Shareholder is expelled, which may be
accomplished by the vote of the holders of at least
two-thirds of the outstanding shares of Common Stock,
which may be taken for any reason and with or without
cause, and not less than thirty (30) days' or more
than ninety (90) days' prior to written notice of the
expulsion stating the date on which such expulsion
shall become effective.
D. if the Shareholder dies.
E. if the Shareholder becomes disabled due to an injury
or an illness or other medical condition by reason of
which, in the determination of the Board of Directors
(with such assistance, if any, from persons not
affiliated with Employer as the Board of Directors
deems necessary or desirable), either (i) the
Shareholder is unable to perform the material and
substantial duties of the professional service
provided by the Shareholder prior to such injury,
illness or other medical condition or (ii) the
Shareholder is restricted to the extent that the
Shareholder can not perform the material and
substantial duties of such professional service
either (A) for substantially the same number of
working hours that the Shareholder customarily
performed such duties prior to the injury, illness or
other medical condition or (B) as effectively as the
Shareholder customarily performed such duties prior
to the injury, illness or other medical condition.
Any such determination by the Board of Directors may
be made retroactively, including after death.
F. if Shareholder ceases to be licensed to practice
medicine in the State of Oregon or to render any
other professional service for which Employer is
organized or ceases to be in good standing with the
Board of Medical Examiners of the State of Oregon or
other regulatory board in the State of Oregon.
G. if Shareholder is elected to public office or accepts
employment, that pursuant to law, places restrictions
or limitations upon Shareholder's continued rendering
of professional services as a physician or other
professional for Employer.
H. if the Shareholder is discharged without cause by the
Board of Directors, such discharge would require the
motion to discharge said Shareholder
<PAGE> 10
to be voted on at two separate consecutive Board of
Directors meetings and passed by a supermajority of
the Board members. Within 30 days this Board action
could be made null and void by a Shareholder vote if
the holders of at least two-thirds of the outstanding
shares of Common Stock voted against the Board
Action. Should a Shareholder be discharged in this
manner, he/she would be entitled to six months notice
and six months severance pay calculated at his/her
current salary rate. In addition, the discharged
Shareholder would be entitled to receive a pro rata
share of any year-end deferred salary/bonus. This
severance payment would be subject to mitigation if
the terminated Shareholder became employed during the
severance period.
I. if Shareholder no longer owns any share or shares of
Common Stock of Clinic.
Upon any employment termination, the Shareholder or the
Shareholder's estate shall receive the Shareholder's compensation prorated to
the last day of the month in which the termination of employment is effective.
Any termination of employment shall not terminate the Shareholder's obligations
under Paragraphs 16, 17 and 18 dealing with non-competition, nonsolicitation,
confidentiality, nondisclosure, right of first refusal, and the like, all of
which shall survive termination.
16. Non-Competition Agreement and Liquidated Damages
A. In signing this Agreement, Shareholder acknowledges
that Employer provides Shareholder with the use of
assets, Employer contractual relationships, trained
staff and facilities, ongoing patronage of Employer
patients, and considerable aid in generating business
through the already established reputation and
referral sources of the Employer. Competitive
practices by Shareholder would cause economic harm to
the Employer's ongoing practice. Loss of the
patronage of ongoing Employer patients, loss of
income from Shareholder, if Shareholder were to
depart, from loss of production, loss of other
trained staff members, loss of referrals, damage to
the Employer's public image, and burdensome costs for
replacing Shareholder are a few examples of the kinds
of harm which the Employer could experience in such
an event. Shareholder and Employer agree that the
damages caused to Employer by Shareholder's
competition with the Employer would be difficult to
calculate, and therefore agree as follows.
(i) Pre-Physician Partners, Inc. Merger
Agreement. Each Physician and other health
care specialist who became a Shareholder of
Employer or its predecessor prior to the
January 31, 1997, PPI merger and who were
subject to a non-competition agreement
shall continue to remain subject to such
non-competition
<PAGE> 11
agreement until such person has completed a
total of ten (10) full years of employment
with The Corvallis Clinic, P.C. Such
non-competition agreement provides that if
Shareholder's employment relationship with
Employer is terminated for any reason, other
than by the Board of Directors without
cause, prior to the time Shareholder has
completed ten (10) full years as an employee
of The Corvallis Clinic, P.C., including
time as a partner of The Corvallis Clinic,
and Shareholder practices medicine in
Corvallis, Oregon or within thirty (30)
miles of the principal business location of
Employer in Corvallis, Oregon during a
period of ten (10) years after Shareholder's
employment relationship is terminated,
Shareholder agrees to pay Employer as
liquidated damages an amount equal to one
hundred percent (100%) of ASI for the fiscal
year preceding the date of employment
termination. Such amount is payable in cash,
or an agreement on other terms satisfactory
to Employer, shall be reached with Employer,
within thirty (30) days after the
commencement of such practice. Since the
amount of actual damages cannot be
calculated with any certainty, the parties
have agreed that liquidated damages
calculated in the above manner are
appropriate.
(ii) Post-Physician Partners, Inc. Merger
Agreement. Physicians and other health care
specialists who are advanced to Shareholder
status after the January 31, 1997, PPI
merger shall be bound by the following
non-competition agreement. This agreement
provides that during the term of employment
of Shareholder by Employer, and for a period
of eighteen (18) months following the
termination of Shareholder's employment
relationship with Employer for any reason,
other than Board action without cause,
Shareholder agrees not to practice medicine
or render any other professional service in
Corvallis, Oregon or within twenty-five (25)
miles of any business location of Employer.
Should such bound Shareholder breach this
non-competition agreement, he/she agrees to
pay Employer as liquidated damages an amount
equal to fifty (50) percent of such
Shareholder's gross compensation received
from The Corvallis Clinic, P.C. for the
fiscal year preceding termination. Such
amount is payable in cash, or an agreement
on other terms satisfactory to Employer,
shall be reached with Employer within thirty
(30) days after commencement of such
practice. Since the amount of actual damages
cannot be calculated with any certainty, the
parties have agreed that liquidated damages
calculated in the above manner are
appropriate.
<PAGE> 12
(iii) Shareholder acknowledges and agrees that
the foregoing restrictions in this Section
16 are reasonable and necessary to protect
the legitimate interests of Employer. Any
violation of Sections 16.A(i) or 16.A(ii)
would result in irreparable injury to
Employer, and the remedy at law for any
breach of Sections 16.A(i) or 16.A(ii) would
be inadequate. In the event of any breach of
Sections 16.A(i) or 16.A(ii), Employer, in
addition to any other relief available to
it, shall be entitled to temporary
injunctive relief before trial from any
arbitrator or court of competent
jurisdiction as a matter of course upon the
posting of not more than nominal bond and to
permanent injunctive relief without the
necessity of proving actual damages.
SHAREHOLDER FURTHER SPECIFICALLY
ACKNOWLEDGES AND AGREES THAT, WITH RESPECT
TO ANY COMPETITION BY SHAREHOLDER OR ATTEMPT
BY SHAREHOLDER TO COMPETE WITH EMPLOYER IN
VIOLATION OF THE NON-COMPETITION AGREEMENTS
IN SECTIONS 16.A(i) OR 16.A(ii) WITH RESPECT
TO WHICH INJUNCTIVE RELIEF IS NOT GRANTED OR
SOUGHT, SHAREHOLDER SHALL BE LIABLE TO PAY
EMPLOYER AS LIQUIDATED DAMAGES, AND NOT AS A
PENALTY, THE AMOUNT SET FORTH IN SECTION
16.A(i) OR 16.A(ii), AS APPLICABLE AND THAT,
UPON SHAREHOLDER'S PAYMENT OF SUCH AMOUNT,
SHAREHOLDER SHALL BE RELEASED FROM THE
COVENANT NOT TO COMPETE I SECTIONS 16.A.(i)
OR 16.A(ii), AS APPLICABLE. This sum
represents the reasonable endeavor by the
parties to estimate a fair compensation for
the foreseeable and unforeseeable losses
that might result from any violation by
shareholder of Sections 16.A(i) or 16.A(ii).
(iv) In the event that any of the provisions
contained in this Section 16 shall ever be
deemed to exceed the time or geographic
limits or any other limitation permitted by
applicable law in any applicable
jurisdiction, then such provisions shall be
deemed reformed in such jurisdiction to the
maximum extent permitted by applicable law.
(v) If Shareholder's employment termination is
the result of Board action without cause,
all pre- and post-Physician Partners, Inc.
noncompetition agreements will become null
and void for the terminated Shareholder.
(vi) The Board of Directors has the discretion,
but not the obligation, to remove any and
all noncompetition provisions from a bound
Shareholder who leaves employment with The
Corvallis Clinic. P.C.
<PAGE> 13
17. Confidentiality, Nondisclosure, and Nonsolicitation.
Shareholder agrees to abide by the following Confidentiality, Nondisclosure, and
Nonsolicitation provisions:
A. Confidentiality. Neither party shall disclose this
Agreement or the terms thereof to a third party,
except as provided herein or as otherwise required by
law or regulation, without the prior written consent
of the other party. Employer hereby agrees to cause
each employee of Employer to abide by the terms of
this Section 17.
B. Confidential Information and Trade Secrets.
(i) Proprietary Information. Shareholder
acknowledges that Shareholder will have
access to information of a proprietary
nature owned by Employer and Physician
Partners, Inc. ("Manager") including, but
not limited to, any and all documents
bearing a form number or other identifying
mark of Employer or Manager, patient lists,
any and all computer programs (whether or
not completed or in use), any and all
operating manuals or similar materials that
constitute the nonmedical systems, policies
and procedures, methods of doing business
developed by Employer or Manager,
administrative, advertising or marketing
techniques, financial affairs and other
information utilized by Employer or Manager.
Consequently, Shareholder acknowledges that
Employer or Manager has a proprietary
interest in all such information and that
all such information constitutes
confidential and proprietary information and
the trade secret property of Employer or
Manager. Shareholder hereby expressly and
knowingly waives any and all rights, title
and interest in and to such trade secrets
and confidential information and agrees to
return all copies of such trade secrets and
confidential information related thereto to
Employer upon the termination Shareholder's
employment by Employer.
(ii) Nondisclosure. Shareholder further
acknowledges and agrees that Employer and
Manager each is entitled to prevent their
competitors from obtaining and utilizing
trade secrets and confidential information.
Therefore, Shareholder agrees to hold
Employer's and Manager's trade secrets and
confidential information in strictest
confidence and to not disclose them or allow
them to be disclosed, directly or
indirectly, to any person or entity other
than those persons or entities who are
employed by or affiliated with Employer,
without the prior written consent of
Employer. During the term of this Agreement,
Shareholder shall
<PAGE> 14
not disclose to anyone, other than persons or
entities who are employed by or affiliated
with Employer or Manager, any confidential or
proprietary information or trade secret
information obtained by Employer or
Shareholder from Manager, except as otherwise
required by law. After the expiration or
earlier termination of this Agreement,
Shareholder shall not disclose to anyone any
confidential or proprietary information or
trade secret information obtained from
Employer or Manager, except as otherwise
required by law or upon the prior written
consent of Employer.
(iii) Equitable Relief. Shareholder acknowledges
and agrees that a breach of this Section will
result in irreparable harm to Employer and
that Employer cannot be reasonably or
adequately compensated in damages, and
therefore, Employer shall be entitled to
equitable remedies, including, but not
limited to, injunctive relief, to prevent a
breach and to secure enforcement thereof in
addition to any other relief or award to
which Employer may be entitled.
(iv) Liquidated Damages. Shareholder specifically
acknowledges and agrees that the existence
of the protections contained in this Section
are reasonable and necessary to protect the
legitimate interests of Employer and
Manager. Any violation of this Section would
result in irreparable injury to Employer,
and the remedy at law for any breach of this
Section would be inadequate. IN THE EVENT OF
A BREACH OF THE TERMS OF THIS SECTION BY
SHAREHOLDER, IN ADDITION TO INJUNCTIVE
RELIEF AND ANY OTHER REMEDY AVAILABLE TO
EMPLOYER, SHAREHOLDER SHALL BE LIABLE TO PAY
TO EMPLOYER AS LIQUIDATED DAMAGES, AND NOT
AS A PENALTY, AN AMOUNT EQUAL TO 50 PERCENT
OF THE GROSS COMPENSATION EARNED BY
SHAREHOLDER FROM EMPLOYER DURING EMPLOYER'S
MOST RECENT FISCAL YEAR. THIS SUM REPRESENTS
THE REASONABLE ENDEAVOR BY THE PARTIES TO
ESTIMATE A FAIR COMPENSATION FOR THE
FORESEEABLE AND UNFORESEEABLE LOSSES THAT
MIGHT RESULT FROM ANY VIOLATION OF THIS
SECTION BY SHAREHOLDER. In the event that
the provisions contained in this Section
shall ever be deemed to exceed the time or
geographic limits or any other limitation
permitted by applicable law in any
applicable jurisdiction, then such
provisions shall be deemed reformed in
<PAGE> 15
such jurisdiction to the maximum extent
permitted by applicable law.
C. Nonsolicitation. Shareholder shall not, during the
term of Shareholder's employment by Employer and
thereafter for a period of one (1) year, directly or
indirectly call on, solicit, employ, contract with or
take away, or attempt to call on, solicit, employ,
contract with or take away any person or entity who
is a "Prohibited Person." As used herein, a ==
"Prohibited Person" is a person who is, during the
term of Shareholder's employment by Employer, or who
was, at the time of the expiration or termination of
Shareholder's employment or thereafter during the
following year, (i) an employee of or under contract
with Manager, (PPI), or (ii) an employee of or under
contract with Employer. IT IS AGREED BY THE PARTIES
THAT IN THE EVENT SHAREHOLDER EMPLOYS OR RETAINS A
PROHIBITED PERSON, SHAREHOLDER SHALL BE LIABLE TO PAY
TO EMPLOYER AS LIQUIDATED DAMAGES, AND NOT AS A
PENALTY, A SUM EQUAL TO ONE YEAR'S SALARY OF THE
PROHIBITED PERSON SO EMPLOYED OR RETAINED BY
SHAREHOLDER. THIS SUM REPRESENTS THE REASONABLE
ENDEAVOR BY THE PARTIES TO ESTIMATE A FAIR
COMPENSATION FOR THE FORESEEABLE AND UNFORESEEABLE
LOSSES THAT MIGHT RESULT FROM ANY SUCH VIOLATION OF
THIS SECTION BY SHAREHOLDER.
18. Right of First Refusal. Shareholder agrees to abide by the Right of
First Refusal section of the Practice Management Agreement signed by The
Corvallis Clinic, P.C. with PPI. This states: In the event Medical Group or its
Shareholders seek to sell Medical Group to a third party pursuant to a bona fide
offer, or to merge or otherwise reorganize Medical Group with a third party in a
transaction in which the third party shall be the surviving entity, Medical
Group shall provide Manager 30 days' prior written notice of the intended sale
or merger and Medical Group and its Shareholders shall grant a right of first
refusal to Manager or Manager's designee to purchase or merge with Medical Group
on substantially the same terms and conditions as those offered by the
third-party purchaser; provided, however, that Manager shall be entitled to
substitute cash for any non-cash items offered by the third-party purchaser.
Manager shall notify Medical Group within 15 days of Manager's receipt of such
written notice, if Manager or its designee wishes to exercise the right of first
refusal granted under this Section 18, and the transaction shall be completed as
promptly as reasonably possible thereafter. Medical Group hereby agrees to
obtain the consent of each Provider to each of the covenants contained in this
Section 18.
19. Malpractice Insurance Reporting Endorsement. If the employment of a
Shareholder is terminated for whatever reason other than discharge without cause
by the Board of Directors prior to the completion of ten (10) years as a
Shareholder, Employer shall pay no part of the cost of a malpractice insurance
reporting endorsement ("tail"). If,
<PAGE> 16
however, the employment of a Shareholder is terminated after the completion of
at least ten (10) years as a Shareholder, Employer shall pay 10% of the cost of
a reporting endorsement for each year the Shareholder has completed as a
Shareholder beyond ten (10) years. After completing twenty years (20) as a
Shareholder, Employer shall pay 100% of the cost of a reporting endorsement.
However, in any event other than discharge without cause by the Board of
Directors wherein the Shareholder continues to practice within 30 miles of any
office of Employer, Employer shall pay no part of the cost of the reporting
endorsement. In the case of discharge without cause by the Board of Directors,
the employer shall pay 100% of the cost of a reporting endorsement regardless of
where the discharged Shareholder chooses to practice.
20. Waiver of Breach. The waiver by either Employer or Shareholder
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach by either Employer or Shareholder. All
waivers shall be in writing to be effective.
21. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of both Employer and Shareholder and their respective
successors, heirs and legal representatives.
22. Amendments. This Agreement may be amended by a writing adopted
by a vote of, or executed by, the holders of two-thirds of the outstanding
Common Shares of Employer, which approval shall be sufficient to cause the
amendment to be binding on all Shareholders party to this Agreement whether or
not, in the case of an individual Shareholder, such Shareholder was among the
holders of two-thirds of the outstanding Common Shares so approving the
amendment.
23. Assignment. Shareholder's interest in this Agreement shall not
be assignable or transferable by Shareholder but this Agreement shall be binding
upon Shareholder's and Employer's successors.
24. Attorney's Fees. In the event any arbitration, suit or action
is instituted for any purpose under or in connection with this Agreement, the
prevailing party shall be entitled to an attorney's fee at arbitration, trial
and upon appeal, in such amount as the arbitrator and/or court may deem
reasonable, in addition to any other relief granted.
25. Applicable Law. This Agreement shall be construed in
accordance with Oregon law.
26. Survival. The covenants, obligations, warranties and
representations made in this Agreement shall survive termination of this
Agreement and be enforceable thereafter in accordance with their terms.
<PAGE> 17
27. Arbitration. If any dispute shall arise relative to the
interpretation of this Agreement, the dispute shall be submitted to binding
arbitration in Benton County according to the then existing rules of the
American Arbitration Association. Notice of the demand for arbitration of a
dispute shall be filed in writing with the other party to this Agreement. The
arbitrators shall assess the costs and charges upon either or both parties.
Judgment on any arbitration award may be entered in any court of competent
jurisdiction. This provision shall be specifically enforceable under the laws of
the State of Oregon. Notwithstanding anything to the contrary in this Agreement,
Employer, at its option, shall have the right at its option to obtain an
injunction or otherwise enforce any of the provisions in Sections 16, 17, and 18
in a court of competent jurisdiction.
28. Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and the Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
29. Supersedure. This Agreement shall supersede and cancel all
prior Master Employment Contract For Shareholder Employees and Restated
Restrictive Stock Agreement between The Corvallis Clinic, P.C. and Shareholder,
as amended. The parties agree that this Agreement was entered into upon the
initial employment of the Shareholder with the Employer or upon the subsequent
bona fide advancement of the Shareholder with the Employer.
30. Date. This Agreement was adopted as of April 14, 1997.
31. Time of Essence. Time is of the essence of each of the
terms, covenants, and conditions of this Agreement.
<PAGE> 18
EMPLOYMENT CONTRACT
THIS AGREEMENT, made and entered into by and between THE CORVALLIS
CLINIC, P.C., an Oregon professional corporation, hereinafter designated as
Employer, and ___________________________, Employee, hereinafter designated as
Physician,
WITNESSETH:
WHEREAS, Employer is an Oregon Professional Corporation duly authorized
to engage in the practice of medicine and Physician is a person who has been
licensed by the State of Oregon Board of Medical Examiners to practice medicine
in the State of Oregon and is in good standing with said Board; now, therefore,
In consideration of the mutual promises herein contained, it is agreed:
1. Employment. Employer agrees to employ Physician for a term
commencing on ___________________, 199___, and continuing until terminated as
provided in the Master Employment Contract for Shareholder Employees, for the
purpose of rendering on behalf of Employer, professional medical services to
such members of the general public as are, or hereafter shall be, accepted as
patients by Employer and referred to Physician. Physician accepts employment
with Employer on the terms and conditions set forth in this agreement and in the
Master Employment Contract for Shareholder Employees and agrees that during the
period of active employment Physician will devote Physician's full professional
time and attention to the rendition of medical services on behalf of Employer
and to the furtherance of Employer's best interests, except for leaves of
absence approved by the Board of Directors, vacations, periods of illness or
disability, and involuntary military service. Physician further agrees that in
the rendition of such professional medical services and in all aspects of
Physician's employment, Physician will comply with the policies, standards and
regulations of Employer from time to time established, and that, if requested to
do so, Physician will serve as an officer or director of Employer.
<PAGE> 19
2. Master Employment Contract for Shareholder Employees. Attached to
this agreement is a copy of the Master Employment Contract for Shareholder
Employees adopted by employer. The terms and conditions of said contract are
hereby incorporated in this agreement as if fully set forth herein. The parties
further agree that any changes in said Master Employment Contract for
Shareholder Employees which are hereafter adopted by the holders of two-thirds
(2/3) of the outstanding Common Stock of Employer while Physician is an Employee
of Employer shall automatically apply to this contract and modify this contract
as of the effective date of said changes, and the contract, as modified, shall
continue thereafter as if re-executed unless terminated as provided in the
Master Employment Contract for Shareholder Employees. Employer shall furnish
Physician with a copy of any modifications in the Master Employment Contract for
Shareholder Employees within seven (7) days after the modifications are adopted.
3. Employment Benefits Plan. Employer has adopted an Employee Benefits
Plan. Said plan may be changed from time to time. Physician shall be entitled to
the benefits set forth in said Employee Benefits Plan which are applicable to
Physician, it being fully understood that said benefits may change from time to
time and that Physician has no vested right in any benefits except as set forth
in said plan.
4. Malpractice Consent to Settle. Physician agrees with The Corvallis
Clinic, P.C., and its Professional Liability insurers, that The Corvallis
Clinic, P.C. shall act on behalf of Physician with respect to authorization to
settle any claim(s) against Physician which arise from occurrences subsequent to
Physician's coverage retroactive date and are reported while Physician is
employed, or after termination of employment if extended reporting coverage
(Tail Coverage) is provided for
Page 2 - Employment Contract
The Corvallis Clinic, P.C.
<PAGE> 20
Physician. Physician understands that if extended reporting coverage (Tail
Coverage), is provided by or on behalf of Physician, Physician will continue to
be bound by the above waiver of consent to settle.
Dated this _________ day of _________________________ , 1997.
EMPLOYER: EMPLOYEE:
THE CORVALLIS CLINIC, P.C.
An Oregon Professional Corporation
By: _________________________________ ________________________________
John R. Ladd, M.D.
President
Page 3 - Employment Contract
The Corvallis Clinic, P.C.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001029816
<NAME> THE CORVALLIS CLINIC, P.C.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 153
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 153
<CURRENT-LIABILITIES> 152
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 153
<SALES> 0
<TOTAL-REVENUES> 10,655
<CGS> 0
<TOTAL-COSTS> 9,856
<OTHER-EXPENSES> 300
<LOSS-PROVISION> 348
<INTEREST-EXPENSE> 457
<INCOME-PRETAX> 224
<INCOME-TAX> 0
<INCOME-CONTINUING> 224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224
<EPS-PRIMARY> 3,500.00
<EPS-DILUTED> 3,500.00
</TABLE>
