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FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
AMENDMENT TO APPLICATION OR REPORT FILED
PURSUANT TO SECTION 12, 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JUNE 17, 1996
DRCA MEDICAL CORPORATION
(Exact name of Registrant as specified in its Charter)
AMENDMENT NO. ONE
COMMISSION FILE NO. 1-10677
The undersigned registrant amends the following Exhibits referenced in Item
6 of Part II to its Quarterly Report on Form 10-QSB for the quarter ended June
30, 1995, dated August 11, 1995, as set forth in the pages attached hereto:
Exhibit 10.99 Management Services Agreement
Exhibit 10.102 Collection Services Agreement
Exhibit 10.107 Master Transaction Agreement
Exhibit 10.108 Professional Services Agreement
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
DRCA MEDICAL CORPORATION
(Registrant)
Dated: June 17, 1996 By: /s/ JEFFERSON R. CASEY
-----------------------------
Jefferson R. Casey, Senior Vice
President, Treasurer and Secretary
(Principal Financial & Accounting
Officer)
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EXHIBIT INDEX
-------------
Exhibit No. Exhibit Title Filed As
- ----------- --------------------------------- --------------
10.99 Management Services Agreement by and between
DRCA Houston Clinics, Inc. and PhysiCare, L.L.P.
dated effective March 1, 1995 /1/Same
10.100 Equipment Lease Agreement by and between Northshore
Orthopedics Assoc. and DRCA Houston Clinics, Inc.
dated effective March 1, 1995 /2/Same
10.101 Lease Agreement by and between William F.
Donovan, M.D. and DRCA Houston Clinics, Inc.
dated effective March 1, 1995 /2/Same
10.102 Collection Services Agreement by and between
DRCA Houston Clinics, Inc. and Northshore
Orthopedics Assoc. dated effective March 1, 1995 /1/Same
10.103 Promissory Note for $500,000 by Northshore
Orthopedics Assoc. and William F. Donovan, M.D.
as Co-Makers and DRCA Houston Clinics, Inc.
dated effective March 1, 1995 /2/Same
10.104 Security Agreement between Northshore Orthopedics
Assoc. and DRCA Houston Clinics, Inc. dated
effective March 1, 1995 /2/Same
10.105 Promissory Note for $1,000,000 by PhysiCare,
L.L.P. and DRCA Houston Clinics, Inc. dated
effective March 1, 1995 /2/Same
10.106 Security Agreement between PhysiCare, L.L.P.
and DRCA Houston Clinics, Inc. dated effective
March 1, 1995 /2/Same
10.107 Master Transaction Agreement by and among
the Company, DRCA Houston Clinics, Inc.,
Occupational Medicine Associates of
Houston, P.A., Northshore Orthopedics Assoc.,
PhysiCare, L.L.P. and William F. Donovan, M.D.
dated effective March 1, 1995 /1/Same
10.108 Professional Services Agreement Medical
Director between William F. Donovan, M.D.
and the Company dated effective
March 1, 1995 /1/Same
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Exhibit No. Exhibit Title Filed As
- ----------- --------------------------------- --------------
10.109 Promissory Note for $600,000 by the Company
to First Interstate Bank of Texas, N.A.
dated May 15, 1995 /2/Same
10.110 Amendment to Loan Agreement dated January 30, 1995
by and among the Company, Northshore Orthopedics
Assoc., PhysiCare, L.L.P., and First Interstate
Bank of Texas, N.A. dated effective May 15, 1995 /2/Same
10.111 Commercial Guarantee by PhysiCare, L.L.P. to
First Interstate Bank of Texas, N.A. dated
May 15, 1995 /2/Same
- --------------------------
/1/Filed herewith
/2/Filed as exhibits to the Company's initial Quarterly Report on Form 10-QSB
for the period ending June 30, 1995.
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EXHIBIT 10.99
*** WHERE REFERENCES TO **CONFIDENTIAL
INFORMATION** HAVE BEEN MADE WITHIN THIS
AGREEMENT, CERTAIN CONFIDENTIAL INFORMATION HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***
MANAGEMENT SERVICES AGREEMENT
between
DRCA HOUSTON CLINICS, INC.
a Texas corporation,
and
PHYSICARE, L.L.P.
a registered limited liability partnership
Effective _____________________, 1995
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
RECITALS............................................................... 1
I. DEFINITIONS...................................................... 2
1.1 Agreement.................................................. 2
1.2 Budget..................................................... 2
1.3 Confidential Information................................... 2
1.4 Management Fee............................................. 2
1.5 Managing Physician......................................... 2
1.6 Medical Practice........................................... 2
1.7 Medical Services........................................... 2
1.8 Medical Practice Account................................... 2
1.9 Medical Practice Expense................................... 2
1.10 Office..................................................... 4
1.11 Physician.................................................. 4
1.12 Manager Expense............................................ 4
1.13 State...................................................... 4
1.14 Term....................................................... 4
II. APPOINTMENT AND AUTHORITY OF THE MANAGER......................... 4
2.1 Appointment................................................. 4
2.2 Authority................................................... 4
2.3 Patient Referrals........................................... 4
2.4 Additional Financial Authority.............................. 5
III. COVENANTS AND RESPONSIBILITIES OF THE MANAGER.................... 5
3.1 Office and Equipment........................................ 5
3.2 Supplies.................................................... 6
3.3 Support Services............................................ 6
3.4 Quality Assurance, Risk Management, and Utilization Review.. 6
3.5 Licenses and Permits........................................ 6
3.6 Marketing and Public Relations.............................. 6
3.7 Personnel................................................... 6
3.8 Contract Negotiations....................................... 7
3.9 Billing and Collection...................................... 7
3.10 Medical Practice Account................................... 9
3.11 Fiscal Matters............................................. 9
3.11-1 Annual Budget...................................... 9
3.11-2 Accounting and Financial Records................... 9
3.11-4 Review of Accounting and Financial Records......... 10
3.11-5 Tax Returns and Taxation Issues.................... 10
(a) In General.................................... 10
(b) Sales and Use Taxes........................... 10
</TABLE>
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<TABLE>
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3.12 Reports and Records........................................ 11
3.12-1 Medical Records.................................... 11
3.12-2 Other Reports and Records.......................... 11
3.13 Recruitment of Medical Practice Personnel and Physicians... 11
3.14 Confidentiality............................................ 11
3.15 Manager's Insurance........................................ 11
3.16 Indemnification by Manager................................. 12
3.17 No Warranty................................................ 12
IV. COVENANTS AND RESPONSIBILITIES OF MEDICAL PRACTICE............... 12
4.1 Organization and Operation.................................. 12
4.2 Medical Practice Personnel.................................. 12
4.2-1 Physician Personnel.................................. 12
4.3 Professional Standards...................................... 13
4.4 Medical Services............................................ 13
4.5 Peer Review/Quality Assurance............................... 13
4.6 Medical Practice's Insurance................................ 14
4.7 Indemnification by Medical Practice......................... 14
4.8 Confidential and Proprietary Information.................... 14
4.9 Noncompetition.............................................. 15
V. FINANCIAL ARRANGEMENT............................................ 16
5.1 Reimbursement of Expenses................................... 16
5.2 Amount of Management Fees................................... 16
5.3 Payment of Management Fee................................... 17
5.4 Adjustments................................................. 17
5.5 Accounts Receivable......................................... 17
VI. TERM AND TERMINATION............................................. 18
6.1 Initial and Renewal Term.................................... 18
6.2 Termination................................................. 18
6.2-1 Termination By The Manager........................... 18
6.2-2 Termination By Medical Practice...................... 19
6.2-3 Termination by Agreement............................. 19
6.2-4 Legislative, Regulatory or Administrative Change..... 19
6.2-5 Termination On Notice of Default..................... 20
6.3 Effects of Termination...................................... 20
VII. MISCELLANEOUS.................................................... 20
7.1 Administrative Services Only................................ 20
7.2 Status of Contractor........................................ 20
7.3 Notices..................................................... 21
7.4 Governing Law............................................... 21
7.5 Assignment.................................................. 21
7.6 Waiver of Breach............................................ 22
7.7 Enforcement................................................. 22
7.8 Gender and Number........................................... 22
</TABLE>
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<TABLE>
<S> <C> <C>
7.9 Additional Assurances...................................... 22
7.10 Consents, Approvals, and Exercise of Discretion............ 22
7.11 Dispute Resolution......................................... 22
7.12 Force Majeure.............................................. 22
7.13 Severability............................................... 23
7.14 Divisions and Headings..................................... 23
7.15 Amendments and Agreement Execution......................... 23
7.16 Entire Agreement........................................... 23
</TABLE>
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and entered
into effective as of the 1st day of March, 1995, by and between DRCA Houston
Clinics, Inc., a Texas corporation ("Manager"), and PhysiCare, L.L.P. ("Medical
Practice").
RECITALS:
This Agreement is made with reference to the following facts:
A. Medical Practice is a duly formed and validly existing Texas
registered limited liability partnership consisting of professional
associations.
B. Medical Practice is formed for and engaged in the conduct of a medical
practice and the provision of medical services to the general public in the
State of Texas through individual physicians who are licensed to practice
medicine in the State of Texas and who are employed or otherwise retained by
Medical Practice.
C. Manager is a duly formed and validly existing Texas corporation, which
is in the business of providing administrative and related services to
professional associations, physicians, and other professional health-care
entities and individuals. Manager personnel are experienced in the design,
development, financing, equipping, staffing, accounts receivable management, and
marketing of medical practices.
D. Medical Practice desires to focus its energies, expertise, and time on
the actual practice of medicine and on the delivery of medical services to
patients, and to accomplish that goal it desires to delegate the increasingly
more complex business aspects of its practice to business persons;
E. Medical Practice wishes to engage Manager to provide the management,
marketing, administrative, and business services that are necessary and
appropriate for the day-to-day administration of the nonmedical aspects of
Medical Practice's medical practice in Texas, and Manager desires to provide
such services, all upon the terms and conditions hereinafter set forth.
F. Medical Practice and the Manager have determined a fair market value
for the services to be rendered by the Manager. Based on this fair market
value, Medical Practice and the Manager have developed a formula to compensate
the Manager that will allow the parties to
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establish a relationship permitting each party to devote its skills and
expertise to the appropriate responsibilities and functions.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
I. DEFINITIONS.
For the purposes of this Agreement, the following terms have the following
meanings, unless otherwise clearly required by the context in which the term is
used.
1.1 AGREEMENT. The term "Agreement" means this Management Services
Agreement between Medical Practice and the Manager and any amendments that may
be adopted from time to time as hereinafter provided.
1.2 BUDGET. The term "Budget" means an operating budget for each fiscal
year as prepared by the Manager.
1.3 CONFIDENTIAL INFORMATION. The term "Confidential Information" means
all of the materials, information and ideas of the Manager, including, without
limitation: operation methods and information, accounting and financial
information, marketing and pricing information and materials, internal
publications and memoranda, and other matters considered confidential by the
Manager.
1.4 MANAGEMENT FEE. The term "Management Fee" means the Manager's
monthly compensation established pursuant to this Agreement.
1.5 MANAGING PHYSICIAN. The term "Managing Physician" means the
physician selected by the partners of Medical Practice to assume overall
supervision and administrative duties related to Medical Practice.
1.6 MEDICAL PRACTICE. The term "Medical Practice" means PhysiCare,
L.L.P., a registered limited liability partnership.
1.7 MEDICAL SERVICES. The term "Medical Services" means medical care and
services, including but not limited to the practice of medicine, and all related
health care services provided by Medical Practice through Medical Practice's
Managing Physician or Physicians or other health-care providers that are
retained by or professionally affiliated with Medical Practice.
1.8 MEDICAL PRACTICE ACCOUNT. The term "Medical Practice Account" means
the bank account of Medical Practice established pursuant to this Agreement.
1.9 MEDICAL PRACTICE EXPENSE. The term "Medical Practice Expense" means
an expense or cost that is incurred by the Manager or Medical Practice and for
which Medical
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Practice is financially liable. Specifically included in Medical
Office Expense, without limitation, are the following:
1.9-1 the salaries, benefits and other direct costs of all employees of
Manager at the Office and the salaries, benefits and other direct costs of the
nonphysician employees of Medical Practice, but not the salaries, benefits or
other direct costs of the Physicians;
1.9-2 the direct cost of any employee or consultant that provides
services at or in connection with the Office for improved clinic performance,
such as management, billing and collections, business office consultation,
accounting and legal services, but only when such services are coordinated by
Manager;
1.9-3 reasonable recruitment costs and out-of-pocket expenses of
Manager or Medical Practice associated with the recruitment of additional
physician employees of Medical Practice;
1.9-4 malpractice insurance expenses for Physicians, Manager
employees, and nonphysician employees and comprehensive and general liability
insurance covering the Office and employees of Medical Practice and Manager at
the Office;
1.9-5 the expense of using, leasing, purchasing or otherwise
procuring the Office and related equipment, including depreciation but not
including monies paid by third parties and expenses related to the amortization
of intangible acquisition costs related to the Office and existing patient flow
available to Partnership upon initiation of this Agreement;
1.9-6 the cost of capital (whether as actual interest on
indebtedness incurred on behalf of Medical Practice or as reasonable imputed
interest on capital advanced by Manager, to finance or refinance obligations of
Medical Practice, purchase medical or nonmedical equipment, or finance new
ventures of Medical Practice;
1.9-7 the reasonable travel expenses associated with attending
meetings, conferences or seminars to benefit Medical Practice;
1.9-8 the cost of medical supplies (including but not limited to
drugs, pharmaceuticals, products, substances, items or medical devices), office
supplies, inventory and utilities other than those medical supplies or medical
inventory owned by Medical Practice on the date of this Management Services
Agreement; and
1.9-9 any State sales tax assessed on those certain enumerated
services in Article IV that have been determined to be taxable services.
1.9-10 any administrative service fees charged to Manager pursuant
to that certain Administrative Services Agreement dated effective August 1, 1993
by and between Manager and DRCA Medical Corporation.
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1.10 OFFICE. The term "Office" means any office space that the
Manager leases, owns, or otherwise procures for the use of Medical Practice.
1.11 PHYSICIAN. The term "Physician" means the individually
licensed professionals who are employed or otherwise retained by or associated
with Medical Practice.
1.12 MANAGER EXPENSE. The term "Manager Expense" means an expense
or cost incurred by the Manager and for which the Manager is financially liable.
1.13 STATE. The term "State" means the State of Texas.
1.14 TERM. The term "Term" means the initial and any renewal
periods of duration of this Agreement.
II. APPOINTMENT AND AUTHORITY OF THE MANAGER.
2.1 APPOINTMENT. Medical Practice appoints the Manager as its sole and
exclusive agent for the management, marketing, and administration of the
business functions and business affairs of Medical Practice in Texas, except as
otherwise specifically agreed in writing by Medical Practice and the Manager,
and the Manager accepts the appointment, subject at all times to the provisions
of this Agreement.
2.2 AUTHORITY. Consistent with the provisions of this Agreement, the
Manager shall have the responsibility and commensurate authority to provide
business, marketing, administrative, and full management services for Medical
Practice, including, without limitation, provision of equipment, supplies,
support services, nonmedical personnel, marketing, office space, management,
administration, financial recordkeeping and reporting, and other business office
services. The Manager is expressly authorized to provide such services in any
reasonable manner the Manager deems appropriate to meet the day-to-day
requirements of the business functions of Medical Practice. Unless an expense
is expressly designated as a Manager Expense in this Agreement, all expenses
incurred by the Manager in providing administrative services pursuant to this
Agreement shall be Medical Practice Expenses. The parties acknowledge and agree
that Medical Practice, through its Physicians, shall be responsible for and
shall have complete authority, responsibility, supervision, and control over the
provision of all Medical Services and other professional health-care services
performed for patients, and that all diagnoses, treatments, procedures, and
other professional health-care services shall be provided and performed
exclusively by or under the supervision of the Physicians as the Physicians, in
their sole discretion, deem appropriate. The Manager shall have and exercise
absolutely no control or supervision over the provision of Medical Services.
2.3 PATIENT REFERRALS. The Manager and the Medical Practice agree that
the benefits to Medial Practice hereunder do not require, are not payment for,
and are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service of any patient of Medical
Practice to any health care facility, laboratory, or hospital controlled,
managed, or operated by the Manager.
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2.4 ADDITIONAL FINANCIAL AUTHORITY. Recognizing the significant financial
commitment to be made by Manager hereunder, Medical Practice specifically grants
to Manager the authority and responsibility to make certain financial decisions
for Medical Practice, including the following:
2.4-1 ** CONFIDENTIAL INFORMATION **
2.4-2 ** CONFIDENTIAL INFORMATION **
2.4-3 ** CONFIDENTIAL INFORMATION **
2.4-4 ** CONFIDENTIAL INFORMATION **
2.4-5 ** CONFIDENTIAL INFORMATION **
2.4-6 ** CONFIDENTIAL INFORMATION **
Notwithstanding the authority granted herein, Manager shall not be or be deemed
to be a partner of Medical Practice or be deemed to be engaged in the practice
of medicine.
III. COVENANTS AND RESPONSIBILITIES OF THE MANAGER.
During the Term of the Agreement, the Manager shall provide all the
management, marketing, administrative and business services that are necessary
and appropriate for the day-to-day administration of the nonprofessional aspects
of Medical Practice's operations, including without limitation those set forth
in this Article III in accordance with the law and all rules, regulations, and
guidelines of applicable governmental agencies. In satisfying its obligations
hereunder, the Manager may perform any service or provide any material directly
or the Manager may engage an affiliate or a third party to perform any service
or provide any material.
3.1 OFFICE AND EQUIPMENT. As necessary and appropriate, the Manager shall
lease or otherwise procure an Office, shall permit Medical Practice to use of
the Office in return for the payment of a use fee, and shall provide all
equipment, fixtures, furniture, and furnishings deemed reasonably necessary by
the Manager for the operation of the Office and reasonably necessary for the
provision of Medical Services therein. The Manager shall consult with and seek
the advice of Medical Practice in connection with equipping the Office and in
connection with the purchase of additional or replacement equipment to ensure
the necessity and appropriateness of equipment placed in service at the Office.
The Manager shall be responsible for the repair and maintenance of the Office,
consistent with the Manager's responsibilities under the terms of any lease or
other use arrangement, and for the repair, maintenance, and replacement of all
equipment other than such repairs, maintenance and replacement necessitated by
the negligence or willful misconduct of Medical Practice, the Physicians, or
other personnel employed by the Medical Practice, the repair or replacement of
which shall be a Medical Practice Expense.
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3.2 SUPPLIES. The Manager shall obtain and provide all reasonable
medical, office, and other supplies, and shall ensure that the Office is at all
times adequately stocked with the supplies that are reasonably necessary and
appropriate for the operation of the Office and the provision of Medical
Services therein; except, however, that Medical Practice shall order, purchase,
stock, and monitor the inventory of pharmaceuticals and other medical supplies,
substances, or items whose purchase, maintenance, or security require licensure
as a health-care provider or require a permit, registration, certification, or
identification number that requires licensure or certification as a health-care
provider.
3.3 SUPPORT SERVICES. The Manager shall provide or arrange for all
printing, stationery, forms, postage, duplication or photocopying services, and
other support services that are reasonably necessary and appropriate for the
operation of the Office and the provision of Medical Services in the Office.
3.4 QUALITY ASSURANCE, RISK MANAGEMENT, AND UTILIZATION REVIEW. The
Manager shall assist Medical Practice in Medical Practice's establishment and
implementation of procedures to ensure the consistency, quality,
appropriateness, and medical necessity of Medical Services provided by Medical
Practice, and shall provide administrative support for Medical Practice's
overall quality-assurance, risk-management, and utilization-review programs.
Manager shall have no authority to make utilization review or medical necessity
decisions.
3.5 LICENSES AND PERMITS. The Manager shall, on behalf of and in the name
of Medical Practice, coordinate all development and planning processes, and
apply for and use the Manager's reasonable best efforts to obtain and maintain
all federal, State, and local licenses and regulatory permits required for or in
connection with the operation of Medical Practice and equipment (existing and
future) located therein, other than those relating to the practice of medicine
or the administration of drugs by Physicians.
3.6 MARKETING AND PUBLIC RELATIONS. Marketing and public relations
services provided by the Manager shall be provided in accordance with the
standards of medical ethics of the American Medical Association and the Texas
Medical Association and all applicable laws prior to publication or distribution
of marketing or public relations material or information. the Manager shall
submit such material to Medical Practice for its review and approval and shall
make the changes thereto as Medical Practice may direct. The Manager shall be
the sole owner and holder of all right, title, and interest in and to any
materials or documents prepared, purchased, or furnished by the Manager pursuant
to this Agreement.
3.7 PERSONNEL.
3.7-1 Except as specifically provided in this Agreement, the
Manager shall employ or otherwise retain as a Medical Practice Expense and shall
be responsible for selecting, training, supervising, and terminating all
management, administrative, clerical, secretarial, bookkeeping, accounting,
payroll, billing and collection, and other nonprofessional personnel as the
Manager deems reasonably necessary and appropriate for the Manager's performance
of its duties and obligations under this Agreement and for the
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operation of the Office. The Manager shall have sole responsibility for
determining the salaries and providing fringe benefits, and for withholding, as
required by law, any sums for income tax, unemployment insurance, social
security, or any other withholding required by applicable law or governmental
requirement.
3.7-2 In recognition of the fact that the Manager and the management
and administrative personnel and nonphysician health care personnel provided to
Medical Practice by the Manager pursuant to this Agreement may from time to time
perform services for others, this Agreement shall not prevent the Manager or
such personnel from performing services for others or restrict the Manager from
so using the Manager's personnel. The Manager shall use reasonable efforts,
consistent with sound business practices, to honor the specific requests of
Medical Practice with regard to the assignment of the Managers's personnel;
provided, however, that the Manager reserves the sole right to determine the
assignment of its personnel.
3.7-3 The Manager expressly agrees to abide by any and all applicable
federal and/or State equal employment opportunity statutes, rules and
regulations, all as may from time to time be modified or amended.
3.7-4 The Manager shall appropriately prepare, maintain, and file all
requisite reports and statements regarding income tax withholdings, unemployment
insurance, social security, workers' compensation, equal employment opportunity,
or other reports and statements required with respect to personnel provided by
the Manager pursuant to this Agreement.
3.8 CONTRACT NEGOTIATIONS. Upon the request of Medical Practice, the
Manager shall advise Medical Practice with respect to and shall negotiate,
either directly or on Medical Practice's behalf, as appropriate, all contractual
arrangements with third parties that are reasonably necessary and appropriate
for Medical Practice's provision of Medical Services, including, without
limitation, negotiated price agreements with third-party payers, alternative
delivery systems, or other purchasers of group health-care services. Medical
Practice shall not execute any agreement relating to the provision of Medical
Services unless Manager has reviewed the agreement, advised the Medical Practice
on the financial implications of the agreement, and approved the nonmedical
provisions of the agreement. No contract or arrangement regarding the provision
of Medical Services shall be entered into without Medical Practice's consent.
3.9 BILLING AND COLLECTION. On behalf of and for the account of Medical
Practice, the Manager shall establish and maintain credit and billing and
collection policies and procedures, and shall use the Manager's reasonable best
efforts to bill and collect timely all professional and other fees for all
billable Medical Services provided by Medical Practice or the Physicians. the
Manager shall advise and consult with Medical Practice regarding the fees for
Medical Services provided by Medical Practice; it being understood, however,
that Medical Practice shall establish the fees to be charged for Medical
Services and that the Manager shall have no authority whatsoever with respect to
the establishment of such fees. In connection with the billing and collection
services to be provided hereunder, and throughout the Term (and thereafter as
provided
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in Section 6.3), Medical Practice grants the Manager a special power of
attorney and appoints the Manager as Medical Practice's true and lawful agent
and attorney-in-fact, and the Manager accepts such special power of attorney and
appointment, for the following purposes:
3.9-1 To bill Medical Practice's patients, in Medical Practice's
name and on Medical Practice's behalf, for all billable Medical Services
provided by Medical Practice to patients;
3.9-2 To bill, in Medical Practice's name and on Medical Practice's
behalf, all claims for reimbursement or indemnification from Blue Cross/Blue
Shield, insurance companies, Medicare, Medicaid, and all other third-party
payers or fiscal intermediaries for all covered billable Medical Services
provided by Medical Practice to patients;
3.9-3 To collect and receive, in Medical Practice's name and on
Medical Practice's behalf, all accounts receivable generated by such billings
and claims for reimbursement, to administer such accounts including, but not
limited to, extending the time of payment of any such accounts for cash, credit
or otherwise; discharging or releasing the obligors of any such accounts; suing,
assigning or selling at a discount such accounts to collection agencies; or
taking other measure to require the payment of any such accounts; provided,
however, that extraordinary collection measures, such as discharging or
releasing obligors or assigning or selling accounts at a discount to collection
agencies shall not be undertaken without approval of Managing Physician;
3.9-4 To deposit all amounts collected into the Medical Practice
Account which shall be and at all times remain in Medical Practice's name.
Medical Practice covenants to transfer and deliver to the Manager all funds
received by Medical Practice from patients or third- party payers for Medical
Services. Upon receipt by the Manager of any funds from patients or third-party
payers or from Medical Practice for Medical Services, the Manager shall
immediately deposit the funds into the Medical Practice Account. The Manager
shall disburse the deposited funds to creditors and other persons on behalf of
Medical Practice, maintaining records of the receipt and disbursement of funds
as directed by Medical Practice; and
3.9-5 To take possession of, endorse in the name of Medical Practice,
and deposit into the Medical Practice Account any notes, checks, money orders,
insurance payments, and any other instruments received in payment of accounts
receivable for Medical Services.
Upon request of the Manager, Medical Practice shall execute and deliver to the
financial institution wherein the Medical Practice Account is maintained any
additional documents or instruments that may be necessary to evidence or effect
the special power of attorney granted to the Manager by Medical Practice
pursuant to this Section or pursuant to Section 3.10 of this Agreement. The
special power of attorney granted in this Agreement shall be coupled with an
interest and shall be irrevocable except with the Manager's written consent.
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3.10 MEDICAL PRACTICE ACCOUNT. The Manager shall have access to
the Medical Practice Account solely for the purposes stated in this Agreement.
In connection with this Agreement and throughout the Term, Medical Practice
grants the Manager a special power of attorney and appoints the Manager as
Medical Practice's true and lawful agent and attorney-in-fact, and the Manager
accepts such special power of attorney and appointment, to deposit into the
Medical Practice Account all funds, fees, and revenues generated from Medical
Practice's provision of Medical Services and collected by the Manager, and to
make withdrawals from the Medical Practice Account for payments specified in
this Agreement and as requested from time to time by Medical Practice.
Notwithstanding the special power of attorney granted to the Manager under this
paragraph, Medical Practice may, upon notice to the Manager, draw checks on the
Medical Practice Account; provided, however, that Medical Practice shall neither
draw checks on the Medical Practice Account nor request the Manager to do so if
the balance remaining in the Medical Practice Account after such withdrawal
would be insufficient to enable the Manager to pay on behalf of Medical Practice
any Medical Practice Expense attributable to the operations of the Office or to
the provision of Medical Services, and/or any other obligations of Medical
Practice. Disbursements shall be related to, and in an amount to ensure that,
disbursements are consistent with the expenditures authorized by the Budget.
Limits on authority to sign checks and purchase orders shall be mutually agreed
upon by Managing Physician and the Manager.
3.11 FISCAL MATTERS.
3.11-1 ANNUAL BUDGET. Annually and at least thirty (30) days prior
to the commencement of each fiscal year of Medical Practice, the Manager, in
consultation with the Managing Physician, shall prepare and deliver to Medical
Practice a Budget, setting forth an estimate of Medical Practice's revenues and
expenses (including, without limitation, all costs associated with the services
provided by the Manager under this Agreement). The Manager shall endeavor to
manage and administer the operations of Medical Practice as herein provided so
that the actual revenues, costs and expenses of the operation and maintenance of
Medical Practice during any applicable period of the Medical Practice's fiscal
year shall be consistent with the Budget.
3.11-2 ACCOUNTING AND FINANCIAL RECORDS. The Manager shall
establish and administer accounting procedures, controls, and systems for the
development, preparation, and safekeeping of administrative or financial records
and books of account relating to the business and financial affairs of Medical
Practice and the provision of Medical Services, all of which shall be prepared
and maintained in accordance with generally accepted accounting principles
consistently applied on both a cash and accrual basis. The Manager shall prepare
and deliver to Medical Practice within ninety (90) days of the end of each
calendar year a balance sheet and a profit-and-loss statement reflecting the
financial status of Medical Practice in respect of the provision of Medical
Services as of the end of the prior calendar year, all of which shall be
prepared in accordance with generally accepted accounting principles
consistently applied. In addition, the Manager shall prepare or assist in the
preparation of any other financial statements or records as Medical Practice may
request from time to time.
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3.11-3 PRIORITY OF PAYMENTS. Each month Manager shall apply the
proceeds in the Medical Practice Account in the following manner:
(a) ** CONFIDENTIAL INFORMATION **
(b) ** CONFIDENTIAL INFORMATION **
(c) ** CONFIDENTIAL INFORMATION **
(d) ** CONFIDENTIAL INFORMATION **
(e) ** CONFIDENTIAL INFORMATION **
On an annual basis within ninety (90) days of the end of each
anniversary, Manager shall apply funds in the Medical Practice Account to the
payment of bonuses as follows:
(a) ** CONFIDENTIAL INFORMATION **
(b) ** CONFIDENTIAL INFORMATION **
3.11-4 Review of Accounting and Financial Records. The Managing
Physician shall review all expenditures related to the operation of the Medical
Practice but shall not have the power to prohibit or invalidate any legitimate
expenditure.
3.11-5 TAX RETURNS AND TAXATION ISSUES.
(A) IN GENERAL. The Manager shall arrange for the
preparation by an accountant approved in advance by Medical
Practice (which approval shall not be unreasonably withheld)
of all appropriate tax returns and reports required of
Medical Practice. As requested by Medical Practice, the
Manager shall, on behalf of Medical Practice and as a
Medical Practice Expense, protest and/or file applications
regarding regulations, orders, and determinations that are
issued by any governmental taxing authority and that affect
or are issued in connection with Medical Practice's
provision of Medical Services.
(B) SALES AND USE TAXES. The Manager and Medical Practice
acknowledge and agree that to the extent that certain of the
services to be provided by the Manager hereunder may be
subject to any State sales and use taxes, the Manager shall
have a legal obligation to collect such taxes from Medical
Practice and to remit same to the appropriate tax collection
authorities. Medical Practice agrees to pay the applicable
State sales and use taxes in respect of the portion of the
Management Fee attributable to taxable services. the Manager
agrees to maintain all books, records, and financial reports
in a manner to ensure adequate differentiation of services
rendered for which such sales and use taxes may be levied.
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3.12 REPORTS AND RECORDS.
3.12-1 MEDICAL RECORDS. The Manager shall establish,
monitor, and maintain procedures and policies for the timely creation,
preparation, filing, and retrieval of all medical records generated by Medical
Practice in connection with Medical Practice's provision of Medical Services;
and, subject to applicable law, shall ensure that medical records are promptly
available to the Physicians and any other appropriate persons. All medical
records shall be retained and maintained in accordance with all applicable State
and federal laws relating to the confidentiality and retention thereof. All
medical records shall remain the property of the Medical Practice or the
Physician performing the Medical Services.
3.12-2 OTHER REPORTS AND RECORDS. The Manager shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate for Medical Practice's provision of Medical Services,
and shall be prepared to analyze and interpret such reports and records upon the
request of Medical Practice.
3.13 RECRUITMENT OF MEDICAL PRACTICE PERSONNEL AND PHYSICIANS. Upon
Medical Practice's request, the Manager shall perform all administrative
services reasonably necessary and appropriate to recruit potential physician
personnel to become employees of Medical Practice or Partners of Medical
Practice. The Manager shall provide Medical Practice with model agreements to
document Medical Practice's employment, retention, or other service arrangements
with such individuals. It shall be and shall remain the sole and complete
responsibility of Medical Practice to interview, select, contract with,
supervise, control, and terminate all Physicians performing Medical Services or
other professional services, and the Manager shall have no authority whatsoever
with respect to such activities.
3.14 CONFIDENTIALITY. The Manager shall instruct its personnel to
keep confidential any financial, statistical, personal, personnel, or patient
information obtained or encountered relating to Medical Practice or any patient
of Medical Practice. However, the Manager shall not be required to keep any data
confidential that is publicly available, that is obtained by the Manager from
third parties, that was available to the Manager prior to commencement of this
Agreement, or that is required by law to be released.
3.15 MANAGER'S INSURANCE.
3.15-1 ON MANAGER. Throughout the Term, the Manager shall,
as a Manager Expense, obtain and maintain with commercial carriers, through
self-insurance, or by some combination thereof, appropriate worker's
compensation coverage for the Manager's employed personnel provided pursuant to
this Agreement, and professional, casualty, and comprehensive general liability
insurance covering the Manager, Manager's personnel, and all of the Manager's
equipment in such amounts, on such basis, and upon such terms and conditions as
the Manager deems appropriate. Upon the request of Medical Practice, the Manager
shall provide Medical Practice with a certificate evidencing such insurance
coverage.
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3.15-2 ON PHYSICIANS. Whenever there is any debt owed to the
Manager by Medical Practice or by a Physician, the Manager may, as a Manager
Expense, obtain and maintain appropriate life and disability insurance and
business overhead insurance coverage for the Managing Physician or for any
Physician indebted to the Manager, which shall be payable to Medical Practice
upon the insured's permanent disability or death and shall be used by Medical
Practice or the retained Physician to repay any debt held by the Manager and to
allow the Medical Practice to continue as a self-sustaining Medical Practice,
provided that the Manager shall be responsible for obtaining and maintaining
such insurance only so long as the Managing Physician has provided the Manager
with a valid assignment of such benefits. The amount of such insurance shall not
exceed the debt then owed to the Manager by the Medical Practice.
3.16 INDEMNIFICATION BY MANAGER. To the extent not otherwise
covered by insurance, the Manager shall indemnify and hold harmless Medical
Practice from and against any and all liability, losses, damages, claims, causes
of action, and expenses, including reasonable attorney's fees, associated with
or directly or indirectly resulting from any act or omission of the Manager or
the personnel under its supervision. To be entitled to such indemnification,
Medical Practice shall give the Manager prompt written notice of the assertion
by a third party of any claim with respect to which Medical Practice might bring
a claim for indemnification hereunder, and in all events must provide such
written notice to the Manager within the applicable period for defense of such
claim by the Manager. The Manager shall, as a Manager Expense, have the right
to defend and litigate any such third-party claim.
3.17 NO WARRANTY. Medical Practice acknowledges that the Manager has
not made and will not make any express or implied warranties or representations
that the services provided by the Manager will result in any particular amount
or level of medical practice or income to Medical Practice.
IV. COVENANTS AND RESPONSIBILITIES OF MEDICAL PRACTICE.
4.1 ORGANIZATION AND OPERATION. Medical Practice, as a continuing
condition of the Manager's obligations under this Agreement, shall at all times
during the Term be and remain legally organized and operated to provide Medical
Services in a manner consistent with all State and federal laws.
4.2 MEDICAL PRACTICE PERSONNEL.
4.2-1 PHYSICIAN PERSONNEL. Medical Practice shall retain, as a
Medical Practice Expense, the number of Physicians (either through direct
contracting or by contracting with a professional association), sufficient in
the sole discretion of Medical Practice, that are necessary and appropriate for
the provision of Medical Services, each of whom shall be bound by and subject to
applicable provisions of this Agreement. Each Physician shall hold and maintain
a valid and unrestricted license to practice medicine in the State and shall be
competent in the practice of medicine in his specialty. Medical Practice shall
enter into and maintain with each Physician (or professional association) a
written
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employment or independent contractor agreement, as applicable. Medical Practice
shall be responsible for paying the compensation for all Physicians and any
other physician personnel or other contracted or affiliated physicians, and for
withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law.
The Manager shall, on behalf of Medical Practice, establish and administer the
compensation with respect to such individuals in accordance with the written
agreement between Medical Practice and each Physician. The Manager shall
neither control nor direct any Physician in the performance of Medical Services
for patients.
4.2-2 NONPHYSICIAN HEALTH-CARE PERSONNEL. All nonphysician health-
care personnel who provide patient-care services in the diagnostic areas of the
Office shall be employed by or retained by Medical Practice and shall be under
Medical Practice's control, supervision, and direction in the performance of or
in connection with Medical Services for patients.
4.3 PROFESSIONAL STANDARDS. As a continuing condition of Medical
Practice's obligations under this Agreement, each Physician must (i) have and
maintain a valid and unrestricted license to practice medicine in the State,
(ii) comply with, be controlled and governed by, and otherwise provide Medical
Services in accordance with applicable federal, State, and municipal laws,
rules, regulations, ordinances, and orders, and the ethics and standard of care
of the medical community wherein the principle office of the Medical Practice is
located, and (iii) obtain and retain appropriate medical staff membership with
appropriate clinical privileges at any hospital or health-care facility at which
Medical Services are to be provided. Procurement of temporary staff privileges
pending the completion of the medical staff approval process shall satisfy this
provision, provided the Physician actively pursues full appointment and actually
obtains full appointment.
4.4 MEDICAL SERVICES. Medical Practice shall ensure that Physicians
and nonphysician health-care personnel are available as necessary to provide
Medical Services to patients. Medical Practice and the Physicians shall be
responsible for scheduling Physician and nonphysician health-care personnel
coverage of all medical procedures. Medical Practice shall cause all Physicians
to exert their best efforts to develop and promote Medical Practice in a manner
designed to ensure that Medical Practice is able to serve the diverse needs of
the community.
4.5 PEER REVIEW/QUALITY ASSURANCE. Medical Practice shall adopt a
peer-review/quality-assurance program to monitor and evaluate the quality and
cost effectiveness of Medical Services provided by physician personnel of
Medical Practice. Upon the request of Medical Practice, the Manager shall
provide administrative assistance to Medical Practice in performing its peer-
review/quality-assurance activities.
4.6 MEDICAL PRACTICE'S INSURANCE. Medical Practice shall, as a Medical
Practice Expense, obtain and maintain with commercial carriers acceptable to the
Manager and the Medical Practice appropriate worker's compensation coverage for
Medical Practice's employed personnel, if any, and professional and
comprehensive general liability insurance covering Medical Practice
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and each Physician. The comprehensive general liability coverage shall be in
the minimum amount of One Hundred Thousand Dollars ($100,000); and professional
liability coverage shall be in the minimum amount of One Million Dollars ($1
Million) for each occurrence and Three Million Dollars ($3 Million) annual
physician aggregate and Ten Million Dollars ($10 Million) annual policy
aggregate. The insurance policy or policies shall provide for at least thirty
(30) days advance written notice to Medical Practice from the insurer as to any
alteration of coverage, cancellation, or proposed cancellation for any cause.
Medical Practice shall cause to be issued by the insurer or insurers a
certificate reflecting such coverage and shall obtain the consent of the insurer
or insurers to provide prior written notice to the Manager equal to notice given
to Physician of the cancellation or proposed cancellation of insurance for any
cause. Upon the termination of this Agreement for any reason, ** CONFIDENTIAL
INFORMATION ** shall obtain and maintain "tail" professional liability coverage,
in such amount and upon such conditions as determined by the Manager, for
twenty-one (21) years following the effective date of the termination.
** CONFIDENTIAL INFORMATION ** responsible for paying all premiums for "tail"
insurance coverage.
4.7 INDEMNIFICATION BY MEDICAL PRACTICE. To the extent not otherwise
covered by insurance, Medical Practice shall indemnify and hold harmless the
Manager from and against any and all liability, losses, damages, claims, causes
of action, and expenses, including, without limitation, reasonable attorney's
fees and associated costs, associated with or directly or indirectly resulting
from any act or omission of Medical Practice, its employees, agents, or
independent contractors during the Term. To be entitled to such
indemnification, the Manager shall give Medical Practice prompt written notice
of the assertion by a third party of any claim with respect to which the Manager
might bring a claim for indemnification hereunder, and in all events must
provide written notice to Medical Practice within the applicable period for
defense of such claim by Medical Practice. Medical Practice shall, as a Medical
Practice Expense, have the right to defend and litigate any such third-party
claim.
4.8 CONFIDENTIAL AND PROPRIETARY INFORMATION. Medical Practice
acknowledges the confidentiality of its relationship with the Manager and of any
Confidential Information of which it may learn or obtain during the Term of this
Agreement. Medical Practice shall not, either during the Term of this Agreement
or at any time after the expiration or sooner termination of this Agreement,
directly or indirectly, disclose to any person or entity other than employees,
agents or independent contractors engaged by Medical Practice, any Confidential
Information obtained or learned by Medical Practice. Medical Practice also
agrees to place any person, including all Physicians, to whom confidential
information is disclosed for the purpose of performance under legal obligation
to treat Confidential Information as strictly confidential.
4.9 NONCOMPETITION. Medical Practice recognizes and acknowledges that
the Manager will incur substantial costs in providing the equipment, support
services, personnel, marketing, management, administration, and other items and
services that are the subject matter of this Agreement, and that in the process
of providing services under this Agreement, Medical Practice will be privy to
financial and confidential information, to which Medical Practice would not
other wise be exposed. The parties also recognize that the services to be
provided by the Manager will
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be feasible only if Medical Practice operates an active practice to which the
Physicians associated with Medical Practice devote their full time and
attention.
4.9-1 Medical Practice agrees that ** CONFIDENTIAL INFORMATION **,
neither it nor any of its partners shall establish, operate, or provide
physician services at a medical office, clinic, or other health-care facility
providing services substantially similar to the services provided by Medical
Practice hereunder anywhere within
** CONFIDENTIAL INFORMATION **.
4.9-2 Except as specifically agreed to by the Manager in writing,
Medical Practice covenants and agrees that during the Term, Medical Practice
shall not directly or indirectly own, manage, operate, control, or be otherwise
associated with, lend funds to, lend its name to, or maintain any interest
whatsoever in any enterprise (i) having to do with the provision, distribution,
marketing, promotion, or advertising of any type of management or administrative
services or products in competition with the Manager in Harris County, Texas;
and/or (ii) offering any type of service(s) or product(s) similar to those
offered by the Manager in Harris County, Texas.
4.9-3 Medical Practice shall obtain and enforce formal agreements
from its partners, their shareholders, and physician employees pursuant to which
the partners, their shareholders and employees agree not to own, establish,
operate, manage, or provide physician services at any medical office, clinic, or
facility providing services similar to those provided by Medical Practice
hereunder within ** CONFIDENTIAL INFORMATION **. Medical Practice may provide
in such restrictive covenants that the former partner, shareholder, or employee
may be released from the restrictive covenant by paying liquidated damages.
4.9-4 Medical Practice understands and acknowledges that the
foregoing provisions in Section 4.8 and Section 4.9 are designed to preserve the
goodwill of the Manager and the goodwill of the individual Physicians of Medical
Practice. Accordingly, if Medical Practice breaches any obligation of Section
4.8 or Section 4.9, in addition to any other remedies available under this
Agreement, at law or in equity, the Manager shall be entitled to enforce this
Agreement by injunctive relief and by specific performance of the Agreement,
such relief to be without the necessity of posting a bond, cash or otherwise.
Additionally, nothing in this paragraph shall limit the Manager's right to
recover any other damages to which it is entitled as result of Medical
Practice's breach. If any provision of the restrictive covenants is held by a
court of competent jurisdiction to be unenforceable due to an excessive time
period, geographic area, or restricted activity, the restrictive covenant shall
be reformed to comply with the time period, geographic area, or restricted
activity that would be held enforceable.
4.9-5 ** CONFIDENTIAL INFORMATION **
V. FINANCIAL ARRANGEMENT.
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5.1 REIMBURSEMENT OF EXPENSES. Medical Practice shall reimburse the
Manager for all out of pocket expenses, direct costs, and reasonable indirect
costs paid or incurred by the Manager on behalf of Medical Practice.
5.2 AMOUNT OF MANAGEMENT FEES.
5.2-1 Medical Practice and the Manager mutually recognize and
acknowledge that the Manager will incur substantial costs and business risks in
arranging for Medical Practice's use of the Office and in providing the
equipment, support services, personnel, marketing, office space, management,
administration, and other items and services that are the subject matter of this
Agreement. Medical Practice and the Manager further recognize that certain of
such costs and expenses can vary to a considerable degree according to the
extent of Medical Practice's business and services. It is the intent of the
parties that the fees paid to the Manager be reasonable and approximate its
costs and expenses plus a reasonable return considering the investment and risk
taken by the Manager and the value of the services provided by the Manager. In
addition to the reimbursement of expenses and costs described in Section 5.1
above, Medical Practice shall pay to the Manager a Management Fee as described
in Exhibit A attached hereto and incorporated into this Agreement.
5.2-2 The Management Fee amount shall be re-evaluated on not less
than a yearly basis in the anniversary month of the execution of this Agreement
or as changes in the Medical Practice dictate, to ensure that the Management Fee
reflects the fair market value of the Manager's services. Payment of the
Management Fee is not intended to be and shall not be interpreted or applied as
permitting the Manager to share in Medical Practice's fees for Medical Services
or any other services but is acknowledged as the parties' negotiated agreement
as to the reasonable fair market value of the equipment, support services,
personnel, marketing, office space, management, administration, and other items
and services furnished by the Manager pursuant to this Agreement, considering
the nature and volume of the services required and the risks assumed by the
Manager.
5.2-3 Notwithstanding the above, the Fixed Fee shall
increase each year by no less than the greater of five percent (5%) of the
increase in the Consumer Price Index for all Urban Consumers.
5.3 PAYMENT OF MANAGEMENT FEE. To facilitate the payment of the
Management Fee and the reimbursement of expenses, Medical Practice expressly
authorizes the Manager to withdraw the Management Fee and other amounts due to
the Manager as reimbursement of expenses from the Medical Practice Account, from
time to time at Manager's sole discretion.
5.4 ADJUSTMENTS. Adjustments to the Management Fee calculation shall
be made as follows:
5.4-1 Upon termination of this Management Services Agreement, a
liability for the Management Fee shall be established in an amount equal to the
difference, if any
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between (i) ** CONFIDENTIAL INFORMATION ** less (ii)** CONFIDENTIAL INFORMATION
**.
5.4-2 If there are not sufficient funds to pay the Bonus Fee,
unpaid amounts ** CONFIDENTIAL INFORMATION **. Furthermore, the amount of the
Bonus Fee paid will be monitored and reconciled on an annual basis and any
overpayments of the Bonus Fee shall be promptly refunded by the Manager.
5.5 ACCOUNTS RECEIVABLE. To assure that Medical Practice receives the
entire amount of professional fees for its services and to assist Medical
Practice in maintaining reasonable cash flow for the payment of Office Expenses,
Manager shall, during the Term, purchase, ** CONFIDENTIAL
INFORMATION **, the accounts receivable of Medical Practice arising during the
previous month by transferring the amount set forth below into the Medical
Practice Account. The consideration for the purchase shall be **CONFIDENTIAL
INFORMATION**. Manager shall be entitled to offset expense reimbursement and
Management Fees due to Manager against the amount payable for the accounts
receivable. If and to the extent Manager determines an account to be
uncollectible, Manager shall ** CONFIDENTIAL INFORMATION **. Although it is the
intention of the parties that Manager purchase and thereby become the owner of
the accounts receivable of Medical Practice, in the event such purchase shall be
ineffective for any reason, Medical Practice is concurrently herewith granting
to Manager a security interest in the accounts receivable, and Medical Practice
shall cooperate with Manager and execute all documents in connection with the
pledge of such accounts receivable to Manager. All collections in respect to
such accounts receivable purchased by Manager shall be received by Manager as
the agent of Medical Practice and shall be endorsed to ** CONFIDENTIAL
INFORMATION ** and deposited in a bank account at a bank ** CONFIDENTIAL
INFORMATION **. To the extent ** CONFIDENTIAL INFORMATION ** comes into
possession of any payments in respect of such accounts receivable,
** CONFIDENTIAL INFORMATION ** shall direct such payments to ** CONFIDENTIAL
INFORMATION ** for deposit in bank accounts ** CONFIDENTIAL INFORMATION **.
5.5-1 The Medical Practice will execute a Promissory Note
and Security Agreement (in substantially the forms as are attached as Exhibit B
and C, respectively), plus any other documentation reasonably required by
Manager to evidence and secure the advances ("Advances") against all tangible
and intangible assets of Medical Practice, including, but not limited to, its
accounts receivable.
5.5-2 The Medical Practice acknowledges that Manager is
borrowing the funds to make the Advances from a third party lender. Medical
Practice consents to the assignment of the Promissory Note and Security
Agreement to the third party lender and agrees to execute all documents
reasonably necessary or required by the third party lender to evidence such
assignment. Medical Practice also agrees to execute and deliver all
documentation reasonably necessary and required by the third party lender to
evidence Manager's and the third party lender's security interest in all
accounts in which the ** CONFIDENTIAL INFORMATION **.
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VI. TERM AND TERMINATION.
6.1 INITIAL AND RENEWAL TERM. The Term of this Agreement shall be for an
initial period of twenty (20) years after the effective date of this Agreement
and shall be automatically renewed for successive five (5) year periods
thereafter, provided that neither the Manager nor the Medical Practice shall
have given notice of termination of this Agreement at least one hundred twenty
(120) days but not more than one hundred fifty (150) days before the end of the
initial twenty-year term or any subsequent five-year period, unless otherwise
terminated in accordance with this Agreement.
6.2 TERMINATION.
6.2-1 TERMINATION BY THE MANAGER. The Manager may terminate this
Agreement immediately upon the occurrence of any one of the following events:
(a) The revocation, suspension, cancellation, surrender, or
restriction of the Managing Physician's license to practice medicine in the
State;
(b) Medical Practice's loss or suspension of its Medicare or
Medicaid provider number and/or Medical Practice's restriction from treating
beneficiaries of the Medicare or Medicaid programs; or
(c) The dissolution of Medical Practice or the filing of a
petition in voluntary bankruptcy, an assignment for the benefit of creditors, or
any other action taken voluntarily or involuntarily under any state or federal
statute for the protection of debtors.
(d) Medical Practice fails to generate a level of gross
billings for Medical Services in excess of the amount specified in Exhibit D,
which exhibit may be modified or amended by the Manager if Medical Practice
adds/removes Partners, changes the number of Physicians under contract, or adds
clinic locations or ancillary services.
6.2-2 TERMINATION BY MEDICAL PRACTICE. Medical Practice may terminate
this Agreement upon thirty (30) days prior written notice upon the occurrence of
any one of the following events:
(a) The dissolution of Manager or the filing of a voluntary or
involuntary petition in bankruptcy, an assignment for the benefit of creditors,
or any other action taken voluntarily or involuntarily under any state or
federal statute for the protection of debtors.
(b) The Fair Market Value (as hereinafter defined) of the common
stock of Manager $0.001 par value per share (the "Common Stock") falls below
**CONFIDENTIAL INFORMATION** per share, subject to adjustment for any
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stock split or other similar transactions. "Fair Market Value" per share as of
a particular date shall mean (i) the closing sales price per share of Common
Stock on the national securities exchange on which the Common Stock is
principally traded for the last preceding date on which there was a sale of such
Common Stock on such exchange, or (ii) if the shares of Common Stock are then
traded in an over-the-counter market, the average of the closing bid and asked
prices for the shares of Common Stock in such over-the-counter market for the
last preceding date on which there was a sale of such Common Stock in such
market, or (iii) if the shares of Common Stock are not then listed on a national
securities exchange or traded in an over-the-counter market, such value as
determined by a third party independent appraiser.
6.2-3 TERMINATION BY AGREEMENT. If Medical Practice and the Manager
shall mutually agree in writing, this Agreement may be terminated on the date
specified in the written agreement.
6.2-4 LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. If there shall
be a change in the Medicare or Medicaid laws, regulations or general
instructions, new case law interpretations, the adoption of new legislation, or
a change in any third-party reimbursement system, any of which materially
affects the manner in which either party may perform or be compensated for its
services under this Agreement, the parties shall immediately propose a new
service arrangement or basis for compensation for the services furnished
pursuant to this Agreement. If such notice of new service arrangement or basis
for compensation is given and if the Manager and Medical Practice are unable
within thirty (30) days thereafter to agree upon a new service arrangement or
basis for compensation, either party may terminate this Agreement by thirty (30)
days notice to the other on any future date specified in the notice.
6.2-5 TERMINATION ON NOTICE OF DEFAULT. If either party shall give
notice to the other that the other party has substantially defaulted in the
performance of any other obligation under this Agreement, and the default shall
not have been cured within sixty (60) calendar days following the giving of the
notice, the party giving notice shall have the right to terminate this Agreement
upon thirty (30) days notice to the other party.
6.3 EFFECTS OF TERMINATION. Upon termination of this Agreement, as
hereinabove provided, neither party shall have any further obligations under
this Agreement except for (i) obligations accruing prior to the date of
termination, including, without limitation, payment of the Management Fee
relating to services provided prior to the termination of this Agreement and
(ii) obligations, promises, or covenants set forth in this Agreement that are
expressly made to extend beyond the Term, including, without limitation,
indemnities and noncompetition provisions.
**CONFIDENTIAL INFORMATION** Upon the expiration or termination of this
Agreement for any reason or cause whatsoever, the Manager shall surrender to
Medical Practice all books and records pertaining to Medical Practice's medical
practice; provided, however, Medical Practice shall provide Manager with access
to such books and records and provide copies thereof which
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are reasonably required to collect accounts receivable of Medical Practice as of
the expiration or termination of this Agreement.
VII. MISCELLANEOUS.
7.1 ADMINISTRATIVE SERVICES ONLY. Nothing in this Agreement is intended
or shall be construed to allow the Manager to exercise control or direction over
the manner or method by which Medical Practice and its Physicians perform
Medical Services or other professional health-care services. The rendition of
all Medical Services, including, but not limited to, emergency medicine and the
prescription or administration of medicine and drugs, shall be the sole
responsibility of Medical Practice and its Physicians, and the Manager shall not
interfere in any manner or to any extent therewith. Nothing in this Agreement
shall be construed to permit the Manager to engage in the practice of medicine,
it being the sole intention of the parties that the services to be rendered to
Medical Practice by the Manager are solely for the purpose of providing
nonmedical management and administrative services to Medical Practice so that
Medical Practice can devote its full time and energies to the professional
conduct of its medical practice and to the provision of Medical Services to its
patients and not to administration, marketing, or practice management.
7.2 STATUS OF CONTRACTOR. It is expressly acknowledged that the parties
are independent contractors, and nothing in this Agreement is intended and
nothing shall be construed to create an employer-employee, partnership, joint-
venture, or other type of relationship, or to allow either party to exercise
control or direction over the manner or method by which the other performs the
services that are the subject matter of this Agreement; provided always that the
services to be provided under this Agreement shall be furnished in a manner
consistent with the standards governing those services and the provisions of
this Agreement. Each party understands and agrees that (i) the other will not
be treated as an employee for federal tax purposes, (ii) neither will withhold
on behalf of the other any sums for income tax, unemployment insurance, social
security, or any other withholding pursuant to any law or requirement of any
governmental body or make available any of the benefits afforded to its
employees, (iii) all of such payments, withholdings, and benefits, if any, are
the sole responsibility of the party incurring the liability, and (iv) each will
indemnify and hold the other harmless from any and all loss or liability arising
with respect to such payments, withholdings, and benefits, if any.
7.3 NOTICES. Any notice, demand, or communication required, permitted, or
desired to be given under this Agreement shall be deemed effectively given when
in writing and personally delivered or mailed by prepaid certified or registered
mail, return receipt requested, addressed as follows:
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MEDICAL PRACTICE: ______________________________________
______________________________________
______________________________________
______________________________________
MANAGER: DRCA Houston Clinics, Inc.
Three Riverway, Suite 1430
Houston, Texas 77056
ATTN: President
or to another address, or to the attention of another person or officer, that
either party may designate by written notice.
7.4 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas and is performable and shall be enforceable in Harris County,
Texas. The federal and state courts of Harris County, Texas shall be the
exclusive courts of jurisdiction and venue for any litigation, special
proceeding, or other proceeding as between the parties that may be brought in
connection with or by reason of, or arise out of, this Agreement.
7.5 ASSIGNMENT. Except as may specifically provided in this Agreement to
the contrary, this Agreement shall inure to the benefit of and be binding upon
the parties and their respective legal representatives, successors, and assigns;
provided, however, that Medical Practice may not assign this Agreement without
the prior written consent of the Manager, which consent the Manager may withhold
in its sole discretion. **CONFIDENTIAL INFORMATION** Any breach of this
provision, whether or not void or voidable, shall constitute a material breach
of this Agreement, and in the event of such a breach, the Manager may terminate
this Agreement upon twenty-four (24) hours notice to Medical Practice. The
Manager shall have the right (i) to assign its rights and obligations under this
Agreement to any third party and (ii) collaterally to assign its interest in
this Agreement and its right to collect Management Fees under this Agreement to
any financial institution or other third party without the consent of Medical
Practice.
7.6 WAIVER OF BREACH. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or be construed to
constitute, a waiver of any subsequent breach of the same or another provision.
7.7 ENFORCEMENT. If either party resorts to legal action to enforce or
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover the costs and expenses of the action, including, without
limitation, reasonable attorneys' fees.
7.8 GENDER AND NUMBER. Whenever the context of this Agreement requires,
the gender of all words shall include the masculine, feminine, and neuter, and
the number of all words shall include the singular and plural.
7.9 ADDITIONAL ASSURANCES. Except as may be specifically provided in this
Agreement to the contrary, the provisions of this Agreement shall be self-
operative and shall not require
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further agreement by the parties; provided, however, at the request of either
party, the other party shall execute any additional instruments and take any
additional acts that are reasonable and that the requesting party may deem
necessary to effectuate this Agreement.
7.10 CONSENTS, APPROVALS, AND EXERCISE OF DISCRETION. Whenever this
Agreement requires any consent or approval to be given by either party or either
party must or may exercise discretion, the parties agree that the consent or
approval shall not be unreasonably withheld or delayed and that the discretion
shall be reasonably exercised.
7.11 DISPUTE RESOLUTION. Manager and Managing Physician shall use
good faith negotiation to resolve any dispute that may arise under this
Agreement. In the event Manager and Managing Physician cannot reach agreement
on any issue, Medical Practice shall call a meeting of its partners, who shall
vote on whether to agree with Manager or Managing Physician on the issue in
dispute. If the partners vote to agree with the Managing Physician, and the
parties remain in disagreement, the issue shall be submitted by either party to
binding arbitration according to the rules of arbitration of the National Health
Lawyers Association. Arbitration shall take place in Houston, Texas.
7.12 FORCE MAJEURE. Neither party shall be liable or deemed to be
in default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party unless the delay or failure in
performance is expressly addressed elsewhere in this Agreement.
7.13 SEVERABILITY. The parties have negotiated and prepared the
terms of this Agreement in good faith and with the intent that every term,
covenant, and condition be binding upon and inure to the benefit of the
respective parties. Accordingly, if any one or more of the terms, provisions,
promises, covenants, or conditions of this Agreement or the application thereof
to any person or circumstance shall be adjudged to any extent invalid,
unenforceable, void, or voidable for any reason whatsoever by a court of
competent jurisdiction, that provision shall be as narrowly construed as
possible, and all the remaining terms, provisions, promises, covenants, and
conditions of this Agreement or their application to other persons or
circumstances shall not be affected thereby and shall be valid and enforceable
to the fullest extent permitted by law. To the extent this Agreement is in
violation of applicable law, then the parties agree to negotiate in good faith
to amend the Agreement, to the extent possible consistent with its purposes, to
conform to applicable law.
7.14 DIVISIONS AND HEADINGS. The divisions of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith is solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
7.15 AMENDMENTS AND AGREEMENT EXECUTION. This Agreement and its
amendments, if any, shall be in writing and may be executed in multiple copies
on behalf of Medical Practice
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by its President and on behalf of the Manager by its duly authorized officer.
Each multiple copy shall be deemed an original, but all multiple copies together
shall constitute one and the same instrument.
7.16 ENTIRE AGREEMENT. With respect to the subject matter of this
Agreement, this Agreement supersedes all previous contracts and constitutes the
entire agreement between the parties. Neither party shall be entitled to
benefits other than those specified in this Agreement. No prior oral statements
or contemporaneous negotiations or understandings or prior written material not
specifically incorporated in this Agreement shall be of any force and effect,
and no changes in or additions to this Agreement shall be recognized unless
incorporated by amendment as provided in this Agreement, such amendment(s) to
become effective on the date stipulated in the amendment(s). The parties
specifically acknowledge that, in entering into and executing this Agreement,
the parties rely solely upon the representations and agreements in this
Agreement and upon no others.
IN WITNESS WHEREOF, Medical Practice and the Manager have caused this
Agreement to be executed by their duly authorized representatives, all as of the
day and year first above written.
MEDICAL PRACTICE: PHYSICARE, L.L.P.
PhysiCare, L.L.P.
Occupational Medicine Associates of Houston, P.A.,
an Authorized Partner
By: /s/ William F. Donovan, M.D.
Name: William F. Donovan, M.D.
Title: President
MANAGER: DRCA HOUSTON CLINICS, INC.
By: /s/ Jose E. Kauachi
Name: Jose E. Kauachi
Title: President & CEO
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Exhibit A
COMPUTATION OF MANAGEMENT FEE
I. **CONFIDENTIAL INFORMATION**
(a) **CONFIDENTIAL INFORMATION**
(b) **CONFIDENTIAL INFORMATION**
(c) **CONFIDENTIAL INFORMATION**
(d) **CONFIDENTIAL INFORMATION**
II. **CONFIDENTIAL INFORMATION**
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EXHIBIT D
MINIMUM LEVELS OF MEDICAL PRACTICE BILLINGS
**CONFIDENTIAL INFORMATION**
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EXHIBIT 10.102
*** WHERE REFERENCES TO **CONFIDENTIAL
INFORMATION** HAVE BEEN MADE WITHIN THIS
AGREEMENT, CERTAIN CONFIDENTIAL INFORMATION
HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION***
COLLECTION SERVICES AGREEMENT
-----------------------------
THIS COLLECTION SERVICES AGREEMENT ("Agreement") is made and entered into
effective as of the 1st day of March, 1995 ("Effective Date"), by and between
DRCA Houston Clinics, Inc., a Texas corporation ("Collection Agent"), and
Northshore Orthopedics Assoc., a Texas professional association ("Medical
Practice").
RECITALS:
This Agreement is made with reference to the following facts:
A. Medical Practice is a validly existing Texas professional association
formed for and engaged in the conduct and provision of medical services to the
general public in the State of Texas through physicians who are licensed to
practice medicine in the State of Texas and who are employed or otherwise
retained by Medical Practice.
B. Collection Agent is a validly existing Texas corporation that provides
administrative and related services to professional associations, physicians,
and other professional health care entities and individuals. Collection Agent's
personnel are experienced in providing collection services for medical
practices.
C. Medical Practice wishes to engage Collection Agent to provide
collection services for Medical Practice, and Collection Agent desires to
provide such services, all upon the terms and conditions hereinafter set forth.
D. Medical Practice and Collection Agent have negotiated at arms-length
and determined a fair market value for the services to be rendered by Collection
Agent. Based on this fair market value, Medical Practice and Collection Agent
have developed a formula to compensate Collection Agent that will allow the
parties to establish a relationship permitting each party to devote its skills
and expertise to the appropriate responsibilities and functions.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
I. APPOINTMENT AND AUTHORITY OF COLLECTION AGENT.
---------------------------------------------
1.1 APPOINTMENT. Medical Practice appoints Collection Agent as its sole
and exclusive agent for the provision of collection services on behalf of
Medical Practice, except as otherwise
<PAGE>
specifically agreed in writing by Medical Practice and Collection Agent, and
Collection Agent accepts the appointment, subject at all times to the provisions
of this Agreement.
1.2 AUTHORITY.
A. Consistent with the provisions of this Agreement, Collection Agent
shall have the responsibility and commensurate authority to provide collection
services on behalf of Medical Practice. In satisfying its obligations
hereunder, Collection Agent may perform any service or provide any material
directly or Collection Agent may engage an affiliate to perform any service or
provide any material.
B. Collection Agent will have no involvement in nor exercise any control
over Medical Practice's internal activities and management decisions, including,
but not limited to, decisions regarding Medical Practice membership or the
manner or method by which Medical Practice conducts its salary allocation.
1.3 PATIENT REFERRALS. Collection Agent and Medical Practice agree that
the benefits to Medical Practice hereunder do not require, are not payment for,
and are not in any way contingent upon a referral or any other arrangement for
the provision of any item or service offered by Collection Agent or any entity
affiliated with Collection Agent of any patient of Medical Practice to any
entity controlled, managed, or operated by Collection Agent.
II. COVENANTS AND RESPONSIBILITIES OF COLLECTION AGENT
2.1 COLLECTION. On behalf of and for the account of Medical Practice,
Collection Agent shall establish and maintain collection policies and
procedures, and shall use Collection Agent's reasonable best efforts to collect
timely all professional and other fees for all billable medical services
provided by Medical Practice or its physicians as such amounts are represented
in Medical Practice's accounts receivable ledger dated 2/28/95, which amounts
represent all uncollected billable services of the Medical Practice as of the
date hereof, a copy of which is attached as Exhibit A (the "Accounts
Receivable"). Collection Agent shall not consult with Medical Practice
regarding the fees for medical services provided by Medical Practice; it being
understood that Medical Practice shall establish the fees to be charged for
medical services, and that Collection Agent shall have no authority whatsoever
with respect to the establishment of such fees. In connection with the
collection services to be provided hereunder, and throughout the term of this
Agreement (and thereafter as provided in Section 5.3), Medical Practice grants
Collection Agent a special power of attorney and appoints Collection Agent as
Medical Practice's true and lawful agent and attorney-in-fact, and Collection
Agent accepts such special power of attorney and appointment, for the following
purposes:
A. To collect and receive, in Medical Practice's name and on Medical
Practice's behalf, all Accounts Receivable, to administer such accounts
including, but not limited to, extending the time of payment of any such
accounts for cash, credit or otherwise; discharging or releasing the obligors of
any such accounts; suing, assigning or
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selling at a discount such accounts to collection agencies; or taking other
measures to require the payment of any such accounts Medical Practice shall be
responsible for fees, if any, to outside collection agencies.
B. To deposit all amounts collected into the bank account of Medical
Practice established pursuant to this Agreement ("Medical Practice Account"),
which shall be and at all times remain in Medical Practice's name. Medical
Practice covenants to transfer and deliver to Collection Agent all funds
received by Medical Practice from patients or third-party payers for medical
services. Upon receipt by Collection Agent of any funds from patients or third-
party payers or from Medical Practice for medical services, Collection Agent
shall immediately deposit the funds into the Medical Practice Account.
Collection Agent may draw checks on the Medical Practice Account as expressly
authorized herein. Medical Practice will not withdraw funds from the Medical
Practice Account without the prior written consent of Collection Agent. Limits
on authority to sign checks shall be mutually agreed upon by Collection Agent
and Medical Practice; and
C. To take possession of, endorse in the name of Medical Practice, and
deposit into the Medical Practice Account any notes, checks, money orders,
insurance payments, and any other instruments received in payment of accounts
receivable for medical services.
Collection Agent shall have access to the Medical Practice Account solely for
the purposes stated in this Agreement. Upon request of Collection Agent,
Medical Practice shall execute and deliver to the financial institution wherein
the Medical Practice Account is maintained any additional documents or
instruments that may be necessary to evidence or effect the special power of
attorney granted to Collection Agent by Medical Practice pursuant to this
Section. The special power of attorney granted in this Agreement shall be
coupled with an interest and shall be irrevocable except with Collection Agent's
written consent.
2.2 COLLECTION REPORTS. By the 30th of each month, Collection Agent
shall prepare and send to Medical Practice Collection Agent's standard monthly
collection reports for the previous month.
2.3 PATIENT FILES. Collection Agent shall establish a mutually agreed-
upon procedure, including documentation, for the request, use, maintenance, and
return of Medical Practice's patient files.
2.4 ASSUMPTION OF CERTAIN COSTS. Collection Agent shall assume all costs
for postage, phone bills, forms, and supplies used by Collection Agent.
2.5 CONFIDENTIALITY. Collection Agent agrees to keep confidential and not
to take, retain, use, or disclose to others during the term of this Agreement
and for a period of two (2) years thereafter, except as expressly consented in
writing by Medical Practice or by law, any secrets or confidential technology,
proprietary information, strategic plans, patient lists or records, documents
pertaining to Medical Practice's business or financial conditions, trade secrets
of
3
<PAGE>
Medical Practice, or any matter or thing ascertained by Collection Agent through
Collection Agent's relationship with Medical Practice, the use or disclosure of
which matter or thing might reasonably be construed to be contrary to the best
interests of Medical Practice. Collection Agent further agrees that upon
termination or expiration of this Agreement, Collection Agent and each and every
one of its members, partners, employees, contractors, or agents will neither
take nor retain, without prior written authorization from Medical Practice, any
papers, patient lists, fee books, files, or other documents or copies thereof or
other confidential information of any kind belonging to Medical Practice or
pertaining to Medical Practice's patients, business, financial condition, or
products. Without limiting other possible remedies to Medical Practice for the
breach of this covenant, Collection Agent agrees that injunctive or other
equitable relief shall be available to enforce this covenant regarding
confidentiality of information.
2.6 INDEMNIFICATION BY COLLECTION AGENT. To the extent not otherwise
covered by insurance, Collection Agent shall indemnify and hold harmless Medical
Practice from and against any and all liability, losses, damages, claims, causes
of action, and expenses, including reasonable attorney's fees, associated with
or directly or indirectly resulting from any act or omission of Collection Agent
or the personnel under its supervision. To be entitled to such indemnification,
Medical Practice shall give Collection Agent prompt written notice of the
assertion by a third party of any claim with respect to which Medical Practice
might bring a claim for indemnification hereunder, and in all events must
provide such written notice to Collection Agent within the applicable period for
defense of such claim by Collection Agent. Collection Agent shall have the
right to defend and litigate any such third-party claim.
III. MEDICAL PRACTICE RESPONSIBILITIES AND OBLIGATIONS.
3.1 ORGANIZATION AND OPERATION. Medical Practice, as a continuing
condition of Collection Agent's obligations under this Agreement, shall at all
times during the term of this Agreement be and remain legally organized and
operated to provide medical services in a manner consistent with all Texas and
federal laws.
3.2 COOPERATION. Medical Practice will cooperate and cause its employees
to cooperate with Collection Agent in every reasonable respect to allow
Collection Agent to perform its duties under this Agreement.
3.3 PROVISION OF COLLECTION INFORMATION. Medical Practice will furnish
Collection Agent with all information necessary to enable Collection Agent to
perform the services set forth in this Agreement. As part of such
responsibility, Medical Practice will provide, without limitation, the following
to Collection Agent:
A. All patient and billing information deemed appropriate or necessary by
Collection Agent; and
B. Access to and copies of requested patient files, superbills, face
sheets, itemized bills and other relevant account documentation.
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<PAGE>
3.4 SOURCE INFORMATION. Medical Practice shall have the sole
responsibility for all source and other information it provides Collection Agent
and Collection Agent shall have no obligation to verify, check or otherwise
inspect the information furnished by Medical Practice.
3.5 INDEMNIFICATION BY PRACTICE. To the extent not otherwise covered by
insurance, Medical Practice shall indemnify and hold harmless Collection Agent
from and against any and all liability, losses, damages, claims, causes of
action, and expenses, including, without limitation, reasonable attorney's fees
and associated costs, associated with or directly or indirectly resulting from
any act or omission of Medical Practice, its employees, agents, or independent
contractors during the term of this Agreement. To be entitled to such
indemnification, Collection Agent shall give Medical Practice prompt written
notice of the assertion by a third party of any claim with respect to which
Collection Agent might bring a claim for indemnification hereunder, and in all
events must provide written notice to Medical Practice within the applicable
period for defense of such claim by Medical Practice. Medical Practice, at its
own expense, has the right to defend and litigate any such third-party claim.
3.6 CONFIDENTIAL AND PROPRIETARY INFORMATION. Medical Practice
acknowledges the confidentiality of its relationship with Collection Agent and
of any confidential information of which it may learn or obtain during the term
of this Agreement. Medical Practice agrees to keep confidential and not to
take, retain, use, or disclose to others during the term of this Agreement and
for a period of two (2) years thereafter, except as expressly consented to in
writing by Medical Practice or by law, any secrets or confidential technology,
proprietary information, strategic plans, documents pertaining to Collection
Agent's business or financial conditions (including the terms of this
Agreement), trade secrets of Collection Agent, or any matter or thing
ascertained by Medical Practice through Medical Practice's relationship with
Collection Agent, the use or disclosure of which matter or thing might
reasonably be construed to be contrary to the best interests of Collection
Agent. Medical Practice further agrees that upon termination or expiration of
this Agreement, Medical Practice and each and every of its members, partners,
employees, contractors, or agents will neither take nor retain, without prior
written authorization from Collection Agent, any papers, programs, fee books,
files, or other documents or copies thereof or other confidential information of
any kind belonging to Collection Agent or pertaining to Collection Agent's
business, sales, financial condition, or products. Without limiting other
possible remedies to Collection Agent for the breach of this covenant, Medical
Practice agrees that injunctive or other equitable relief shall be available to
enforce this covenant regarding confidentiality of information, such relief to
be without necessity of posting bond, cash, or otherwise. Medical Practice
further agrees that if any restriction contained in this Section is held by any
court to be unenforceable or unreasonable, a lesser restriction shall be
enforced in its place and remaining restrictions contained herein shall be
enforced independently of each other.
IV. FINANCIAL ARRANGEMENT.
4.1 COLLECTION FEE. The fees payable to Collection Agent for providing
the collection services to Medical Practice ("Collection Fee") will be
**CONFIDENTIAL INFORMATION** of the first **CONFIDENTIAL INFORMATION** of
collections received
5
<PAGE>
hereunder,**CONFIDENTIAL INFORMATION** of the next **CONFIDENTIAL INFORMATION**
collected hereunder, and **CONFIDENTIAL INFORMATION** of collections received
hereunder in excess of **CONFIDENTIAL INFORMATION**, plus sales tax, payable
within five (5) days of invoice by the Collection Agent.
4.2 REASONABLE VALUE. The fee set forth in Section 4.1 is acknowledged as
the parties' negotiated agreement to the reasonable fair market value of the
services furnished by Collection Agent pursuant to this Agreement plus a
reasonable return to Collection Agent, considering investment, the risks
assumed, and the nature and volume of the collection services provided by
Collection Agent.
4.3 PAYMENT OF COLLECTION FEE. To facilitate the payment of the
Collection Fee, Medical Practice expressly authorizes Collection Agent to
**CONFIDENTIAL INFORMATION** business day of each calendar month (or on the date
of expiration or termination of this Agreement if not on the first business day
of a calendar month).
4.4 COLLECTION ADVANCE AND SECURITY.
A. COLLECTION ADVANCE. Collection Agent will lend **CONFIDENTIAL
INFORMATION** to Medical Practice as an advance on collections which are
anticipated under this Agreement (the "Collection Advance"). The amount of the
Collection Advance shall be **CONFIDENTIAL INFORMATION**.
B. SECURITY. The Collection Advance shall be secured by a first priority
security interest in the Accounts Receivable.
C. REPAYMENT. The Collection Advance plus interest thereon shall be
repaid from the first collections retained by Medical Practice after having
deducted therefrom the Collection Fee. **CONFIDENTIAL INFORMATION**
D. LOAN DOCUMENTATION. The Medical Practice will execute a Promissory
Note and Security Agreement (in substantially the forms as are attached as
Exhibit B and C, respectively), plus any other documentation reasonably required
by Collection Agent to evidence and secure the Collection Advance.
E. UNDERLYING FINANCING AND ASSIGNMENT. The Medical Practice acknowledges
that Collection Agent is borrowing the funds to make the Collection Advance from
a third party lender. Medical Practice consents to the assignment of the
Promissory Note and Security Agreement to the third party lender and agrees to
execute all documents reasonably necessary or required by the third party lender
to evidence such assignment. The sole shareholder of Medical Practice also
agrees to execute and deliver all documentation reasonably necessary and
required by the third party lender to evidence Collection Agent's and the third
party lender's security interest in all accounts in which the Medical Practice's
sole shareholder has any personal interest (including but not limited
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<PAGE>
to those Accounts Receivables for which reimbursement is expected to be received
from Medicare, Medicaid or Champus).
4.5 TAXES. All taxes and other levies in the nature of sales, use or
excise taxes resulting from the services provided to Medical Practice hereunder
will be the sole responsibility of Medical Practice and will be paid by Medical
Practice directly.
4.6 NET PROCEEDS. On or before the tenth (10th) day of each calendar
month, Collection Agent will perform an accounting (the "Monthly Accounting") of
all amounts collected and the withdrawals taken from the account since the prior
Monthly Accounting, which Monthly Accounting shall also include any handling
fees related to the Medical Practice Account plus a One Thousand Dollar
($1,000.00) minimum balance requirement. Collections remaining after deducting
withdrawals and the $1,000.00 minimum balance (the "Net Proceeds") shall be
withdrawn by the Collection Agent and paid to the Medical Practice on or before
the tenth (10th) day of each calendar month.
V. TERM AND TERMINATION.
5.1 TERM. The term of this Agreement shall be for an initial period
continuing until all Accounts Receivable are collected or the parties agree that
remaining Accounts Receivable are uncollectible.
5.2 TERMINATION.
A. TERMINATION BY AGREEMENT. If Medical Practice and Collection Agent
shall mutually agree in writing, this Agreement may be terminated on the date
specified in the written agreement.
B. TERMINATION BY COLLECTION AGENT. Collection Agent may terminate this
Agreement immediately upon the occurrence of any one of the following events:
1. The revocation, suspension, cancellation, surrender, or restriction of
the license to practice medicine in the State of Texas of Medical Practice's
sole shareholder;
2. Medical Practice's loss or suspension of its Medicare or Medicaid
provider number and/or Medical Practice's restriction from treating
beneficiaries of the Medicare or Medicaid programs; or
3. The dissolution of Medical Practice or the filing of a petition in
voluntary bankruptcy, an assignment for the benefit of creditors, or any other
action taken voluntarily or involuntarily under any state or federal statute for
the protection of debtors.
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C. LEGISLATIVE, REGULATORY, ADMINISTRATIVE, OR THIRD-PARTY PAYMENT CHANGE.
If there shall be a change in the Medicare or Medicaid laws, regulations or
general instructions, the adoption of new legislation, or a change in any third-
party reimbursement system or applicable law, any of which materially affects
the manner in which either party may perform or be compensated for its services
under this Agreement, the parties shall immediately propose a new service
arrangement or basis for compensation for the services furnished pursuant to
this Agreement. If such notice of new service arrangement or basis for
compensation is given and if Collection Agent and Medical Practice are unable
within thirty (30) days thereafter to agree upon a new service arrangement or
basis for compensation, Collection Agent may terminate this Agreement by thirty
(30) days notice to the Medical Practice on any future date specified in the
notice.
5.3 EFFECTS OF TERMINATION. Upon termination of this Agreement, neither
party shall have any further obligations under this Agreement except for (i)
obligations accruing prior to the date of termination, including, without
limitation, payment of Collection Agent's fee relating to services provided
prior to the termination of this Agreement and (ii) obligations, promises, or
covenants set forth in this Agreement that are expressly made to extend beyond
the term of this Agreement, including, without limitation, indemnity and
confidentiality provisions, which provisions shall survive the expiration or
termination of this Agreement. Medical Practice shall have sole authority and
responsibility for collecting and receiving all cash collections from accounts
receivable in existence at the time this Agreement is terminated. Within five
(5) days of the effective date of the expiration or termination of this
Agreement for any reason or cause whatsoever, Collection Agent shall surrender
to Medical Practice all books and records pertaining to Medical Practice's
medical practice, including all patient and account information, and Medical
Practice shall surrender to Collection Agent the originals and all copies of
Collection Agent's programs, specifications, documentation manuals, and other
proprietary information. If conversion from Collection Agent computer format to
Medical Practice's computer is required then such conversion and any associated
expense shall be the responsibility of the Medical Practice.
VI. MISCELLANEOUS.
6.1 COLLECTION SERVICES ONLY. Nothing in this Agreement is intended or
shall be construed to allow Collection Agent to exercise control or direction
over the manner or method by which Medical Practice and its physicians perform
medical services or other professional health care services. The rendition of
all medical services shall be the sole responsibility of Medical Practice and
its physicians, and Collection Agent shall not interfere in any manner or to any
extent therewith. Nothing in this Agreement shall be construed to permit
Collection Agent to engage in the practice of medicine. Collection Agent
renders solely nonmedical collection services to Medical Practice so that
Medical Practice can devote its full time and energies to the professional
conduct of its medical practice and to the provision of medical services to its
patients.
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6.2 STATUS OF COLLECTION AGENT. It is expressly acknowledged that the
parties are independent contractors, and nothing in this Agreement is intended,
and nothing shall be construed to create an employer-employee, partnership,
joint-venture, or other type of relationship, or to allow either party to
exercise control or direction over the manner or method by which the other
performs the services that are the subject matter of this Agreement; provided
always that the services to be provided under this Agreement shall be furnished
in a manner consistent with the standards governing those services and the
provisions of this Agreement. Each party understands and agrees that (i) the
other will not be treated as an employee for federal tax purposes, (ii) neither
will withhold on behalf of the other any sums for income tax, unemployment
insurance, social security, or any other withholding pursuant to any law or
requirement of any governmental body or make available any of the benefits
afforded to its employees, (iii) all of such payments, withholdings, and
benefits, if any, are the sole responsibility of the party incurring the
liability, and (iv) each will indemnify and hold the other harmless from any and
all loss or liability arising with respect to such payments, withholdings, and
benefits, if any.
6.3 NOTICES. Any notice, demand, or communication required, permitted,
or desired to be given under this Agreement shall be deemed effectively given
when in writing and personally delivered or mailed by prepaid certified or
registered mail, return receipt requested, addressed as follows:
MEDICAL PRACTICE: Northshore Orthopedics Assoc.
12445 East Freeway
Houston, Texas 77015
Attention: William F. Donovan, M.D.
SOLE SHAREHOLDER OF
MEDICAL PRACTICE: William F. Donovan, M.D.
12445 East Freeway
Houston, Texas 77015
COLLECTION AGENT: DRCA Houston Clinics, Inc.
Three Riverway Suite, 1430
Houston, Texas 77056
Attention: _________________________
or to another address, or to the attention of another person or officer, that
either party may designate by written notice.
6.4 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Texas and is performable and shall be enforceable in Harris County,
Texas. The federal and state courts of Harris County, Texas shall be the
exclusive courts of jurisdiction and venue for any litigation, special
proceeding, or other proceeding as between the parties that may be brought in
connection with or by reason of, or arise out of, this Agreement.
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6.5 ARBITRATION. Any controversy, dispute or disagreement arising
out of or relating to this Agreement or of the breach thereof shall be settled
by arbitration, which shall be conducted in Houston, Texas in accordance with
the National Health Lawyers Association Alternative Dispute Resolution Service
Rules of Procedure for Arbitration, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
6.6 ASSIGNMENT. Except as otherwise provider herein, this Agreement
shall not be assignable by Medical Practice without the prior written consent of
Collection Agent. Nothing in this Agreement, expressed or implied, is intended
to confer upon any person, other than the parties hereto and their successors
and permitted assigns, any rights or remedies under or by reason of this
Agreement.
6.7 WAIVER OF BREACH. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or
another provision.
6.8 ENFORCEMENT. If either party resorts to legal action to enforce
or interpret any provision of this Agreement, the prevailing party shall be
entitled to recover the costs and expenses of the action, including, without
limitation, reasonable attorneys' fees.
6.9 ADDITIONAL ASSURANCES. Except as may be specifically provided in
this Agreement to the contrary, the provisions of this Agreement shall be self-
operative and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute any
additional instruments and take any additional acts that are reasonable and that
the requesting party may deem necessary to effectuate this Agreement.
6.10 FORCE MAJEURE. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party unless the delay or failure in
performance is expressly addressed elsewhere in this Agreement.
6.11 SEVERABILITY. The parties have negotiated and prepared the
terms of this Agreement in good faith and with the intent that every term,
covenant, and condition be binding upon and inure to the benefit of the
respective parties. Accordingly, if any one or more of the terms, provisions,
promises, covenants, or conditions of this Agreement or the application thereof
to any person or circumstance shall be adjudged to any extent invalid,
unenforceable, void, or voidable for any reason whatsoever by a court of
competent jurisdiction, that provision shall be as narrowly construed as
possible, and all the remaining terms, provisions, promises, covenants, and
conditions of this Agreement or their application to other persons or
circumstances shall not be affected thereby and shall be valid and enforceable
to the fullest extent permitted by law. To the extent this Agreement is in
violation of applicable law, then the parties agree to negotiate in good
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faith to amend the Agreement, to the extent possible consistent with its
purposes, to conform to applicable law.
6.12 AMENDMENTS AND AGREEMENT EXECUTION. This Agreement and its
amendments, if any, shall be in writing and may be executed in multiple copies
on behalf of Medical Practice by its President and on behalf of Collection Agent
by its duly authorized officer. Each multiple copy shall be deemed an original,
but all multiple copies together shall constitute one and the same instrument.
6.13 ENTIRE AGREEMENT. With respect to the subject matter of this
Agreement, this Agreement supersedes any and all previous contracts and
constitutes the entire agreement between the parties. Neither party shall be
entitled to benefits other than those specified in this Agreement. No prior oral
statements or contemporaneous negotiations or understandings or prior written
material not specifically incorporated in this Agreement shall be of any force
and effect, and no changes in or additions to this Agreement shall be recognized
unless incorporated by amendment as provided in this Agreement, such
amendment(s) to become effective on the date stipulated in the amendment(s).
The parties specifically acknowledge that, in entering into and executing this
Agreement, the parties rely solely upon the representations and agreements in
this Agreement and upon no others.
IN WITNESS WHEREOF, Medical Practice and Collection Agent have caused
this Agreement to be executed by their duly authorized representatives, all as
of the Effective Date.
MEDICAL PRACTICE: NORTHSHORE ORTHOPEDICS ASSOC.
By: /s/ WILLIAM F. DONOVAN, M.D.
Name: WILLIAM F. DONOVAN, M.D.
Title: President
SOLE SHAREHOLDER OF
MEDICAL PRACTICE: /s/ WILLIAM F. DONOVAN, M.D.
William F. Donovan, M.D.
COLLECTION AGENT: DRCA HOUSTON CLINICS, INC.
By: /s/ JOSE E. KAUACHI
Name: JOSE E. KAUACHI
Title: President & CEO
11
<PAGE>
*** WHERE REFERENCES TO **CONFIDENTIAL
INFORMATION** HAVE BEEN MADE WITHIN THIS
AGREEMENT, CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***
EXHIBIT 10.107
MASTER TRANSACTION AGREEMENT
BY AND AMONG
DRCA MEDICAL CORPORATION
DRCA HOUSTON CLINICS, INC.
OCCUPATIONAL MEDICINE ASSOCIATES OF HOUSTON, P.A.
NORTHSHORE ORTHOPEDICS ASSOC.
PHYSICARE, L.L.P.
WILLIAM F. DONOVAN, M.D.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
RECITALS...................................................... 1
1.1 Partnership...................................... 1
1.2 Management Services Agreement.................... 1
1.3 Contract for Service............................. 1
1.4 Employment....................................... 2
1.5 Medical Director Agreement....................... 2
1.6 Real Property Lease.............................. 2
1.7 Equipment Lease.................................. 2
1.8 Transaction Agreements........................... 2
ARTICLE II. TERMINATION...................................... 2
2.1 Termination Without Cause........................ 2
2.2 Effect of Termination............................ 3
ARTICLE III. MISCELLANEOUS.................................... 3
3.1 Parties Bound.................................... 3
3.2 Choice of Law.................................... 3
3.3 Assignment....................................... 3
3.4 Multiple Counterparts............................ 3
3.5 Headings......................................... 3
3.6 Mediation and Arbitration........................ 3
</TABLE>
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<PAGE>
MASTER TRANSACTION AGREEMENT
This Master Transaction Agreement ("Master Transaction Agreement") dated as
of May 11, 1995 is by and among DRCA Medical Corporation, a Texas corporation,
("DRCA"); DRCA Houston Clinics, Inc., a Texas corporation ("DRCA Houston");
Occupational Medicine Associates of Houston, P.A., a Texas professional
association ("OMA"); Northshore Orthopedics Assoc., a Texas professional
association ("Northshore"); PhysiCare, L.L.P., a Texas registered limited
liability partnership ("PhysiCare"); and William F. Donovan, M.D. ("Physician").
RECITALS:
A. Physician is a physician licensed to practice medicine in the State of
Texas.
B. Physician is the sole shareholder of OMA and Northshore.
C. Physician desires to restructure his medical practice by the
consummation of the transactions described in this Master Transaction Agreement.
D. The Parties to this Master Transaction Agreement desire to set forth
certain terms and conditions upon which the restructuring described above shall
be accomplished and to agree upon other matters set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the Parties
agree as follows:
ARTICLE I. RESTRUCTURE
1.1 Partnership. Concurrently herewith OMA and Northshore will enter
into a partnership agreement of PhysiCare (the "Partnership Agreement"), whereby
PhysiCare will become a provider of medical and ancillary services. The
Partnership Agreement is attached hereto as Exhibit A, and made a part of this
Master Transaction Agreement.
1.2 Management Services Agreement. Concurrently herewith PhysiCare and
DRCA Houston will enter into a Management Services Agreement (the "Management
Services Agreement"), whereby DRCA Houston will be the exclusive provider of
management services to PhysiCare. The Management Services Agreement is attached
hereto as Exhibit B, and made a part of this Master Transaction Agreement.
1.3 Contract for Service.
a. Concurrently herewith PhysiCare, Northshore and Physician will enter
into a Contract for Services ("Northshore Contract"), whereby Physician
or
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<PAGE>
other physicians will provide medical services to the patients of
PhysiCare. The Northshore Contract is attached hereto as Exhibit C, and
made a part of this Master Transaction Agreement.
b. Concurrently herewith PhysiCare and OMA will enter into a Contract for
Services ("OMA Contract"), whereby Physician or other physicians will
provide medical services to the patients of PhysiCare. The OMA Contract
is attached hereto as Exhibit D, and made a part of this Master
Transaction Agreement.
1.4 Employment. Concurrently herewith Northshore and Physician will
enter into an Employment Agreement (the "Employment Agreement"), whereby
Physician will be exclusively employed by Northshore. The Employment Agreement
is attached hereto as Exhibit E, and made a part of this Master Transaction
Agreement.
1.5 Medical Director Agreement. Concurrently herewith DRCA and Physician
will enter into a Professional Services Agreement Medical Director (the "Medical
Director Agreement"), whereby Physician will be the medical director for DRCA.
The Medical Director Agreement is attached hereto as Exhibit F, and made a part
of this Master Transaction Agreement.
1.6 Real Property Lease. Concurrently herewith DRCA Houston and
Physician will enter into a Lease Agreement (the "Lease Agreement"), whereby
DRCA Houston will lease certain property for the use of PhysiCare. The Lease
Agreement is attached hereto as Exhibit G, and made a part of this Master
Transaction Agreement.
1.7 Equipment Lease. Concurrently herewith DRCA Houston and Northshore
will enter into an Equipment Lease Agreement (the "Equipment Lease Agreement"),
whereby DRCA Houston will lease certain equipment from Northshore for use in
PhysiCare's practice. The Equipment Lease Agreement is attached hereto as
Exhibit H, and made a part of this Master Transaction Agreement.
1.8 Transaction Agreements. The Partnership Agreement, the Management
Services Agreement, the Northshore Contract, the OMA Contract, the Employment
Agreement, the Medical Director Agreement, the Lease Agreement, and the
Equipment Lease Agreement are collectively referred to herein as the
"Transaction Agreements."
ARTICLE II. TERMINATION
2.1 Termination Without Cause. Notwithstanding anything to the contrary
contained in any of the Transaction Agreements, **CONFIDENTIAL INFORMATION**,
terminate the Transaction Agreements to which they are parties,**CONFIDENTIAL
INFORMATION**
2.2 Effect of Termination. In the event that the Transaction Agreements
are terminated as described in Section 2.1 above,**CONFIDENTIAL INFORMATION**
2
<PAGE>
ARTICLE III. MISCELLANEOUS
3.1 Parties Bound. Except to the extent otherwise expressly provided
herein, this Master Transaction Agreement shall be binding upon and inure to the
benefit of the Parties and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
3.2 Choice of Law. This Master Transaction Agreement shall be
construed, interpreted, and the rights of the Parties determined in accordance
with, the laws of the State of Texas.
3.3 Assignment. The Master Transaction Agreement may not be assigned
by operation of law or otherwise except that DRCA shall have the right to assign
this Master Transaction Agreement, at any time, to any direct or indirect wholly
owned subsidiary of DRCA or to any company which acquires all or substantially
all of DRCA's operations or which is the surviving company of a merger with
DRCA. No such assignment shall relieve DRCA of its obligations hereunder.
3.4 Multiple Counterparts. This Master Transaction Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
3.5 Headings. The headings of the several Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Master Transaction
Agreement.
3.6 Mediation and Arbitration. Any dispute, controversy or claim
(including without limitation tort claims, requests for provisional remedies or
other interim relief, and issues as to arbitrability of any matter) arising out
of or relating to this Master Transaction Agreement, or the breach thereof, that
cannot be settled through negotiation shall be settled (a) first, by the parties
trying in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the National Health Lawyers Association ("NHL") (such
mediation session to be held in Houston, Texas and to commence within 15 days of
the appointment of the mediator by the NHL), and (b) if the controversy, claim
or dispute cannot be settled by mediation, then by arbitration administered by
the NHL under its Commercial Arbitration Rules (such arbitration to be held in
Houston, Texas before a single arbitrator and to commence within 15 days of the
appointment of the arbitrator by the NHL), and judgment on the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties have caused this Master Transaction
Agreement to be duly executed as of May 11, 1995, but effective for all purposes
as of May 11, 1995.
DRCA MEDICAL CORPORATION,
a Texas corporation
3
<PAGE>
By: /s/ JOSE E. KAUACHI
Name: Jose E. Kauachi
Title: President & CEO
DRCA HOUSTON CLINICS, INC.,
a Texas Corporation
By: /s/ JOSE E. KAUACHI
Name: Jose E. Kauachi
Title: President & CEO
OCCUPATIONAL MEDICINE ASSOCIATES OF
HOUSTON, P.A.,
a Texas Professional Association
By: /s/ WILLIAM F. DONOVAN, M.D.
Name: William F. Donovan, M.D.
Title: President
NORTHSHORE ORTHOPEDICS, ASSOC.,
a Texas Professional Association
By: /s/ WILLIAM F. DONOVAN, M.D.
Name: William F. Donovan, M.D.
Title: President
PHYSICARE, L.L.P.,
Occupational Medicine Associates of Houston, P.A.,
an Authorized Partner
By: /s/ WILLIAM F. DONOVAN, M.D.
Name: William F. Donovan, M.D.
Title: President
4
<PAGE>
PHYSICIAN:
By: /s/ WILLIAM F. DONOVAN, M.D.
William F. Donovan, M.D.
5
<PAGE>
*** WHERE REFERENCES TO **CONFIDENTIAL
INFORMATION** HAVE BEEN MADE WITHIN THIS
AGREEMENT, CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***
EXHIBIT 10.108
PROFESSIONAL SERVICES AGREEMENT MEDICAL DIRECTOR
THIS AGREEMENT is made this ____ day of April, 1995, effective as of March
1, 1995, by and between William F. Donovan, M.D. (hereinafter referred to as
"Physician"), and DRCA Medical Corporation, a Texas corporation, located in
Houston, Texas (hereinafter referred to as "DRCA").
R E C I T A L S:
WHEREAS, DRCA manages a registered limited liability partnership (the
"Medical Practice") located at Three Riverway, Suite 1430, Houston, Texas 77056;
and
WHEREAS, DRCA desires to engage Physician to perform professional services
for DRCA as described in this Agreement and on Exhibit A attached hereto, and
Physician desires to perform such services, all on the terms and conditions
specified in this Agreement.
WHEREAS, Physician's employer, Northshore Orthopedics, Assoc. has consented
to allow Physician to execute this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. ENGAGEMENT.
DRCA hereby engages Physician to perform the services for DRCA as described
in this Agreement and on Exhibit A attached hereto.
2. TERM.
This Agreement shall become effective upon execution hereof and shall have
a term ending on the last day of the third term year (the "Initial Term"). At
the end of such Initial Term, this Agreement shall extend automatically unless
it is terminated by either party 90 days prior to the end of the Initial Term.
3. OBLIGATIONS OF PHYSICIAN.
3.1 STATUS AND MEMBERSHIP. Physician shall remain in full compliance with
all of the following conditions continuously during the entire term of this
Agreement. Failure of Physician to satisfy any or all of the following
conditions shall constitute grounds for automatic termination of this Agreement
as set forth in Section 8.
<PAGE>
(a) Physician shall be licensed to practice medicine in the State of Texas
without restriction or subject to any disciplinary or corrective action;
(b) Physician shall be an employee of Northshore Orthopedics, Assoc. (the
"PA");
(c) Physician shall have all customary narcotics and controlled substances
numbers and licenses.
3.2 DUTIES AND RESPONSIBILITIES. Physician shall be responsible for all
administrative matters involving the Medical Practice, and those duties and
responsibilities set forth on Exhibit A attached hereto and incorporated hereby
and, in addition, the following:
(a) Physician shall (i) advise DRCA on general medical issues, (ii) act as
Physician liaison and maintain Physician relations in all medical practices
managed by DRCA, its subsidiaries and affiliates, (iii) advise DRCA on clinic
management and operations issues, and (iv) assist in development of medical
service programs and products in support of medical practices managed by DRCA,
its subsidiaries and affiliates. Physician shall perform all services and duties
under this Agreement in strict accordance with all laws, rules, regulations,
ordinances, and judicial and administrative interpretations thereof, of the
United States, the State of Texas, the City of Houston, and all political
subdivisions, agencies and instrumentalities of any of them. Particularly, and
not by way of limitation, Physician shall comply with the Texas Medical Practice
Act and all rules and regulations of the Texas State Board of Medical Examiners
and shall do everything necessary to maintain in effect Physician's license to
practice medicine within the State of Texas. Periodic medical reviews shall be
conducted by Physician to ensure compliance with the foregoing and with quality
assurance and medical audit programs of DRCA.
(b) Physician shall be available at reasonable times for consultation with
the individual members of the Medical Staff of the Medical Practice (and
physicians consulting with such staff members), committees of the Medical Staff
and nursing and administrative employees of DRCA who work at the Center.
Physician shall participate actively in the affairs of the Medical Staff of the
Medical Practice, shall participate for reasonable periods of time in
educational and teaching functions and programs of the Medical Practice and the
Medical Staff, and perform such tasks and provide such services as the Medical
Staff, or any committee thereof, may from time to time request.
(c) Physician shall assist DRCA in the training of any Medical Practice
personnel required for operation of the Medical Practice.
(d) Physician shall devote such time and attention as is necessary, but in
no event less than ten (10) hours per week, to fulfillment of his duties and
responsibilities. Physician shall be available during normal business hours for
on-call consultation,
2
<PAGE>
assistance and decisions regarding patient care or emergency issues at any
Medical Practice location.
(e) Physician shall have the title of "Medical Director."
3.3 PHYSICIAN'S WARRANTIES. Physician represents and warrants to DRCA
that (a) Physician's license to practice medicine in any state has never been
suspended or revoked; (b) Physician has never been reprimanded, sanctioned or
disciplined by any licensing board or state or local medical society or
specialty board; (c) except as disclosed on Schedule 3.3 attached hereto, there
has never been entered against Physician a final judgment in a malpractice
action having an aggregate award to the plaintiff in excess of $10,000, and no
action, based on an allegation of malpractice by Physician, has ever been
settled by payment to the plaintiff of an aggregate of more than $10,000; (d)
Physician has never been denied membership or reappointment of membership on the
medical staff of any hospital and no hospital medical staff membership or
clinical privileges of Physician have ever been suspended, curtailed or revoked;
and (e) Physician is not in breach of any other contract, obligation, or
covenant that would affect Physician's ability to perform hereunder and, as a
result of entering into this Agreement, will not breach any such contract,
obligation or covenant.
3.4 EMPLOYMENT OF OTHER PHYSICIANS BY PHYSICIAN. In order to provide for
DRCA the services described in Section 3.2, Physician shall provide services by
other physicians during vacations or illnesses of Physician, when Physician
attends seminars and meetings, and as may otherwise be necessary to perform
Physician's obligations under Section 3.2. Physicians who provide services on
behalf of Physician shall be employees or independent contractors of Physician.
Physician shall be responsible for recruiting, contracting, scheduling,
compensating and supervising all such other physicians; however, prior approval
of any physician providing coverage for Physician must be obtained from DRCA.
Physicians engaged by Physician shall meet the same license, certification and
membership requirements required of Physician under this Agreement and shall
have and maintain professional insurance in a type and amount equivalent to that
which Physician is required to have and maintain under Section 3.5.
3.5 INSURANCE. Physician and all physicians who may provide services
hereunder for Physician will at all times throughout the term of this Agreement
maintain general and professional liability insurance, including malpractice
insurance, in an amount no less than One Million Dollars ($1,000,000) per
occurrence for each claim and Three Million Dollars ($3,000,000) annual
aggregate. Such insurance shall be obtained from a reputable insurance company
authorized to sell liability insurance policies in Texas, rated A or better and
satisfactory to DRCA. Such insurance may be in a combination of primary and
excess amounts. Moreover, in the event that Physician (or any physician
providing services hereunder for Physician) ceases to provide services
hereunder, or upon the termination or expiration of this Agreement, Physician
and each physician whose insurance is "claims made" insurance rather than
"occurrence" insurance will either (i) purchase "tail" coverage to continue the
liability insurance coverage for the period during which Physician or any
physician rendered services hereunder or (ii) continue in full force and effect
the same level of liability insurance coverage on a claims made basis until the
longest
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<PAGE>
statute of limitations for professional liability has expired (recognizing that
the statute of limitations for minors is tolled until they reach the age of
majority). This requirement shall be deemed continuing and shall survive any
termination or expiration of this Agreement. Said insurance shall cover all of
Physician's professional services provided to patients, his private medical
practice, as well as his activities and responsibilities as a member of the
Medical Staff of the Medical Practice. On or before the effective date of this
Agreement and thereafter on the first day of each year of the term of this
Agreement, Physician and each physician will deliver to DRCA a certificate of
insurance evidencing the required coverage and the payment of premiums by
Physician for the ensuing year. Physician's insurer or insurers shall provide
written notice to DRCA of the cancellation or proposed cancellation of any such
liability insurance policy.
3.6 DISCLOSURE OF INFORMATION. Physician recognizes and acknowledges that
he will have access to certain confidential information of DRCA and that such
information constitutes valuable, special and unique property of DRCA.
Physician will not, during or after the term of this Agreement, without the
consent of DRCA, disclose any such confidential information to any other person,
firm, corporation, association, or other entity for any reason or purpose
whatsoever except as may be ordered by a court or governmental agency or as may
otherwise be required by law. In the event of a breach or a threatened breach
by Physician of the provisions of this paragraph, DRCA shall be entitled to an
injunction restraining Physician from disclosing in whole or in part any
confidential information. Nothing herein shall be construed as prohibiting DRCA
from pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from Physician.
3.7 FINANCIAL OBLIGATION. Physician shall incur no financial obligation
on behalf of DRCA or for which DRCA shall be responsible without prior approval
of DRCA.
3.8 BILLING. Physician shall not charge patients for services rendered as
Medical Director of DRCA.
3.9 SERVICES. Physician shall perform all obligations of Physician under
this Agreement at Physician's principal place of business.
4. OBLIGATIONS OF DRCA.
4.1 SUPPORT SERVICES. DRCA shall provide Physician clerical assistance at
the Medical Practice as necessary for Physician to fulfill his responsibilities
as Medical Director.
4.2 FACILITIES. DRCA shall furnish Physician with an office for the
performance of services under this Agreement.
4.3 INSURANCE. DRCA shall furnish at its own cost insurance required of
Physician pursuant to Section 3.5 hereof.
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<PAGE>
5. COMPENSATION.
In consideration of the administrative and supervisory services to be
provided to DRCA under this Agreement, DRCA agrees to pay to Physician monthly
compensation in the amount of **CONFIDENTIAL TREATMENT** Physician, as an
independent contractor, agrees to pay in a timely manner all social security and
other payroll taxes relating to such compensation.
6. RESTRICTIVE COVENANTS.
During the term of this Agreement and for a period of one (1) year after
the effective date of the termination or expiration of this Agreement, except as
otherwise agreed in writing by DRCA, Physician shall not, directly or
indirectly, in any capacity (whether as an owner, shareholder, employee,
independent contractor, consultant, or otherwise) provide or enter into
negotiations to provide any services as a Medical Director for any person
engaged in a competing business with DRCA, its subsidiaries or affiliates within
Harris County, Texas or within thirty (30) miles of any other medical practice
managed by DRCA, its subsidiaries or affiliates, including but not limited to
the development, management or operation of any facility or part thereof.
Physician further covenants that during the term of this covenant, Physician
will not interfere with, solicit, disrupt or attempt to disrupt any past,
present or prospective relationship, contractual or otherwise, between DRCA and
any contractor, third party payor, or employee of DRCA. Physician acknowledges
that the foregoing restriction is reasonable and necessary to protect the
legitimate interest of DRCA and that DRCA would not have entered into this
Agreement without the Physician non-compete covenant contained herein, that the
violation of this covenant will result in irreparable injury to DRCA, that the
remedy at law for any such violation or threatened violation would be inadequate
and that in the event of any such breach or violation, DRCA, in addition to any
other remedies or damages available to it, shall be entitled to temporary
injunctive relief before trial from any court of competent jurisdiction as a
matter of course and to permanent injunctive relief without the necessity of
proving actual damages.
7. INDEPENDENT CONTRACTOR.
In the performance of all services pursuant to this Agreement, Physician is
at all times acting as an independent contractor engaged in the profession and
practice of medicine. Physician shall employ his own means and methods and
exercise his own professional judgment in the performance of such services, and
DRCA shall have no right of control or direction with respect to such means,
methods or judgments, or with respect to the details of such services. The
only concern of DRCA under this Agreement or otherwise is that, irrespective of
the means selected, such services shall be provided in a competent, efficient
and satisfactory manner. It is expressly agreed that Physician shall not for
any purpose be deemed to be an employee, agent, partner, joint venturer,
ostensible or apparent agent, servant, or borrowed servant of DRCA. Physician,
and all physicians and other individuals providing services pursuant to this
Agreement, shall not have any claim against DRCA for vacation pay, sick leave,
retirement benefits, social security, workers' compensation, disability or
unemployment insurance benefits, or employee benefits of any kind.
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<PAGE>
8. TERMINATION.
8.1 TERMINATION. DRCA at any time may terminate this Agreement, with or
without cause, by giving written notice of such termination to Physician at
least sixty (60) days prior to the date on which the termination is to be
effective, such date to be specified in the notice; provided, however, that in
such event,**CONFIDENTIAL TREATMENT** medical director fees shall be retained by
Physician. This Agreement shall terminate automatically **CONFIDENTIAL
TREATMENT** Notwithstanding the above, if Physician fails to comply with any or
all of the requirements set forth in Section 3 of this Agreement at any time
during this Agreement, DRCA shall be entitled to terminate this Agreement
effective immediately.
9. INDEMNIFICATION.
Physician hereby agrees to indemnify and hold harmless DRCA from and
against any claim, loss, damage, cost, expense or liability arising out of or
related to the performance or nonperformance by Physician, or such other
physicians as Physician employs or contracts with to provide coverage on
Physician's behalf, of any services (including supervision), to be performed or
provided by Physician under this Agreement, including but not limited to the
practice of the profession of medicine by Physician or such other physicians.
This covenant shall be deemed continuing and shall survive any termination or
expiration of this Agreement.
10. MISCELLANEOUS.
10.1 GOVERNING LAW. This Agreement shall be subject to and governed by
the laws of the State of Texas.
10.2 REMEDIES. All rights, powers and remedies granted to either party by
any particular term of this Agreement are in addition to, and not in limitation
of, any rights, powers or remedies which it has under any other term of this
Agreement, at common law, in equity, by statute, or otherwise. All such rights,
powers and remedies may be exercised separately or concurrently, in such order
and as often as may be deemed expedient by either party. No delay or omission
by either party to exercise any right, power or remedy shall impair such right,
power or remedy or be construed to be a waiver of or an acquiescence to any
breach or default. A waiver by either party of any breach or default hereunder
shall not constitute a waiver of any subsequent breach or default.
10.3 AMENDMENT. No amendment or variation of the terms of this Agreement
shall be valid unless in writing and signed by both parties.
10.4 ASSIGNMENT. DRCA may assign this Agreement to any subsidiary or
affiliate without Physician's consent. Physician may not assign his rights or
obligations under this Agreement. Further, Physician may not subcontract or
otherwise arrange for another individual or entity to perform his duties under
this Agreement, with the exception of the limited coverage provisions set out in
Section 3.4 of this Agreement.
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<PAGE>
10.5 CAPTIONS. The captions for each Section of this Agreement are
included for convenience of reference only and are not to be considered a part
hereof, and shall not be deemed to modify, restrict or enlarge any of the terms
of provisions of this Agreement.
10.6 NOTICE. Any notices or payments required or permitted to be given
under this Agreement shall be deemed given when in writing and hand delivered or
deposited in the United States mail, certified or registered, postage prepaid,
return receipt requested, to the other party at the address set forth below or
as the party may designate in writing:
To Physician: William F. Donovan, M.D.
12445 East Freeway
Houston, Texas 77515
To DRCA: DRCA Medical Corporation
Three Riverway, Suite 1430
Houston, Texas 77504
Attn: President
With a copy to: Ronald G. Pearson, Esq.
Jenkens & Gilchrist
1100 Louisiana, Suite 1800
Houston, Texas 77002
All notices shall be deemed to have been given on the date of actual delivery,
as evidenced by the return receipt or courier record.
10.7 SEVERABILITY. In the event that any provision of this Agreement is
held to be unenforceable for any reason, the unenforceability of that provision
shall not affect the remainder of this Agreement, which shall remain in full
force and effect in accordance with its terms.
10.8 FRAUD AND ABUSE. The parties enter into this Agreement with the
intent of conducting their relationship in full compliance with applicable
state, local, and federal law including the Medicare/Medicaid Anti-fraud and
Abuse Amendments. Notwithstanding any unanticipated effect of any of the
provisions herein, neither party will intentionally conduct itself under the
terms of this Agreement in a manner to constitute a violation of the Medicare
and Medicaid fraud and abuse provisions. Further, if legislation is passed, the
effect of which would be to hinder DRCA's ability to obtain reimbursement from
Medicare or Medicaid due to the existence of this Agreement, or in the event
that this Agreement does not comply in all respects with any applicable
exemption or "safe harbor" promulgated under the Medicare and Medicaid Patient
and Program Protection Act of 1987 when and if such regulations become
effective, then DRCA may, at its option, terminate this Agreement.
10.9 ACCESS TO BOOKS AND RECORDS OF SUBCONTRACTOR. Upon the written
request of the Secretary of Health and Human Services or the Comptroller General
or any of their duly
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authorized representatives, Physician will make available those contracts,
books, documents, and records necessary to verify the nature and extent of the
costs of providing services under this Agreement. Such inspection shall be
available up to four (4) years after the rendering of such services. If
Physician carries out any of the duties of this Agreement through a subcontract
with a value of $10,000 or more over a 12-month period with a related individual
or organization, Physician agrees to include this requirement in any such
subcontract. This Section is included pursuant to and is governed by the
requirements of Public Law 96-499, Sec. 952 (Sec. 1861(v) (I) of the Social
Security Act) and the regulations promulgated thereunder. No attorney-client,
accountant-client or other legal privilege will be deemed to have been waived by
DRCA or Physician by virtue of this Agreement.
10.10 POLICY. Nothing contained in this Agreement shall require Physician
or any Physician to admit or refer any Patients to any facility in which DRCA
may own, operate or manage as a precondition to receiving the benefits set forth
herein.
10.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
any and all other agreements, understandings, negotiations, or representations,
oral or written, between them. All continuing covenants shall survive the
termination or expiration of this Agreement.
10.12 EXECUTION IN COUNTERPARTS. This Agreement and any amendments hereto
may be executed in multiple counterparts by Physician and by an appropriate
officer of DRCA. Each counterpart shall be deemed an original, but all
counterparts together shall constitute one and the same instrument.
10.13 AUTHORIZATION FOR AGREEMENT. The execution and performance of this
Agreement by DRCA and Physician have been duly authorized by all necessary laws,
resolutions, and corporate or partnership action, and this Agreement constitutes
the valid and enforceable obligations of Physician and DRCA in accordance with
its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
DRCA Medical Corporation William F. Donovan, M.D.
By: /s/ JOSE E. KAUACHI /s/ WILLIAM F. DONOVAN, M.D.
Name: Jose E. Kauachi
Title: President & CEO
8
<PAGE>
EXHIBIT A
RESPONSIBILITIES OF PHYSICIAN
Physician shall:
1. Establish and continually review policies and procedures related to
medical education.
2. Be responsible for ensuring that established non-medical policies,
bylaws, rules and regulations of DRCA are followed in the Medical
Practice.
3. Meet regularly with Medical Practice employees and quality assurance
staff for discussion of clinical issues to ensure proper treatment.
4. Develop and continually review criteria to monitor the quality of
educational programs provided to physicians.
5. Evaluate quality assurance audits to identify medical education needs.
6. Propose programs to address those needs (with the assistance and input
of consultants of the specialties where medical education needs were
identified).
7. Assist in physician, consumer and patient education, marketing and
recruitment.
A-1
<PAGE>
SCHEDULE 3.3
PROFESSIONAL SERVICE AGREEMENT MEDICAL DIRECTOR
None
/s/ WILLIAM F. DONOVAN, M.D.
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William F. Donovan, M.D.
