UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 10, 1996
OMEGA HEALTH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19283
(Commission File Number)
63-0858713
(I.R.S. Employer Identification No.)
5100 Poplar Avenue, Suite 2100, Memphis, Tennessee 38137
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 901-683-7868
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 1. Acquisition or Disposition of Assets.
On September 10, 1996, Omega Health Systems of North Texas, Inc., a wholly-owned
subsidiary of the Registrant, completed the acquisition of substantially all of
the net assets of EyeCare and SurgeryCenter of North Texas, P.A. and ECSC
Retina, P.A., two Dallas, Texas, professional associations which practice
ophthalmology in exchange for 771,429 shares of the Registrant's common stock.
Omega Health Systems of North Texas, Inc. will manage the practices pursuant to
long-term management agreements.
Also on September 10, 1996, Omega Surgical Associates of North Texas, Inc.
(OSANTI), a wholly-owned subsidiary of the Registrant, and SurgEyeCare, Inc.
entered into a partnership agreement to form SurgEyeCare General Partnership
(the "Partnership"). Under the terms of the partnership agreement, OASNTI
contributed $4,550,000 cash to the Partnership and SurgEyeCare, Inc. contributed
assets with an agreed value of $6,100,000. After the initial capital
contributions, the Partnership distributed $4,476,438 in cash to SurgEyeCare,
Inc. After these transactions, OSANTI owns a 75% interest in the Partnership and
SurgEyeCare, Inc. owns a 25% interest. Under the terms of the partnership
agreement, OSANTI is designated as managing partner.
The Registrant financed the contribution to the Partnership, in part, with the
proceeds of a $3,280,000 acquisition term loan from a commercial bank.
Item 2. Financial Statements and Exhibits.
(a) Financial Statements of the Business Acquired
To be filed by amendment.
(b) Exhibits
2.1 Press Release dated September 11, 1996
2.2 Asset Exchange Agreement dated as of August 31, 1996 by and between
EyeCare and Surgery Center of North Texas, P.A. and Omega Health
Systems of North Texas, Inc.
2.3 Asset Exchange Agreement dated as of August 31, 1996 by and between
ECSC Retina, P.A. and Omega Health Systems of North Texas, Inc.
2.4 Management Agreement dated as of August 31, 1996
2.5 Partnership Agreement of SurgEyeCare General Partnership
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMEGA HEALTH SYSTEMS, INC.
Date: September 25, 1996 By: /S/ RONALD L. EDMONDS
-----------------------
Ronald L. Edmonds
Senior Vice President and Chief Financial Officer
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Exhibit 2.1
OMEGA COMPLETES NORTH TEXAS ACQUISITIONS
MEMPHIS - September 11 - Omega Health Systems (Nasdaq: OHSI) today announced
that it had completed the acquisition of the net assets of EyeCare and
SurgeryCenter of North Texas (ECSC), the ophthalmology practice of Wesley K.
Herman, MD, and Bradford Pazandak, MD, and acquired a controlling interest in
SurgEyeCare, an ambulatory surgery center located adjacent to ECSC.
Simultaneously with the acquisitions, Omega entered into long-term management
agreements with the Herman-Pazandak practice, the related retina practice and
the surgery center.
Omega acquired the net assets of ECSC in exchange for 771,429 shares of Omega
common stock. The acquisition of the net assets of ECSC will be accounted for as
a pooling of interests. Omega acquired its 75% interest in SurgEyeCare for $4.55
million, which was partially funded with the proceeds of a $3.28 million
acquisition term loan from a commercial bank. The acquisition of SurgEyeCare
will be accounted for as a purchase.
Tom Lewis, President & CEO of Omega, commented on the Dallas acquisitions,
"These acquisitions represent a significant step forward for Omega in executing
its growth through acquisition strategy. The Herman-Pazandak practice is a
leader in ophthalmology-optometry programs in North Texas. These acquisitions
will add materially to Omega's revenues and earnings and will be materially
accretive to 1996 earnings per share."
Omega Health Systems is an integrated eye care services company, with operations
in physician practice management, managed eye care programs, eye surgical
facilities, excimer laser refractive surgery programs and an ophthalmic
specialty supplies and equipment distribution company.
Certain statements in this press release consists of forward-looking statements
based on management's current expectations that are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in or implied by forward-looking statements. These risks are described
in the Company's annual report on Form 10-KSB filed with the Securities and
Exchange Commission.
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Exhibit 2.2
ASSET EXCHANGE AGREEMENT
------------------------
THIS ASSET EXCHANGE AGREEMENT is entered as of the 31st day of August,
1996, by and between EYECARE AND SURGERYCENTER OF NORTH TEXAS, P.A., a Texas
professional association (the "P.A.") and OMEGA HEALTH SYSTEMS OF NORTH TEXAS,
INC., a Texas corporation ("Omega North Texas").
W I T N E S S E T H:
WHEREAS, Omega North Texas and Omega North Texas's parent, Omega Health
Systems, Inc., a Delaware corporation ("Omega"), and certain of their affiliates
are engaged in the business of providing management and marketing services to
ophthalmology and optometry practices; and
WHEREAS, Omega North Texas wishes to establish a presence in the Dallas,
Texas market; and
WHEREAS, Dr. Wesley K. Herman ("Dr. Herman") and Dr. Bradford B. Pazandak
("Dr. Pazandak") are engaged in the practice of ophthalmology in Dallas, Texas
and are the members and shareholders of P.A.;
WHEREAS, the P.A. wishes to transfer substantially all of its assets, as
defined in this Agreement, to Omega North Texas in exchange for stock in Omega;
WHEREAS, the P.A. and Omega North Texas intend that the exchange
consummated pursuant to this Agreement shall qualify as a tax-free
reorganization pursuant to the provisions of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties desire to set forth in writing the terms and
conditions under which said exchange will be consummated.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties, it is agreed as
follows:
ARTICLE I
DEFINITIONS
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In addition to terms defined elsewhere in this Agreement (including the
recitals, which are hereby incorporated into this Agreement by this reference),
the following terms shall have the meanings assigned to them in this ARTICLE I,
both for the purposes of this Agreement and all schedules and exhibits hereto:
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"Agreement" or "this Agreement" shall mean this Asset Exchange Agreement,
as amended from time to time by the parties hereto, together with all schedules
and exhibits hereto.
"Assets" shall mean all Tangible Personal Property (as hereinafter
defined) and Intangible Property (as hereinafter defined) and other assets
connected with or used in the operation of the P.A.'s business including
accounts receivable, all items of furnishings, furniture, fixtures, equipment,
office supplies, machinery, equipment warranty rights, supplies, Contracts or
Other Agreements (hereinafter defined) and all medical records (excluding
patient files) and all other records including without limitation, those items
listed on SCHEDULE 6.1.1, free and clear of all liens, except as listed on
SCHEDULE 6.1.2, and excluding the Excluded Assets.
"Closing" shall mean the transfer by Omega North Texas to P.A. of the
consideration set forth herein, the transfer of the Assets to Omega North Texas
and the consummation of the transactions contemplated by this Agreement.
"Contracts or Other Agreements" shall mean all of P.A.'s contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, subleases, mortgages, franchises, licenses, commitments or binding
arrangements, expressed or implied, oral or written.
"Documents and Other Papers" shall mean and include any document,
agreement, instrument, certificate, notice, consent, affidavit, letter,
telegram, telex, statements, file, computer disk, microfiche, or other document
in electronic format, schedule, exhibit or any other paper whatsoever.
"Excluded Assets" shall mean those assets set forth on SCHEDULE 1.1
including, but not limited to, personal automobiles, cash, and pension plan
assets. Excluded Assets shall also include all controlled substances Omega North
Texas is prohibited by state or Federal law from acquiring.
"Intangible Property" shall have the meaning ascribed in SECTION 6.6
hereof.
"Lien" shall mean any lien, pledge, claim, charge, security interest or
incumbrance of any nature whatsoever.
"Tangible Personal Property" shall have the meaning ascribed in SECTION
6.5 hereof.
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ARTICLE II
EXCHANGE OF ASSETS
------------------
Subject to the terms and conditions hereof, at Closing, P.A. shall
transfer, assign, convey and deliver to Omega North Texas and Omega North Texas
shall acquire from P.A. all of the Assets of P.A. Omega North Texas will not
acquire the Excluded Assets. The P.A. and Omega North Texas intend that the
exchange consummated pursuant to this Agreement shall qualify as a tax-free
reorganization pursuant to the provisions of Section 368(a)(1)(C) of the Code.
In connection with such tax-free reorganization, it is anticipated that the P.A.
will liquidate and dissolve, distributing its remaining assets, including the
Omega Stock (hereinafter defined), to Dr. Herman and Dr. Pazandak. After Dr.
Herman and Dr. Pazandak notify Omega North Texas of the liquidation and
dissolution of the P.A. and deliver to Omega North Texas the certificate
representing the Omega Stock (endorsed in favor of Dr. Herman and Dr. Pazandak),
Omega shall issue, upon receipt by Dr. Herman and Dr. Pazandak of appropriate
representations, substantially in the form of EXHIBIT 2.1, two (2) separate new
certificates (the "Replacement Shares") replacing the Omega Stock, one such
certificate to be issued in the name of Dr. Herman and the other such
certificate to be issued in the name of Dr. Pazandak, as directed by Dr. Herman
and Dr. Pazandak. If the P.A. is liquidated promptly following consummation of
the exchange hereunder, Omega North Texas and the P.A. will report the
transaction on their respective income tax returns or other appropriate
schedules or informational returns as qualifying for tax-free reorganization
treatment under Section 368(a)(1)(C) of the Code. Omega North Texas shall not be
liable to the P.A., however, if the transaction does not ultimately result in a
tax-free reorganization unless Omega North Texas has breached or otherwise
violated this Agreement in such a manner so as to render the contemplated
transaction as other than a tax-free reorganization.
ARTICLE III
CONSIDERATION
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III.1 AMOUNT OF CONSIDERATION. As consideration for the Assets, Omega
North Texas shall at Closing transfer to P.A., Omega Health Systems, Inc. Common
Stock (the "Omega Stock") valued at Three Million Six Hundred Forty Thousand
Dollars ($3,640,000) with the shares of Omega Stock valued at the average of the
closing price of Omega Stock for the twenty (20) trading days ending August 31,
1996, provided that the maximum conversion price shall be Six Dollars ($6.00)
per share. The Omega Stock will not be registered, and will be restricted
securities that are not fully transferrable, except to the extent provided
herein, and the certificates representing the Omega Stock shall bear a legend to
that effect.
III.2 REGISTRATION RIGHTS. The P.A. will be entitled to "piggyback"
registration rights for unregistered Omega Stock on registrations of Omega's
stock or securities, subject to the right of Omega and its underwriters to
reduce the number of shares of Omega Stock proposed to be registered in view of
market conditions, and Omega shall promptly advise the P.A. of any proposed
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registration. Such underwriter's "cutback" shall be applied proportionately to
all unregistered Omega Stock or other securities and unregistered warrants or
stock options which are requesting registration at such time pursuant to
contractual rights. Omega may not include unregistered Omega Stock or other
securities held by shareholders other than the P.A. (the "Non-P.A. Stock") in a
registration statement pursuant to this SECTION 3.2 if such Omega Stock or other
securities were not granted registration rights similar to the rights contained
in this SECTION 3.2 as a condition to their original issuance, except to the
extent that the amount of unregistered Omega Stock otherwise included in such
registration statement would not thereby be diminished by the inclusion of the
Non-P.A. Stock. The costs to Omega of registering such Omega Stock in a
piggyback registration shall be borne by Omega, except that underwriting
discounts and commissions shall be paid by the P.A., and the costs of P.A.'s
counsel shall be paid by the P.A.
III.3 TRANSFERABILITY OF OMEGA STOCK. Provided any transferee under this
subsection acknowledges any restrictions placed on the Omega Stock, nothing in
this Agreement shall prevent the Omega Stock from being transferred in whole, or
in part, to one or more members of the respective family of Dr. Herman or Dr.
Pazandak, to a trust, established for the respective benefit of Dr. Herman or
Dr. Pazandak and/or one or more of the members of the respective family of Dr.
Herman or Dr. Pazandak, to a family partnership (general or limited) established
respectively by Dr. Herman or Dr. Pazandak and/or one or more of the members of
the respective family of Dr. Herman or Dr. Pazandak, to any other entity that is
respectively owned by Dr. Herman or Dr. Pazandak and/or one or more of the
members of the respective family of Dr. Herman or Dr. Pazandak.
III.4 REFERRALS. The parties agree that nothing in this Agreement is
intended to violate state or federal health care laws or regulations including,
but not limited to, those listed in SECTION 6.10 herein, nor shall any portion
of the consideration be construed as a payment for or inducement of the referral
of patients. P.A. shall be free to refer patients to whomever it sees fit in the
exercise of professional judgment, according to the convenience or preference of
the patient, or otherwise.
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ARTICLE IV
LIABILITIES NOT ASSUMED
-----------------------
With the exception of the real estate leases of the P.A.'s business,
leases of equipment and other personal property listed on SCHEDULE 6.7.1, and
those material contracts described in SECTION 6.7 hereof, it is expressly
acknowledged and agreed, except as set forth in the immediately following
sentence, that Omega North Texas will not assume and shall not be liable, either
expressly or impliedly, for any of the obligations or liabilities of P.A. of any
kind and nature. Notwithstanding the foregoing, in addition to the real estate
leases of the P.A.'s business, leases of equipment and other personal property
listed on SCHEDULE 6.7.1, and those material contracts described in SECTION 6.7
hereof, Omega North Texas assumes and agrees to be liable for any other amounts
payable by P.A. (the "Payables") in an aggregate amount not to exceed Two
Hundred Seventy Thousand Eight U.S. Dollars ($270,008); and, if any of the
Payables include or result from (i) amounts borrowed by P.A. from Compass
Bank-Dallas or (ii) amounts that P.A. agreed to pay to Compass Bank-Dallas on
behalf of third parties ((i) and (ii) being collectively referred to as the
"Bank Payable"), the Bank Payable shall be paid by Omega North Texas to Compass
Bank-Dallas concurrent with the Closing and prior to payment of any other of the
Payables. No later than September 30, 1996, P.A. shall provide to Omega North
Texas a final list of the Payables (the "Payables List"). Without limiting the
foregoing, Omega North Texas shall not, unless set forth on the Payables List,
assume or become liable (expressly or impliedly) with respect to any of the
following:
(a) any liability of P.A., either directly or indirectly, for either
principal or interest, with respect to advances or loans made to or owed by
P.A.;
(b) any liability or claim arising out of or related to the operation and
use of the Assets prior to the Closing, including, without limitation, any
obligations or liabilities with respect to medical malpractice, Medicare or
Medicaid fraud or abuse, overpayments under any third party payor programs,
negligence, strict liability in tort, product liability or breach of warranty
claims;
(c) any liability arising out of any employee benefit plans maintained by
P.A. for the benefit of any employees of P.A. or any other liability of P.A.
with respect to any employees, including, but not limited to, incentive
compensation plans, severance pay, accrued salaries, wages, bonuses, payroll
taxes, hospitalization and medical insurance, deferred compensation of vacation
and sick pay;
(d) any liability attributable to personal property tax assessed by any
governmental entity, federal, state or local, against any of the Assets to be
conveyed or leased hereunder, such taxes to remain the responsibility of P.A.;
and
(e) any liability for any other tax assessed by any governmental entity,
federal, state or local, attributable to the business of P.A. relating to the
period on or before the Closing including, but not limited to, any income,
franchise, excise, sales or use taxes.
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ARTICLE V
THE CLOSING
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The acquisition of the Assets as contemplated hereby shall close at a time
and place mutually agreed upon by the parties after satisfaction of all
regulatory requirements, if any, and the conditions provided for in SECTIONS 8.1
AND 8.3 hereof. At the Closing, all assignments, bills of sale and other
documents required to be delivered hereunder shall be delivered to Omega North
Texas. Also at Closing, Omega North Texas shall deliver executed copies of all
required documents. P.A. and Omega North Texas covenant and agree to use their
best efforts to satisfy the conditions to Closing described in ARTICLE VIII of
this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF P.A.,
---------------------------------------
DR. HERMAN AND DR. PAZANDAK
---------------------------
P.A., Dr. Herman and Dr. Pazandak represent, warrant, covenant and agree
with Omega North Texas that:
VI.1 TITLE; CONDITION. SCHEDULE 6.1.1 contains a complete, true and
correct list of P.A.'s Assets. P.A. has good and marketable title to all of the
Assets, and all Assets are in good operating condition. Except as otherwise
provided in this SECTION 6.1, the Assets are being transferred "as is, where
is." Except as disclosed on Schedule 6.1.2 hereto, none of such Assets of P.A.
is subject to sale by the P.A. under a sales contract or other agreement of sale
or subject to security interests, mortgages, encumbrances, liens (including
income, personal property and other tax liens) or charges of any kind or
character. Except as indicated on SCHEDULE 6.1.2, P.A.'s Assets shall be
conveyed to Omega North Texas free and clear of all liens and encumbrances.
VI.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. P.A. has the full right,
power and capacity, and all authority and approval required to enter into,
execute and deliver this Agreement and to perform and observe fully P.A.'s
obligations hereunder and to perform the transactions contemplated hereby. This
Agreement has been fully executed and delivered by P.A. and is the valid and
binding obligation of P.A. enforceable in accordance with its terms.
VI.3 LITIGATION. Other than that set forth on SCHEDULE 6.3, there is no
suit, action, proceeding at law or in equity, arbitration, administrative
proceeding or other proceeding by any governmental entity pending or to the best
knowledge of P.A., Dr. Herman and Dr. Pazandak, threatened against, or affecting
P.A., or any of the Assets to be conveyed hereunder, and to the best knowledge
of P.A., Dr. Herman and Dr. Pazandak, there is no basis for any of the
foregoing.
VI.4 LICENSES. SCHEDULE 6.4 is a list of all material licenses, permits,
authorizations, approvals and consents (collectively, the "Licenses") P.A. owns,
uses, or has obtained relative to operating or conducting P.A.'s business. There
are no other material licenses, permits, authorizations, approvals or consents
required by any federal, state, or local government or government department,
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agency, board, commission, bureau or instrumentality (collectively,
"Governmental Authority") to properly operate or conduct the P.A.'s business.
Each license has been duly obtained as valid and in full force and effect, and
is not subject to any pending or, to the best knowledge of P.A., Dr. Herman and
Dr. Pazandak, threatened administrative or judicial proceeding to revoke, cancel
or declare such license invalid in any respect. To the best knowledge of P.A.,
Dr. Herman and Dr. Pazandak, P.A. is not in default or in violation with respect
to any of the licenses, and no event has occurred which constitutes, or with due
notice or lapse of time or both may constitute, a default by P.A. under, or
violation of, any license. P.A. has completed and submitted, on a timely basis,
all reports and filings associated with the P.A.'s business as are required by
any governmental authority. P.A. will take all necessary actions to transfer, or
assist Omega North Texas in transferring, the licenses to Omega North Texas or
its designee.
VI.5 TANGIBLE PERSONAL PROPERTY. The machinery, equipment, furniture,
fixtures, office supplies, warranty rights, supplies, books and records,
(excluding medical records), and other tangible personal property owned, leased
or used by P.A. (the "Tangible Personal Property") are sufficient and adequate
to permit P.A. to conduct the P.A.'s business as it is presently being
conducted, and P.A. has not received notice that any such item of Tangible
Personal Property or the use thereof is in violation of any existing law or any
building, zoning, health, safety or other ordinance, code or regulation. P.A. is
not in default with respect to any item of Tangible Personal Property purported
to be leased by it, and no event has occurred which constitutes, or with due
notice or lapse of time or both may constitute, a default under any such lease.
Except as set forth on SCHEDULE 6.5 hereof, P.A. does not hold any Tangible
Personal Property of any other person, firm or corporation pursuant to any
consignment or similar arrangement.
VI.6 INTANGIBLE PROPERTY. SCHEDULE 6.6.1 is a true and correct list of all
United States and state trademarks, servicemarks, trade names, patents,
copyrights, trade secrets, technical data and proprietary know-how (either
registered or applied for) owned by, registered in the name of, licensed to, or
used in the business of P.A. (the "Intangible Property"). Such a list includes a
summary description of each such item and specifies, where applicable, the date
the license or registration was granted or applied for, the expiration date and
the current status thereof. There is no restriction effecting the use of any of
the Intangible Property by P.A. and no license has been granted with respect
thereto. Each item of Intangible Property is valid and in good standing, is not
currently being challenged or infringed, is not involved in any pending or
threatened administrative or judicial proceeding, and does not conflict with any
rights of any other person, firm or corporation. Other than listed on SCHEDULE
6.6.2, P.A. has only operated or transacted business under the name of EyeCare &
SurgeryCenter of North Texas, P.A.
VI.7 CONTRACTS OR OTHER AGREEMENTS. P.A. has described on SCHEDULE 6.7.1
and has furnished to Omega North Texas copies and/or descriptions of all
Contracts or Other Agreements affecting the Assets. P.A. has performed all
obligations required of P.A. with respect to, and except as listed on SCHEDULE
6.7.2, P.A. is not in default under, any such Contracts or Other Agreements.
Except as listed on SCHEDULE 6.7.3, neither the execution nor the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
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will: (i) conflict with, constitute a breach, violation or termination of any
provision of any Contracts or Other Agreements to which P.A. is a party or by
which P.A. is bound; (ii) result in the creation or imposition of any lien
against any of the Assets; or (iii) to the best knowledge of P.A., Dr. Herman
and Dr. Pazandak, after due inquiry by each, violate any law, regulation,
judgment, rule, order or any other material restriction applicable to the P.A.
or the Assets.
VI.8 FUTURE BILLING. To the extent permitted by applicable law, Dr.
Herman, Dr. Pazandak, and P.A. hereby appoint Omega North Texas as their agent
to bill, collect and otherwise seek payment for professional services rendered
by Dr. Herman, Dr. Pazandak, and/or P.A. or any related entity; provided,
however, to the extent permitted by applicable law, such appointment may, upon
thirty (30) days written notice to Omega North Texas, be revoked by any of Dr.
Herman, Dr. Pazandak, P.A., or any related entity for the purpose of enforcing
any indemnification obligation of Omega North Texas to Dr. Herman, Dr. Pazandak,
P.A. or any related entity, which indemnification obligation has been refused by
Omega North Texas. For purposes of this SECTION 6.8, "related entity" means any
entity that is controlled by Dr. Herman or Dr. Pazandak.
VI.9 HEALTHCARE COMPLIANCE. P.A. is participating in or otherwise
authorized to receive reimbursement from or is a party to Medicare, Medicaid,
and other third-party payor programs. All necessary certifications and contracts
required for participation in such programs are in full force and effect and
have not been amended or otherwise modified, rescinded, revoked or assigned as
of the date hereof, and to the best knowledge of P.A., Dr. Herman, and Dr.
Pazandak, no condition exists or event has occurred which in itself or with the
giving of notice or the lapse of time or both would result in the suspension,
revocation, impairment, forfeiture, or non-renewal of any such third-party payor
program. To the best knowledge of P.A., Dr. Herman, and Dr. Pazandak, P.A. is in
full compliance with the requirements of all such third-party payor programs
applicable thereto.
VI.10 FRAUD AND ABUSE. P.A. and persons and entities providing
professional services for P.A., have not, to the knowledge of P.A., or to the
knowledge of Dr. Herman and Dr. Pazandak, engaged in any activities which are
prohibited under 42 U.S.C. ss. 1320a-7b, or the regulations promulgated
thereunder pursuant to such statutes, or related state or local statues or
regulations, or which are prohibited by rules of professional conduct, including
but not limited to the following:
(a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(c) failing to disclose knowledge by a claimant of the occurrence of any
event effecting the initial or continued right to any benefit or payment on his
own behalf or on behalf of another, with intent to fraudulently secure such
benefit or payment; or
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(d) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate) directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration (i)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which payment may
be made in whole or in part by Medicaid or Medicare.
VI.11 REVIEW AND CONSULTATION. P.A. has had access to and reviewed such
information and has consulted with all legal counsel, tax counsel, accountants
and other experts and advisors deemed necessary by P.A. in connection with the
transactions contemplated herein.
VI.12 EXHIBITS. All the facts recited in schedules annexed hereto (as
updated as of the Closing) shall be deemed to be representations of fact by P.A.
as if they were fully recited in this ARTICLE VI.
VI.13 FULL DISCLOSURE. When considered in the context of all information
contained herein, no representation or warranty made by P.A. in this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit or fail to state a material fact necessary to make the statements
contained herein or therein not misleading.
VI.14 VIOLATIONS. Omega North Texas shall have the right to be repaid all
sums paid to P.A. under the terms of ARTICLE III, to the extent that it has
suffered damages as a result of P.A.'s misrepresentations or omissions. Omega
North Texas further has the rights provided for in the Stock Escrow Agreement
described in SECTION XV.
VI.15 INVESTMENT INTENT. The P.A. acknowledges that the Omega Stock has
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and that the Omega Stock, except as provided for in SECTION 2
and SECTION 3.3, may not be sold, pledged or otherwise transferred absent such
registration, or unless an exemption from registration is available. The P.A. is
acquiring the Omega Stock for its own account, for investment purposes only and
not with a view to distribution of such Omega Stock within the meaning of
Section 2(11) of the Securities Act. The P.A. qualifies as an "accredited
investor", as defined in Rule 501(a) pursuant to the Securities Act. The P.A.
has received from Omega a copy of Omega's Form 10-K for 1994 and 1995, Omega's
10-Q for the quarter ended June 30, 1996, and Omega's 1994 and 1995 Annual
Report to shareholders. The P.A. has had the opportunity to ask questions of and
receive answers from Omega senior management concerning Omega and the terms and
conditions of this investment by the P.A. The P.A. has had the opportunity to
obtain other additional information concerning Omega from Omega senior
management.
VI.16 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 6.16 are financial
statements of the P.A. at December 31, 1994 and December 31, 1995, and June 30,
1996, including balance sheets and income statements for the periods then ended.
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Such financial statements accurately reflect the conditions and results of
operations of the P.A. at such dates and for such periods. Since June 30, 1996,
there has not been any material adverse change in the assets or business
conditions, financial or otherwise, of the P.A. or the Assets.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF OMEGA NORTH TEXAS
---------------------------------------------------
Omega North Texas represents, warrants and agrees with P.A. that:
VII.1 CONTRACTS OR OTHER AGREEMENTS. Neither the execution or delivery of
this Agreement nor the consummation of this transaction will: (i) conflict with,
constitute a breach, violation or termination of any provision of any contract
or other agreement to which Omega North Texas is a party or by which it is
bound; or (ii) to the best knowledge of Omega North Texas, after due inquiry,
violate any law, regulation, judgment, rule, order or any other restriction of
any kind or character applicable to Omega North Texas.
VII.2 REVIEW AND CONSULTATION. Omega North Texas has had access to and
reviewed such information and has consulted with all legal counsel, tax counsel,
accountants and other experts and advisors deemed necessary by Omega North Texas
in connection with the transactions contemplated herein.
VII.3 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Omega North Texas has
the full right, power and capacity, and all authority and approval required to
enter into, execute and deliver this Agreement and to perform and observe fully
Omega North Texas's obligations hereunder and to perform the transactions
contemplated hereby. This Agreement has been fully executed and delivered by
Omega North Texas and is the valid and binding obligation of Omega North Texas
enforceable in accordance with its terms.
VII.4 OWNERSHIP. Omega North Texas is a wholly-owned subsidiary of Omega.
VII.5 FRAUD AND ABUSE. Omega and Omega North Texas and persons and
entities providing professional services for Omega North Texas, have not, to the
knowledge of Omega North Texas, engaged in any activities which are prohibited
under 42 U.S.C. ss. 1320a-7b, or the regulations promulgated thereunder pursuant
to such statutes, or related state or local statues or regulations, or which are
prohibited by rules of professional conduct, including but not limited to the
following:
(a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(c) failing to disclose knowledge by a claimant of the occurrence of any
event effecting the initial or continued right to any benefit or payment on his
own behalf or on behalf of another, with intent to fraudulently secure such
benefit or payment; or
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(d) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate) directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration (i)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which payment may
be made in whole or in part by Medicaid or Medicare.
VII.6 LITIGATION. Other than that set forth on SCHEDULE 7.6, there is no
suit, action, proceeding at law or in equity, arbitration, administrative
proceeding or other proceeding by any governmental entity pending or to the best
of Omega North Texas's knowledge, threatened against, or affecting Omega North
Texas, or any of the Assets to be conveyed hereunder, and to the best of Omega
North Texas's knowledge there is no basis for any of the foregoing.
VII.7 AUTHORITY TO ISSUE OMEGA STOCK. Omega has the full legal right,
power and capacity, and all authority and approval required to issue the Omega
Stock, which stock shall be fully paid and non-assessable.
ARTICLE VIII
CONDITIONS AND ADDITIONAL AGREEMENTS
------------------------------------
VIII.1 OMEGA NORTH TEXAS'S CONDITIONS TO CLOSE. The Closing and all
obligations of Omega North Texas pursuant to this Agreement shall be conditioned
upon the following:
(a) all representations and warranties contained in ARTICLE VI shall be
true as of the Closing;
(b) there shall not have been any material change in the Assets (either
individually or in the aggregate) or in the operation of the P.A.'s business
from the date of Omega North Texas's execution of this Agreement through the
Closing if the date of execution of this Agreement and the Closing are not one
and the same;
(c) there shall have been neither death of nor material adverse change in
the health of Dr. Herman and Dr. Pazandak nor any insolvency (whether voluntary
or involuntary) of the P.A. from the date of Omega North Texas's execution of
this Agreement through the Closing if the date of execution of this Agreement
and the Closing are not one and the same;
(d) P.A. shall have performed all of its obligations under this Agreement
required to be performed as of the Closing including, but not limited to,
delivery of all documents set forth in SECTION 8.4 hereof;
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(e) other than listed on SCHEDULE 8.1, the transactions contemplated
hereby shall not: (i) require the consent, waiver, authorization or approval of
any Governmental Authority, or of any other person, entity or organization, or
(ii) conflict with or result in any breach or violation of the terms and
conditions of, or constitute (or with notice or lapse of time, or both,
constitute) a default under applicable federal, state, local or foreign statute,
regulation, order, judgment or decree; and
(f) Omega North Texas shall have been satisfied with its "due diligence"
review of the P.A.'s business and shall not have discovered any conditions or
set of facts which in Omega North Texas's sole determination, individually or in
the aggregate would have a material adverse effect on the P.A.'s business.
In the event Omega North Texas reasonably believes that any of the foregoing
conditions is not satisfied, then Omega North Texas shall request in writing
that such unsatisfied conditions be corrected to its reasonable satisfaction. If
such condition or conditions remain unsatisfied after thirty (30) days, the
Omega North Texas may, at its option, terminate this Agreement, in which event
Omega North Texas shall be relieved of all obligations hereunder and this
Agreement shall be deemed null, void and of no force or effect.
VIII.2 OMEGA NORTH TEXAS'S DELIVERIES. At or prior to the Closing, Omega
North Texas shall deliver to P.A. the following documents:
(a) CORPORATE RESOLUTIONS. A copy of directors' resolutions of Omega North
Texas, certified by its corporate secretary or assistant secretary as having
been duly and validly adopted and as being in full force and effect on the
Closing Date, authorizing the execution and delivery by Omega North Texas of
this Agreement, the other instruments to be executed and delivered by Omega
North Texas as provided herein, and the performance by Omega North Texas of the
transactions contemplated hereby;
(b) CONSIDERATION. Stock certificates representing the number of shares
of Omega Stock to be delivered pursuant to ARTICLE III hereof; and
(c) OPINION OF COUNSEL FOR OMEGA NORTH TEXAS AND OMEGA. An opinion of
counsel from Omega North Texas dated as of the Closing, in form and substance
reasonably satisfactory to P.A.'s counsel, and where appropriate with reliance
upon a certificate from Omega North Texas or the owner of Omega North Texas to
the effect that:
1) Omega North Texas is (i) duly incorporated, validly existing, and
in good standing under the laws of the State of Texas, (ii) duly qualified
to transact business in Texas, and is not required to be so qualified in
any other jurisdiction, and (iii) duly empowered and authorized to hold
and own its properties and carry on its business as now conducted and as
proposed to be conducted. Omega North Texas has the corporate power and
authority to execute, deliver and perform this Agreement and all other
agreements contemplated hereby.
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<PAGE>
2) Omega North Texas has the full power and authority to execute,
deliver, and perform this Agreement and all other agreements and documents
necessary to consummate the contemplated transaction, and, upon the
requisite approvals thereof, all corporate actions of Omega North Texas
necessary for such execution, delivery and performance will have been duly
taken.
3) This Agreement and all agreements related to this Agreement have
been duly executed and delivered by Omega North Texas and constitute the,
valid, and binding agreement of Omega North Texas enforceable in
accordance with their terms (subject as to enforcement of remedies to the
discretion of the courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws
effecting the rights of creditors generally). The execution and delivery
by Omega North Texas of this Agreement, and the performance of its
obligations hereunder, do not require any action or consent of any party
other than Omega North Texas pursuant to any contract, agreement or other
understanding of Omega North Texas, or pursuant to any order or decree to
which Omega North Texas is a party or to which its properties or assets
are subject and will not violate any provision of law, the articles of
incorporation or bylaws of Omega North Texas or any order of any court or
other agency of the government.
4) Omega North Texas is duly licensed to carry out its operations
pursuant to any and all federal, state, local or municipal laws, rules,
orders, regulations, statutes, ordinances, codes, decrees, or the
requirements of any federal department, commission, board, bureau, agency
or instrumentality which regulates such operations. To the best of such
counsel's knowledge, with respect to Omega North Texas there are no
actions, suits, claims, proceedings or investigations pending or, to such
counsel's knowledge, threatened against Omega North Texas at law or in
equity, or before or by a federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, or any professional licensing or disciplinary authority which
would adversely effect the transactions contemplated herein or any party's
right to enter into this Agreement.
5) Omega North Texas is not in default with respect to any order,
writ, injunction or decree of any court or of any federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign which would effect the
rights of Omega North Texas to enter into and perform this Agreement.
6) All consents, approvals, qualifications, orders or authorizations
of or filings with any governmental authority, including any court,
required in connection with the valid execution, delivery and performance
by Omega North Texas of this Agreement have been duly made and obtained
and are effective on and as of the Closing; and
7) The Omega Stock has been duly and validly issued by Omega, with
the authorization and approval of Omega's Board of Directors, and such
Omega Stock is fully paid and non-assessable.
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<PAGE>
(d) OFFICER'S CERTIFICATE. A Certificate of Omega North Texas' President
and Secretary confirming the matters in SECTION 8.1(A).
(e) OTHER PURCHASE DOCUMENTS. All such documents and instruments P.A. and
its counsel may reasonably request in connection with the consummation of the
transactions contemplated by this Agreement.
VIII.3 P.A.'S CONDITIONS TO CLOSE. The Closing and all obligations of P.A.
pursuant to this Agreement shall be conditioned upon the following:
(a) all representations and warranties contained in ARTICLE VII shall
be true as of the Closing;
(b) Omega North Texas shall have performed all of its obligations under
this Agreement required to be performed as of the Closing including, but not
limited to, delivery of all documents set forth in SECTION 8.2 hereof; and
(c) other than listed on SCHEDULE 8.3, the transactions contemplated
hereby shall not: (i) require the consent, waiver, authorization or approval of
any Governmental Authority, or of any other person, entity or organization, or
(ii) conflict with or result in any breach or violation of the terms and
conditions of, or constitute (or with notice or lapse of time, or both,
constitute) a default under applicable federal, state, local or foreign statute,
regulation, order, judgment or decree.
VIII.4 P.A.'S DELIVERIES. At or prior to the Closing, P.A. shall deliver
to Omega North Texas the following documents:
(a) BILL OF SALE. The bill of sale, conveying all of P.A.'s right, title
and interest in and to the Assets to Omega North Texas, and substantially in the
form of that attached hereof as EXHIBIT 8.4(A);
(b) EXECUTED CONTRACTS. Copies of all executed contracts or other material
agreements entered into by or on behalf of the P.A.;
(c) COPY OF LEASES. Copies of all real estate and equipment leases
pertaining to the P.A.'s business;
(d) OPINION OF COUNSEL FOR P.A. An opinion from counsel for P.A. dated as
of the Closing, in form and substance reasonably satisfactory to Omega North
Texas's counsel, and where appropriate with reliance upon a certificate from
P.A., Dr. Herman or Dr. Pazandak to the effect that:
1) P.A. is (i) duly formed and validly existing as a professional
association under the Texas Professional Association Act, (ii) in good
standing as a professional association under the laws of the State of
Texas, and (iii) duly empowered and authorized to hold and own its own
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properties and carry on its business as now conducted and as proposed to
be conducted.
2) Subject to obtaining the required consent of certain third
parties to the assignment and/or transfer of the Assets and/or Contracts
or Other Agreements by P.A. and/or the assumption by Omega of the
obligations associated with such Assets and/or Contracts or Other
Agreements (collectively, the "Required Third Party Consents"), P.A. has
the full power and authority to execute, deliver and perform this
Agreement and all other agreements and documents contemplated hereby to
which P.A. is a party and which are necessary to consummate the
contemplated transaction to which P.A. is a party; and, subject to
obtaining the Required Third Party Consents, all action required of P.A.
necessary for such execution, delivery and performance will have been duly
taken.
3) This Agreement and all agreements related to this Agreement to
which P.A. is a party have been duly executed and delivered by P.A. and
constitute the valid and binding agreement of P.A. enforceable in
accordance with their terms (subject as to enforcement of remedies to the
discretion of the courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium
and similar laws effecting the rights of creditors generally, and subject
to the Required Third Party Consents). The execution and delivery by P.A.
of this Agreement, and the performance of its obligations thereunder, do
not require, except for the Required Third Party Consents, any action or
consent of any party other than P.A. pursuant to any contract, agreement
or other understanding of P.A., or pursuant to any order or decree to
which P.A. is a party or to which its properties or assets are subject and
will not violate any provisions of the articles of association or bylaws
of P.A. or any order of any court or other agency of the government.
4) P.A. is duly licensed to carry out its operations pursuant to any
and all federal, state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or the requirements of
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which regulates such
operations. To the best of such counsel's knowledge, with respect to P.A.
(except for the matters included in SCHEDULE 6.3 hereto), there are no
actions, suits, claims, proceedings or investigations pending or
threatened against P.A. at law or in equity, or before or by a federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any
professional licensing or disciplinary authority which would adversely
effect the transactions contemplated herein or any party's right to enter
into this Agreement.
5) P.A. is not in default with respect to any order, writ,
injunction or decree of any court or of any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which would effect the rights of P.A.
to enter into and perform this Agreement.
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<PAGE>
6) All consents, approvals, qualifications, orders or authorizations
of or filings with any governmental authority, including any court,
required in connection with the valid execution, delivery and performance
by P.A. of this Agreement have been duly made and obtained and are
effective on and as of the Closing; and
(e) OFFICER'S CERTIFICATE. A certificate from P.A.'s President and
Secretary confirming the matters in SECTION 8.3(A) hereof.
(f) OTHER PURCHASE DOCUMENTS. All such documents and instruments
Omega North Texas and its counsel may reasonably request in connection with the
consummation of the transactions contemplated by this Agreement.
ARTICLE IX
EXPENSES
--------
Except as otherwise provided herein, each of the parties shall pay its own
costs and expenses incurred or to be incurred by it in negotiating and preparing
this Agreement and in consummating the transactions contemplated by this
Agreement.
ARTICLE X
ARBITRATION AND MEDIATION
-------------------------
X.1 MEDIATION. In the event a dispute arises out of or relating to this
Agreement, or the breach thereof, and if said dispute cannot be settled through
negotiation, the parties agree to attempt in good faith to settle the dispute by
mediation under the Commercial Mediation Rules of the American Arbitration
Association. Unless the parties reach an agreement reduced to writing, this
mediation will be non-binding, but the parties must participate in good faith in
non-binding mediation, before resorting to binding arbitration.
X.2 BINDING ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or its breach, not satisfied through either
negotiation or mediation, shall be settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
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As soon as reasonably practical after submission of a demand for binding
arbitration, Omega North Texas and the P.A. shall select one arbitrator,
agreeable to all parties. This arbitrator will be selected from lists prepared
by the American Arbitration Association. From the American Arbitration
Association list the parties will submit to the American Arbitration Association
a ranked list of arbitrators which are acceptable. The highest ranking
acceptable candidate will be selected by the American Arbitration Association.
If no arbitrators from the list composed by the American Arbitration Association
are acceptable by either of the parties, the American Arbitration Association
will compile a second list. This procedure will be followed until the parties
have selected an arbitrator. The results of the arbitrator's finding will be
binding on the parties.
ARTICLE XI
NOTICES
-------
Any notice hereunder shall be deemed to have been given by one party to
the other if it is in writing and it is (i) delivered or tendered in person, or
(ii) deposited in the United States Mail in a sealed envelope, with postage
prepaid, in either case addressed as follows:
If to Omega North Texas: Omega Health Systems of North Texas, Inc.
5100 Poplar Avenue, Suite 2100
Memphis, Tennessee 38137
Attn: Thomas P. Lewis
With a copy to: Baker, Donelson, Bearman & Caldwell
2000 First Tennessee Building
Memphis, Tennessee 38103
Attn: Robert Walker
If to P.A.: EyeCare & SurgeryCenter of North Texas, P.A.
5421 La Sierra Drive
Dallas, Texas 75231-4185
Attn: Wesley K. Herman, M.D.
With a copy to: Barry M. Bloom, P.C.
8300 Douglas Avenue, Suite 800
Dallas, Texas 75225
Attn: Barry M. Bloom
or to such other address as the parties shall have previously designated by
notice to the serving party, given in accordance with this ARTICLE XI. Notices
shall be deemed to have been given on the date of delivery if delivered
personally, or on the third day after mailing as provided above; provided,
however, that a notice not given as above shall, if it is in writing, be deemed
given if and when actually received by a party.
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<PAGE>
ARTICLE XII
AMENDMENT AND WAIVER
--------------------
The parties hereto may by mutual agreement amend this Agreement in any
respect. Any party hereto may extend the time for the performance of any of the
obligations of the other, waive any inaccuracies and representations by the
other contained in this Agreement or in any document delivered pursuant hereto
which inaccuracies would constitute a breach of this Agreement, waive compliance
by the other with any of the covenants contained in this Agreement and
performance of any obligations by the other, waive the fulfillment of any
condition that is precedent to the performance by the party so waiving any of
its obligations under this Agreement. Any agreement on the part of any party for
any such amendment, extension or waiver must be in writing and signed by the
party agreeing to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
ARTICLE XIII
TERMINATION AND ABANDONMENT
---------------------------
XIII.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of P.A. and Omega North Texas;
(b) by Omega North Texas, if all of the conditions set forth in SECTION
8.1 of this Agreement shall not have been satisfied or waived on or prior to the
Closing; or
(c) by P.A., if all of the conditions set forth in SECTION 8.3 of this
Agreement shall not have been satisfied or waived on or prior to the Closing.
If this Agreement is terminated pursuant to this SECTION 13.1, it shall become
null and void and of no further force or effect, except as provided in SECTION
13.2.
XIII.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment of this Agreement by P.A. or Omega North Texas pursuant to SECTION
13.1 hereof, written notice thereof shall forthwith be given to the other party
or parties as provided herein and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
P.A. or Omega North Texas, and P.A. and Omega North Texas shall each return to
the other party any documents or copies thereof in possession of such party
furnished by such other party in connection with the transaction contemplated by
this Agreement. If this Agreement is terminated as provided herein, no party to
this Agreement shall have any liability or further obligation to any other party
to this Agreement with respect to this Agreement or the transactions
contemplated hereby except as provided in this SECTION 13.2; provided, however,
that no termination of this Agreement pursuant to the provisions of this ARTICLE
XIII shall relieve any party of liability for breach of any provision of this
Agreement occurring prior to such termination; and provided, further, that any
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and all confidential or proprietary information obtained from either party must
be returned to that party, and each party hereto agrees to maintain any and all
confidential or proprietary information obtained from the other party in
strictest confidence and not to divulge such information to any third party,
except as may be permitted or required by law.
ARTICLE XIV
INDEMNIFICATION
---------------
XIV.1 INDEMNIFICATION OF OMEGA NORTH TEXAS. P.A., Dr. Herman and Dr.
Pazandak shall indemnify, defend and hold Omega North Texas and its officers,
directors, shareholders, agents, employees, representatives, successors and
assigns harmless from and against any and all damage, loss, cost, obligation,
claims, demands, assessments, judgments or liability (whether based on contract,
tort, product liability, strict liability or otherwise), including taxes, and
all expenses (including interest, penalties and reasonable attorneys' and
accountants' fees and disbursements) incurred by any of the above-named persons,
resulting from or in connection with any one or more of the following:
(a) Misrepresentations, breach of warranties, failure to perform any
covenant or Agreement of P.A. contained herein;
(b) Debts, commitments, obligations of P.A. (except those specifically
assumed by Omega North Texas), any transaction, event or act that occurred on or
prior to the Closing that materially adversely affects the value of the Assets;
(c) Claims, actions or suits by former employees of P.A.; or
(d) P.A.'s failure to discharge pension or benefit plan obligations.
Omega North Texas agrees to give prompt notice to P.A. of the assertion of any
claim, or the threat or commencement of any suit, action, proceeding or other
matter in respect of which indemnity may be sought under this SECTION 14.1. P.A.
may participate in the defense of any such suit, action, proceeding or other
matter at P.A.'s expense. P.A. shall not be liable under this SECTION 14.1 for
any settlement effected without P.A.'s consent of any claim, suit, action,
proceeding or other matter in respect of which indemnity may be sought under
this SECTION 14.1, which consent shall not be unreasonably withheld.
XIV.2 INDEMNIFICATION OF P.A. Omega North Texas and Omega shall indemnify,
defend and hold P.A. and its officers, directors, shareholders, agents,
employees, representatives, successors and assigns harmless from any and all
damage, loss, cost, obligation, claims, demands, assessments, judgments or
liability (whether based on contract, tort, product liability, strict liability
or otherwise), including taxes and all expenses (including interest, penalties
and reasonable attorneys' and accountants' fees and disbursements) incurred by
any of the above-named persons, resulting from or in connection with
misrepresentations, breach of warranties or failure to perform any covenant or
Agreement of Omega North Texas contained herein. P.A. agrees to give prompt
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notice to Omega North Texas of the assertion of any claim, or the threat or
commencement of any suit, action, proceeding or other matter in respect of which
indemnity may be sought under this SECTION 14.2. Omega North Texas may
participate in the defense of any such suit, action, proceeding or other matter
at Omega North Texas' expense. Omega North Texas shall not be liable under this
SECTION 14.2 for any settlement effected without Omega North Texas' consent of
any claim, suit, action, proceeding or other matter in respect of which
indemnity may be sought under this SECTION 14.2, which consent shall not be
unreasonably withheld.
ARTICLE XV
STOCK PLEDGE AND ESCROW
-----------------------
To secure the indemnity under this Agreement and certain other agreements,
P.A. pledges to Omega North Texas and places in escrow fifty percent (50%) of
the Omega Stock on terms as provided for in that certain Stock Pledge and Escrow
Agreement dated as of August 31, 1996, a copy of which is attached hereto as
EXHIBIT 15.1.
ARTICLE XVI
MISCELLANEOUS
-------------
16.1 BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto, their successors and assigns.
16.2 ENTIRE AGREEMENT. This Agreement shall embody the entire agreement
between the parties hereto and cancels and supersedes all other previous
agreements and understandings relating to the subject matter of this Agreement,
written or oral, between the parties hereto. There are no agreements,
representations or warranties between the parties hereto as to the subject
matter hereof other than those expressly set forth or expressly provided herein.
All schedules called for by this Agreement and delivered to the parties shall be
considered a part hereof with the same force and effect as if the same had been
specifically set forth in this Agreement.
16.3 GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Texas. Any mediation or arbitration brought with respect to this Agreement shall
be conducted in Dallas County, Texas.
16.4 HEADINGS. The subject headings of the articles, sections and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
16.5 NO THIRD PARTY BENEFIT. This Agreement is binding upon, and is for
the benefit of, the parties hereto and their respective successors and
authorized assigns. Except as otherwise expressly provided, nothing in this
Agreement, express or implied, is intended or shall be construed to confer upon
any person other than the parties hereto, any right, remedy, or claim, legal or
equitable, under or by reason of this Agreement or any provision thereof. Except
as otherwise expressly provided, nothing in this Agreement, express or implied,
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is intended or shall be construed to confer upon any person other than the
parties hereto, any right, remedy, or claim, legal or equitable, under or by
reason of this Agreement or any provision thereof.
16.6 ASSIGNABILITY. Neither this Agreement nor any of the rights and
duties of any party hereto may be transferred or assigned to any person except
by a written agreement executed by each of the parties hereto, except that Omega
North Texas reserves the right to assign this Agreement to any Affiliate or
successor. As used in this SECTION 16.6, "Affiliate" shall mean Omega,
subsidiaries of Omega and subsidiaries of Omega North Texas.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
16.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year hereinabove first set forth.
OMEGA HEALTH SYSTEMS OF
NORTH
TEXAS, INC.
By:
-----------------------------------
Thomas P. Lewis, President
EYECARE AND SURGERYCENTER
OF
NORTH TEXAS, P.A.
By:
-----------------------------------
Wesley K. Herman, M.D., President
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Exhibit 2.3
ASSET EXCHANGE AGREEMENT
------------------------
THIS ASSET EXCHANGE AGREEMENT is entered as of the 31st day of August,
1996, by and between ECSC RETINA, P.A., a Texas professional association (the
"P.A.") and OMEGA HEALTH SYSTEMS OF NORTH TEXAS, INC., a Texas corporation
("Omega North Texas").
W I T N E S S E T H:
WHEREAS, Omega North Texas and Omega North Texas's parent, Omega Health
Systems, Inc., a Delaware corporation ("Omega"), and certain of their affiliates
are engaged in the business of providing management and marketing services to
ophthalmology and optometry practices; and
WHEREAS, Omega North Texas wishes to establish a presence in the Dallas,
Texas market; and
WHEREAS, Dr. Wesley K. Herman ("Dr. Herman") and Dr. Bradford B. Pazandak
("Dr. Pazandak") are the members and shareholders of the P.A., which offers
retina surgery services in Dallas, Texas;
WHEREAS, the P.A. wishes to transfer substantially all of its assets, as
defined in this Agreement, to Omega North Texas in exchange for stock in Omega;
WHEREAS, the P.A. and Omega North Texas intend that the exchange
consummated pursuant to this Agreement shall qualify as a tax-free
reorganization pursuant to the provisions of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties desire to set forth in writing the terms and
conditions under which said exchange will be consummated.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties, it is agreed as
follows:
ARTICLE I
DEFINITIONS
-----------
In addition to terms defined elsewhere in this Agreement (including the
recitals, which are hereby incorporated into this Agreement by this reference),
the following terms shall have the meanings assigned to them in this ARTICLE I,
both for the purposes of this Agreement and all schedules and exhibits hereto:
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"Agreement" or "this Agreement" shall mean this Asset Exchange Agreement,
as amended from time to time by the parties hereto, together with all schedules
and exhibits hereto.
"Assets" shall mean all Tangible Personal Property (as hereinafter
defined) and Intangible Property (as hereinafter defined) and other assets
connected with or used in the operation of the P.A.'s business including
accounts receivable, all items of furnishings, furniture, fixtures, equipment,
office supplies, machinery, equipment warranty rights, supplies, Contracts or
Other Agreements (hereinafter defined) and all medical records (excluding
patient files) and all other records including without limitation, those items
listed on SCHEDULE 6.1.1, free and clear of all liens, except as listed on
SCHEDULE 6.1.2, and excluding the Excluded Assets.
"Closing" shall mean the transfer by Omega North Texas to P.A. of the
consideration set forth herein, the transfer of the Assets to Omega North Texas
and the consummation of the transactions contemplated by this Agreement.
"Contracts or Other Agreements" shall mean all of P.A.'s contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, subleases, mortgages, franchises, licenses, commitments or binding
arrangements, expressed or implied, oral or written.
"Documents and Other Papers" shall mean and include any document,
agreement, instrument, certificate, notice, consent, affidavit, letter,
telegram, telex, statements, file, computer disk, microfiche, or other document
in electronic format, schedule, exhibit or any other paper whatsoever.
"Excluded Assets" shall mean those assets set forth on SCHEDULE 1.1
including, but not limited to, personal automobiles, cash, and pension plan
assets. Excluded Assets shall also include all controlled substances Omega North
Texas is prohibited by state or Federal law from acquiring.
"Intangible Property" shall have the meaning ascribed in SECTION 6.6
hereof.
"Lien" shall mean any lien, pledge, claim, charge, security interest or
incumbrance of any nature whatsoever.
"Tangible Personal Property" shall have the meaning ascribed in SECTION
6.5 hereof.
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ARTICLE II
EXCHANGE OF ASSETS
------------------
Subject to the terms and conditions hereof, at Closing, P.A. shall
transfer, assign, convey and deliver to Omega North Texas and Omega North Texas
shall acquire from P.A. all of the Assets of P.A. Omega North Texas will not
acquire the Excluded Assets. The P.A. and Omega North Texas intend that the
exchange consummated pursuant to this Agreement shall qualify as a tax-free
reorganization pursuant to the provisions of Section 368(a)(1)(C) of the Code.
In connection with such tax-free reorganization, it is anticipated that the P.A.
will liquidate and dissolve, distributing its remaining assets, including the
Omega Stock (hereinafter defined), to Dr. Herman and Dr. Pazandak. After Dr.
Herman and Dr. Pazandak notify Omega North Texas of the liquidation and
dissolution of the P.A. and deliver to Omega North Texas the certificate
representing the Omega Stock (endorsed in favor of Dr. Herman and Dr. Pazandak),
Omega shall issue, upon receipt by Dr. Herman and Dr. Pazandak of appropriate
representations, substantially in the form of EXHIBIT 2.1, two (2) separate new
certificates (the "Replacement Shares") replacing the Omega Stock, one such
certificate to be issued in the name of Dr. Herman and the other such
certificate to be issued in the name of Dr. Pazandak, as directed by Dr. Herman
and Dr. Pazandak. If the P.A. is liquidated promptly following consummation of
the exchange hereunder, Omega North Texas and the P.A. will report the
transaction on their respective income tax returns or other appropriate
schedules or informational returns as qualifying for tax-free reorganization
treatment under Section 368(a)(1)(C) of the Code. Omega North Texas shall not be
liable to the P.A., however, if the transaction does not ultimately result in a
tax-free reorganization unless Omega North Texas has breached or otherwise
violated this Agreement in such a manner so as to render the contemplated
transaction as other than a tax-free reorganization.
ARTICLE III
CONSIDERATION
-------------
III.1 AMOUNT OF CONSIDERATION. As consideration for the Assets, Omega
North Texas shall at Closing transfer to P.A. Omega Health Systems, Inc. Common
Stock (the "Omega Stock") valued at Nine Hundred Fifty Thousand Dollars
($950,000), with the shares of Omega Stock valued at the average of the closing
price of Omega Stock for the twenty (20) trading days ending August 31, 1996,
provided that the maximum conversion price shall be Six Dollars ($6.00) per
share. The Omega Stock will not be registered, and will be restricted securities
that are not fully transferrable, except to the extent provided herein, and the
certificates representing the Omega Stock shall bear a legend to that effect.
III.2 REGISTRATION RIGHTS. The P.A. will be entitled to "piggyback"
registration rights for unregistered Omega Stock on registrations of Omega's
stock or securities, subject to the right of Omega and its underwriters to
reduce the number of shares of Omega Stock proposed to be registered in view of
market conditions, and Omega shall promptly advise the P.A. of any proposed
registration. Such underwriter's "cutback" shall be applied proportionately to
all unregistered Omega Stock or other securities and unregistered warrants or
stock options which are requesting registration at such time pursuant to
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contractual rights. Omega may not include unregistered Omega Stock or other
securities held by shareholders other than the P.A. (the "Non-P.A. Stock") in a
registration statement pursuant to this SECTION 3.2 if such Omega Stock or other
securities were not granted registration rights similar to the rights contained
in this SECTION 3.2 as a condition to their original issuance, except to the
extent that the amount of unregistered Omega Stock otherwise included in such
registration statement would not thereby be diminished by the inclusion of the
Non-P.A. Stock. The costs to Omega of registering such Omega Stock in a
piggyback registration shall be borne by Omega, except that underwriting
discounts and commissions shall be paid by the P.A., and the costs of P.A.'s
counsel shall be paid by the P.A.
III.3 TRANSFERABILITY OF OMEGA STOCK. Provided any transferee under
this subsection acknowledges any restrictions placed on the Omega Stock, nothing
in this Agreement shall prevent the Omega Stock from being transferred in whole,
or in part, to one or more members of the respective family of Dr. Herman or Dr.
Pazandak, to a trust, established for the respective benefit of Dr. Herman or
Dr. Pazandak and/or one or more of the members of the respective family of Dr.
Herman or Dr. Pazandak, to a family partnership (general or limited) established
respectively by Dr. Herman or Dr. Pazandak and/or one or more of the members of
the respective family of Dr. Herman or Dr. Pazandak, to any other entity that is
respectively owned by Dr. Herman or Dr. Pazandak and/or one or more of the
members of the respective family of Dr. Herman or Dr. Pazandak.
III.4 REFERRALS. The parties agree that nothing in this Agreement is
intended to violate state or federal health care laws or regulations including,
but not limited to, those listed in SECTION 6.10 herein, nor shall any portion
of the consideration be construed as a payment for or inducement of the referral
of patients. P.A. shall be free to refer patients to whomever it sees fit in the
exercise of professional judgment, according to the convenience or preference of
the patient, or otherwise.
ARTICLE IV
LIABILITIES NOT ASSUMED
-----------------------
With the exception of the real estate leases of the P.A.'s business,
leases of equipment and other personal property listed on SCHEDULE 6.7.1, those
material contracts described in SECTION 6.7 hereof, and those payables of the
P.A. listed on SCHEDULE 4.1 hereof, it is expressly acknowledged and agreed that
Omega North Texas will not assume and shall not be liable, either expressly or
impliedly, for any of the obligations or liabilities of P.A. of any kind and
nature. Without limiting the foregoing, Omega North Texas shall not assume or
become liable (expressly or impliedly) with respect to any of the following:
(a) any liability for the salary of G. Philip Matthews, M.D. ("Dr.
Matthews"), or any other costs associated with his employment by P.A.;
(b) any liability of P.A., either directly or indirectly, for either
principal or interest, with respect to advances or loans made to or owed by
P.A.;
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(c) any liability or claim arising out of or related to the operation and
use of the Assets prior to the Closing, including, without limitation, any
obligations or liabilities with respect to medical malpractice, Medicare or
Medicaid fraud or abuse, overpayments under any third party payor programs,
negligence, strict liability in tort, product liability or breach of warranty
claims;
(d) any liability arising out of any employee benefit plans maintained by
P.A. for the benefit of any employees of P.A. or any other liability of P.A.
with respect to any employees, including, but not limited to, incentive
compensation plans, severance pay, accrued salaries, wages, bonuses, payroll
taxes, hospitalization and medical insurance, deferred compensation of vacation
and sick pay;
(e) any liability attributable to personal property tax assessed by any
governmental entity, federal, state or local, against any of the Assets to be
conveyed or leased hereunder, such taxes to remain the responsibility of P.A.;
and
(f) any liability for any other tax assessed by any governmental entity,
federal, state or local, attributable to the business of P.A. relating to the
period on or before the Closing including, but not limited to, any income,
franchise, excise, sales or use taxes.
ARTICLE V
THE CLOSING
-----------
The acquisition of the Assets as contemplated hereby shall close at a time
and place mutually agreed upon by the parties after satisfaction of all
regulatory requirements, if any, and the conditions provided for in SECTIONS 8.1
AND 8.3 hereof. At the Closing, all assignments, bills of sale and other
documents required to be delivered hereunder shall be delivered to Omega North
Texas. Also at Closing, Omega North Texas shall deliver executed copies of all
required documents. P.A. and Omega North Texas covenant and agree to use their
best efforts to satisfy the conditions to Closing described in ARTICLE VIII of
this Agreement.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF P.A.,
---------------------------------------
DR. HERMAN AND DR. PAZANDAK
---------------------------
P.A., Dr. Herman and Dr. Pazandak represent, warrant, covenant and agree
with Omega North Texas that:
VI.1 TITLE; CONDITION. SCHEDULE 6.1.1 contains a complete, true and
correct list of P.A.'s Assets. P.A. has good and marketable title to all of the
Assets, and all Assets are in good operating condition. Except as otherwise
provided in this Section 6.1, the Assets are being transferred "as is, where
is." Except as disclosed on SCHEDULE 6.1.2 hereto, none of such Assets of P.A.
is subject to sale by the P.A. under a sales contract or other agreement of sale
or subject to security interests, mortgages, encumbrances, liens (including
income, personal property and other tax liens) or charges of any kind or
character. Except as indicated on SCHEDULE 6.1.2, P.A.'s Assets shall be
conveyed to Omega North Texas free and clear of all liens and encumbrances.
VI.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. P.A. has the full right,
power and capacity, and all authority and approval required to enter into,
execute and deliver this Agreement and to perform and observe fully P.A.'s
obligations hereunder and to perform the transactions contemplated hereby. This
Agreement has been fully executed and delivered by P.A. and is the valid and
binding obligation of P.A. enforceable in accordance with its terms.
VI.3 LITIGATION. Other than that set forth on SCHEDULE 6.3, there is no
suit, action, proceeding at law or in equity, arbitration, administrative
proceeding or other proceeding by any governmental entity pending or to the best
knowledge of P.A., Dr. Herman and Dr. Pazandak, threatened against, or affecting
P.A., or any of the Assets to be conveyed hereunder, and to the best knowledge
of P.A., Dr. Herman and Dr. Pazandak there is no basis for any of the foregoing.
VI.4 LICENSES. SCHEDULE 6.4 is a list of all material licenses, permits,
authorizations, approvals and consents (collectively, the "Licenses") P.A. owns,
uses, or has obtained relative to operating or conducting P.A.'s business. There
are no other material licenses, permits, authorizations, approvals or consents
required by any federal, state, or local government or government department,
agency, board, commission, bureau or instrumentality (collectively,
"Governmental Authority") to properly operate or conduct the P.A.'s business.
Each license has been duly obtained as valid and in full force and effect, and
is not subject to any pending or, to the best knowledge of P.A., Dr. Herman and
Dr. Pazandak, threatened administrative or judicial proceeding to revoke, cancel
or declare such license invalid in any respect. To the best knowledge of P.A.,
Dr. Herman and Dr. Pazandak, P.A. is not in default or in violation with respect
to any of the licenses, and no event has occurred which constitutes, or with due
notice or lapse of time or both may constitute, a default by P.A. under, or
violation of, any license. P.A. has completed and submitted, on a timely basis,
all reports and filings associated with the P.A.'s business as are required by
any governmental authority. P.A. will take all necessary actions to transfer, or
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assist Omega North Texas in transferring, the licenses to Omega North Texas or
its designee.
VI.5 TANGIBLE PERSONAL PROPERTY. The machinery, equipment, furniture,
fixtures, office supplies, warranty rights, supplies, books and records,
(excluding medical records), and other tangible personal property owned, leased
or used by P.A. (the "Tangible Personal Property") are sufficient and adequate
to permit P.A. to conduct the P.A.'s business as it is presently being
conducted, and P.A. has not received notice that any such item of Tangible
Personal Property or the use thereof is in violation of any existing law or any
building, zoning, health, safety or other ordinance, code or regulation. P.A. is
not in default with respect to any item of Tangible Personal Property purported
to be leased by it, and no event has occurred which constitutes, or with due
notice or lapse of time or both may constitute, a default under any such lease.
Except as set forth on SCHEDULE 6.5 hereof, P.A. does not hold any Tangible
Personal Property of any other person, firm or corporation pursuant to any
consignment or similar arrangement.
VI.6 INTANGIBLE PROPERTY. SCHEDULE 6.6.1 is a true and correct list of all
United States and state trademarks, servicemarks, trade names, patents,
copyrights, trade secrets, technical data and proprietary know-how (either
registered or applied for) owned by, registered in the name of, licensed to, or
used in the business of P.A. (the "Intangible Property"). Such a list includes a
summary description of each such item and specifies, where applicable, the date
the license or registration was granted or applied for, the expiration date and
the current status thereof. There is no restriction effecting the use of any of
the Intangible Property by P.A. and no license has been granted with respect
thereto. Each item of Intangible Property is valid and in good standing, is not
currently being challenged or infringed, is not involved in any pending or
threatened administrative or judicial proceeding, and does not conflict with any
rights of any other person, firm or corporation. Other than listed on SCHEDULE
6.6.2, P.A. has only operated or transacted business under the name of ECSC
Retina, P.A.
VI.7 CONTRACTS OR OTHER AGREEMENTS. P.A. has described on SCHEDULE 6.7.1
and has furnished to Omega North Texas copies and/or descriptions of all
Contracts or Other Agreements affecting the Assets. P.A. has performed all
obligations required of P.A. with respect to, and except as listed on SCHEDULE
6.7.2, P.A. is not in default under, any such Contracts or Other Agreements.
Except as listed on SCHEDULE 6.7.3, neither the execution nor the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
will: (i) conflict with, constitute a breach, violation or termination of any
provision of any Contracts or Other Agreements to which P.A. is a party or by
which P.A. is bound; (ii) result in the creation or imposition of any lien
against any of the Assets; or (iii) to the best knowledge of P.A., Dr. Herman
and Dr. Pazandak after due inquiry by each, violate any law, regulation,
judgment, rule, order or any other material restriction applicable to the P.A.
or the Assets.
VI.8 FUTURE BILLING. To the extent permitted by applicable law, Dr.
Herman, Dr. Pazandak, and P.A. hereby appoint Omega North Texas as their agent
to bill, collect and otherwise seek payment for professional services rendered
by Dr. Matthews, or any related entity; provided, however, to the extent
permitted by applicable law, such appointment may, upon thirty (30) days written
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notice to Omega North Texas, be revoked by any of Dr. Herman, Dr. Pazandak,
P.A., or any related entity for the purpose of enforcing any indemnification
obligation of Omega North Texas to Dr. Herman, Dr. Pazandak, P.A. or any related
entity, which indemnification obligation has been refused by Omega North Texas.
For purposes of this SECTION 6.8, "related entity" means any entity that is
controlled by Dr. Herman or Dr. Pazandak.
VI.9 HEALTHCARE COMPLIANCE. P.A. is participating in or otherwise
authorized to receive reimbursement from or is a party to Medicare, Medicaid,
and other third-party payor programs. All necessary certifications and contracts
required for participation in such programs are in full force and effect and
have not been amended or otherwise modified, rescinded, revoked or assigned as
of the date hereof, and to the best knowledge of P.A., Dr. Herman and Dr.
Pazandak, no condition exists or event has occurred which in itself or with the
giving of notice or the lapse of time or both would result in the suspension,
revocation, impairment, forfeiture, or non-renewal of any such third-party payor
program. To the best knowledge of P.A., Dr. Herman and Dr. Pazandak, P.A. is in
full compliance with the requirements of all such third-party payor programs
applicable thereto.
VI.10 FRAUD AND ABUSE. P.A. and persons and entities providing
professional services for P.A., have not, to the knowledge of P.A., or to the
knowledge of Dr. Herman and Dr. Pazandak, engaged in any activities which are
prohibited under 42 U.S.C. ss. 1320a-7b, or the regulations promulgated
thereunder pursuant to such statutes, or related state or local statues or
regulations, or which are prohibited by rules of professional conduct, including
but not limited to the following:
(a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(c) failing to disclose knowledge by a claimant of the occurrence of any
event effecting the initial or continued right to any benefit or payment on his
own behalf or on behalf of another, with intent to fraudulently secure such
benefit or payment; or
(d) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate) directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration (i)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which payment may
be made in whole or in part by Medicaid or Medicare.
VI.11 REVIEW AND CONSULTATION. P.A. has had access to and reviewed
such information and has consulted with all legal counsel, tax counsel,
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accountants and other experts and advisors deemed necessary by P.A. in
connection with the transactions contemplated herein.
VI.12 EXHIBITS. All the facts recited in schedules annexed hereto (as
updated as of the Closing) shall be deemed to be representations of fact by P.A.
as if they were fully recited in this ARTICLE VI.
VI.13 FULL DISCLOSURE. When considered in the context of all information
contained herein, no representation or warranty made by P.A. in this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit or fail to state a material fact necessary to make the statements
contained herein or therein not misleading.
VI.14 VIOLATIONS. Omega North Texas shall have the right to be repaid
all sums paid to P.A. under the terms of ARTICLE III, to the extent that it has
suffered damages as a result of P.A.'s misrepresentations or omissions. Omega
North Texas further has the rights provided for in the Stock and Escrow
Agreement described in SECTION XV.
VI.15 INVESTMENT INTENT. The P.A. acknowledges that the Omega Stock has
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and that the Omega Stock, except as provided for in SECTION 2
and SECTION 3.3, may not be sold, transferred or otherwise disposed of absent
such registration, or unless an exemption from registration is available. The
P.A. is acquiring the Omega Stock for its own account, for investment purposes
only and not with a view to distribution of such Omega Stock within the meaning
of Section 2(11) of the Securities Act. Each of the shareholders of the P.A.
qualifies as an "accredited investor", as defined in Rule 501(a) pursuant to the
Securities Act. The P.A. and its shareholders have received from Omega a copy of
Omega's Form 10-K for 1994 and 1995, Omega's 10-Q for the quarter ended June 30,
1996, and Omega's 1994 and 1995 Annual Report to shareholders. The P.A. and its
shareholders have had the opportunity to ask questions of and receive answers
from Omega senior management concerning Omega and the terms and conditions of
this investment by the P.A. The P.A. and its shareholders have had the
opportunity to obtain other additional information concerning Omega from Omega
senior management.
VI.16 FINANCIAL INFORMATION. Attached hereto as SCHEDULE 6.16 is
certain financial information relating to the P.A. for its operations through
July 31, 1996. Such financial information fairly reflects results of operations
of the P.A. for such periods. Since July 31, 1996, there has not been any
material adverse change in the assets or business condition, financial or
otherwise, of the P.A. or the Assets.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF OMEGA NORTH TEXAS
---------------------------------------------------
Omega North Texas represents, warrants and agrees with P.A. that:
VII.1 CONTRACTS OR OTHER AGREEMENTS. Neither the execution or delivery of
this Agreement nor the consummation of this transaction will: (i) conflict with,
constitute a breach, violation or termination of any provision of any contract
or other agreement to which Omega North Texas is a party or by which it is
bound; or (ii) to the best knowledge of Omega North Texas, after due inquiry,
violate any law, regulation, judgment, rule, order or any other restriction of
any kind or character applicable to Omega North Texas.
VII.2 REVIEW AND CONSULTATION. Omega North Texas has had access to and
reviewed such information and has consulted with all legal counsel, tax counsel,
accountants and other experts and advisors deemed necessary by Omega North Texas
in connection with the transactions contemplated herein.
VII.3 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Omega North Texas has
the full right, power and capacity, and all authority and approval required to
enter into, execute and deliver this Agreement and to perform and observe fully
Omega North Texas's obligations hereunder and to perform the transactions
contemplated hereby. This Agreement has been fully executed and delivered by
Omega North Texas and is the valid and binding obligation of Omega North Texas
enforceable in accordance with its terms.
VII.4 OWNERSHIP. Omega North Texas is a wholly-owned subsidiary of Omega.
VII.5 FRAUD AND ABUSE. Omega and Omega North Texas and persons and
entities providing professional services for Omega North Texas, have not, to the
knowledge of Omega North Texas, engaged in any activities which are prohibited
under 42 U.S.C. ss. 1320a-7b, or the regulations promulgated thereunder pursuant
to such statutes, or related state or local statues or regulations, or which are
prohibited by rules of professional conduct, including but not limited to the
following:
(a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(c) failing to disclose knowledge by a claimant of the occurrence of any
event effecting the initial or continued right to any benefit or payment on his
own behalf or on behalf of another, with intent to fraudulently secure such
benefit or payment; or
(d) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate) directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration (i)
in return for referring an individual to a person for the furnishing or
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arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which payment may
be made in whole or in part by Medicaid or Medicare.
VII.6 LITIGATION. Other than that set forth on SCHEDULE 7.6, there is no
suit, action, proceeding at law or in equity, arbitration, administrative
proceeding or other proceeding by any governmental entity pending or to the best
of Omega North Texas's knowledge, threatened against, or affecting Omega North
Texas, or any of the Assets to be conveyed hereunder, and to the best of Omega
North Texas's knowledge there is no basis for any of the foregoing.
VII.7 AUTHORITY TO ISSUE OMEGA STOCK. Omega has the full legal right,
power and capacity, and all authority and approval required to issue the Omega
Stock, which stock shall be fully paid and non-assessable.
ARTICLE VIII
CONDITIONS AND ADDITIONAL AGREEMENTS
------------------------------------
VIII.1 OMEGA NORTH TEXAS'S CONDITIONS TO CLOSE. The Closing and all
obligations of Omega North Texas pursuant to this Agreement shall be conditioned
upon the following:
(a) all representations and warranties contained in ARTICLE VI shall be
true as of the Closing;
(b) there shall not have been any material change in the Assets (either
individually or in the aggregate) or in the operation of the P.A.'s business
from the date of Omega North Texas's execution of this Agreement through the
Closing if the date of execution of this Agreement and the Closing are not one
and the same;
(c) there shall have been neither death of nor material adverse change in
the health of Dr. Matthews nor any insolvency (whether voluntary or involuntary)
of the P.A. from the date of Omega North Texas's execution of this Agreement
through the Closing if the date of execution of this Agreement and the Closing
are not one and the same;
(d) P.A. shall have performed all of its obligations under this Agreement
required to be performed as of the Closing including, but not limited to,
delivery of all documents set forth in SECTION 8.4 hereof;
(e) other than listed on SCHEDULE 8.1, the transactions contemplated
hereby shall not: (i) require the consent, waiver, authorization or approval of
any Governmental Authority, or of any other person, entity or organization, or
(ii) conflict with or result in any breach or violation of the terms and
conditions of, or constitute (or with notice or lapse of time, or both,
constitute) a default under applicable federal, state, local or foreign statute,
regulation, order, judgment or decree; and
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(f) Omega North Texas shall have been satisfied with its "due diligence"
review of the P.A.'s business and shall not have discovered any conditions or
set of facts which in Omega North Texas's sole determination, individually or in
the aggregate would have a material adverse effect on the P.A.'s business.
In the event Omega North Texas reasonably believes that any of the foregoing
conditions is not satisfied, then Omega North Texas shall request in writing
that such unsatisfied conditions be corrected to its reasonable satisfaction. If
such condition or conditions remain unsatisfied after thirty (30) days, the
Omega North Texas may, at its option, terminate this Agreement, in which event
Omega North Texas shall be relieved of all obligations hereunder and this
Agreement shall be deemed null, void and of no force or effect.
VIII.2 OMEGA NORTH TEXAS'S DELIVERIES. At or prior to the Closing,
Omega North Texas shall deliver to P.A. the following documents:
(a) CORPORATE RESOLUTIONS. A copy of directors' resolutions of Omega North
Texas, certified by its corporate secretary or assistant secretary as having
been duly and validly adopted and as being in full force and effect on the
Closing Date, authorizing the execution and delivery by Omega North Texas of
this Agreement, the other instruments to be executed and delivered by Omega
North Texas as provided herein, and the performance by Omega North Texas of the
transactions contemplated hereby;
(b) CONSIDERATION. Stock certificates representing the number of shares
of Omega Stock to be delivered pursuant to ARTICLE III hereof; and
(c) OPINION OF COUNSEL FOR OMEGA NORTH TEXAS AND OMEGA. An opinion of
counsel from Omega North Texas dated as of the Closing, in form and substance
reasonably satisfactory to P.A.'s counsel, and where appropriate with reliance
upon a certificate from Omega North Texas or the owner of Omega North Texas to
the effect that:
1) Omega North Texas is (i) duly incorporated, validly existing, and
in good standing under the laws of the State of Texas, (ii) duly qualified
to transact business in Texas, and is not required to be so qualified in
any other jurisdiction, and (iii) duly empowered and authorized to hold
and own its properties and carry on its business as now conducted and as
proposed to be conducted. Omega North Texas has the corporate power and
authority to execute, deliver and perform this Agreement and all other
agreements contemplated hereby.
2) Omega North Texas has the full power and authority to execute,
deliver, and perform this Agreement and all other agreements and documents
necessary to consummate the contemplated transaction, and, upon the
requisite approvals thereof, all corporate actions of Omega North Texas
necessary for such execution, delivery and performance will have been duly
taken.
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3) This Agreement and all agreements related to this Agreement have
been duly executed and delivered by Omega North Texas and constitute the,
valid, and binding agreement of Omega North Texas enforceable in
accordance with their terms (subject as to enforcement of remedies to the
discretion of the courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws
effecting the rights of creditors generally). The execution and delivery
by Omega North Texas of this Agreement, and the performance of its
obligations hereunder, do not require any action or consent of any party
other than Omega North Texas pursuant to any contract, agreement or other
understanding of Omega North Texas, or pursuant to any order or decree to
which Omega North Texas is a party or to which its properties or assets
are subject and will not violate any provision of law, the articles of
incorporation or bylaws of Omega North Texas or any order of any court or
other agency of the government.
4) Omega North Texas is duly licensed to carry out its operations
pursuant to any and all federal, state, local or municipal laws, rules,
orders, regulations, statutes, ordinances, codes, decrees, or the
requirements of any federal department, commission, board, bureau, agency
or instrumentality which regulates such operations. To the best of such
counsel's knowledge, with respect to Omega North Texas there are no
actions, suits, claims, proceedings or investigations pending or, to such
counsel's knowledge, threatened against Omega North Texas at law or in
equity, or before or by a federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, or any professional licensing or disciplinary authority which
would adversely effect the transactions contemplated herein or any party's
right to enter into this Agreement.
5) Omega North Texas is not in default with respect to any order,
writ, injunction or decree of any court or of any federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign which would effect the
rights of Omega North Texas to enter into and perform this Agreement.
6) All consents, approvals, qualifications, orders or authorizations
of or filings with any governmental authority, including any court,
required in connection with the valid execution, delivery and performance
by Omega North Texas of this Agreement have been duly made and obtained
and are effective on and as of the Closing; and
7) The Omega Stock has been duly and validly issued by Omega, with
the authorization and approval of Omega's Board of Directors, and such
Omega Stock is fully paid and non-assessable.
(d) OFFICER'S CERTIFICATE. A Certificate of Omega North Texas' President
and Secretary confirming the matters in SECTION 8.3(A).
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(e) OTHER PURCHASE DOCUMENTS. All such documents and instruments P.A. and
its counsel may reasonably request in connection with the consummation of the
transactions contemplated by this Agreement.
VIII.3 P.A.'S CONDITIONS TO CLOSE. The Closing and all obligations of P.A.
pursuant to this Agreement shall be conditioned upon the following:
(a) all representations and warranties contained in ARTICLE VII shall be
true as of the Closing;
(b) Omega North Texas shall have performed all of its obligations under
this Agreement required to be performed as of the Closing including, but not
limited to, delivery of all documents set forth in SECTION 8.2 hereof; and
(c) other than listed on SCHEDULE 8.3, the transactions contemplated
hereby shall not: (i) require the consent, waiver, authorization or approval of
any Governmental Authority, or of any other person, entity or organization, or
(ii) conflict with or result in any breach or violation of the terms and
conditions of, or constitute (or with notice or lapse of time, or both,
constitute) a default under applicable federal, state, local or foreign statute,
regulation, order, judgment or decree.
VIII.4 P.A.'S DELIVERIES. At or prior to the Closing, P.A. shall deliver
to Omega North Texas the following documents:
(a) BILL OF SALE. The bill of sale, conveying all of P.A.'s right, title
and interest in and to the Assets to Omega North Texas, and substantially in the
form of that attached hereof as EXHIBIT 8.4(A);
(b) EXECUTED CONTRACTS. Copies of all executed contracts or other
material agreements entered into by or on behalf of the P.A.;
(c) COPY OF LEASES. Copies of all real estate and equipment leases
pertaining to the P.A.'s business;
(d) OPINION OF COUNSEL FOR P.A. An opinion from counsel for P.A. dated as
of the Closing, in form and substance reasonably satisfactory to Omega North
Texas's counsel, and where appropriate with reliance upon a certificate from
P.A., Dr. Herman or Dr. Pazandak to the effect that:
1) P.A. is (i) duly formed and validly existing as a
professional association under the Texas Professional Association Act,
(ii) in good standing as a professional association under the laws of the
State of Texas, and (iii) duly empowered and authorized to hold and own
its own properties and carry on its business as now conducted and as
proposed to be conducted.
2) Subject to obtaining the required consent of certain third
parties to the assignment and/or transfer of the Assets and/or Contracts
or Other Agreements by P.A. and/or the assumption by Omega of the
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obligations associated with such Assets and/or Contracts or Other
Agreements (collectively, the "Required Third Party Consents"), P.A. has
the full power and authority to execute, deliver and perform this
Agreement and all other agreements and documents contemplated hereby to
which P.A. is a party and which are necessary to consummate the
contemplated transaction to which P.A. is a party; and, subject to
obtaining the Required Third Party Consents, all action required of P.A.
necessary for such execution, delivery and performance will have been duly
taken.
3) This Agreement and all agreements related to this Agreement to
which P.A. is a party have been duly executed and delivered by P.A. and
constitute the valid and binding agreement of P.A. enforceable in
accordance with their terms (subject as to enforcement of remedies to the
discretion of the courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium
and similar laws effecting the rights of creditors generally, and subject
to the Required Third Party Consents). The execution and delivery by P.A.
of this Agreement, and the performance of its obligations thereunder, do
not require, except for the Required Third Party Consents, any action or
consent of any party other than P.A. pursuant to any contract, agreement
or other understanding of P.A., or pursuant to any order or decree to
which P.A. is a party or to which its properties or assets are subject and
will not violate any provisions of the articles of association or bylaws
of P.A. or any order of any court or other agency of the government.
4) P.A. is duly licensed to carry out its operations pursuant to any
and all federal, state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or the requirements of
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which regulates such
operations. To the best of such counsel's knowledge, with respect to P.A.
(except for the matters included in SCHEDULE 6.3 hereto), there are no
actions, suits, claims, proceedings or investigations pending or
threatened against P.A. at law or in equity, or before or by a federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any
professional licensing or disciplinary authority which would adversely
effect the transactions contemplated herein or any party's right to enter
into this Agreement.
5) P.A. is not in default with respect to any order, writ,
injunction or decree of any court or of any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which would effect the rights of P.A.
to enter into and perform this Agreement.
6) All consents, approvals, qualifications, orders or authorizations
of or filings with any governmental authority, including any court,
required in connection with the valid execution, delivery and performance
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by P.A. of this Agreement have been duly made and obtained and are
effective on and as of the Closing; and
(e) OFFICER'S CERTIFICATE. A certificate from P.A.'s President and
Secretary confirming the matters in SECTION 8.1(A) hereof.
(f) CONSENT OF DR. MATTHEWS. Written acknowledgment and consent by Dr.
Matthews to the transactions set forth in this Agreement and written
acknowledgment by Dr. Matthews that his Employment Agreement with ECSC Retina
II, P.A., a Texas professional association, is in full force and effect and that
he is ready and able to perform his duties under such Employment Agreement.
(g) OTHER PURCHASE DOCUMENTS. All such documents and instruments Omega
North Texas and its counsel may reasonably request in connection with the
consummation of the transactions contemplated by this Agreement.
ARTICLE IX
EXPENSES
--------
Except as otherwise provided herein, each of the parties shall pay its own
costs and expenses incurred or to be incurred by it in negotiating and preparing
this Agreement and in consummating the transactions contemplated by this
Agreement.
ARTICLE X
ARBITRATION AND MEDIATION
-------------------------
X.1 MEDIATION. In the event a dispute arises out of or relating to this
Agreement, or the breach thereof, and if said dispute cannot be settled through
negotiation, the parties agree to attempt in good faith to settle the dispute by
mediation under the Commercial Mediation Rules of the American Arbitration
Association. Unless the parties reach an agreement reduced to writing, this
mediation will be non-binding, but the parties must participate in good faith in
non-binding mediation, before resorting to binding arbitration.
X.2 BINDING ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or its breach, not satisfied through either
negotiation or mediation, shall be settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
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As soon as reasonably practical after submission of a demand for binding
arbitration, Omega North Texas and the P.A. shall select one arbitrator,
agreeable to all parties. This arbitrator will be selected from lists prepared
by the American Arbitration Association. From the American Arbitration
Association list the parties will submit to the American Arbitration Association
a ranked list of arbitrators which are acceptable. The highest ranking
acceptable candidate will be selected by the American Arbitration Association.
If no arbitrators from the list composed by the American Arbitration Association
are acceptable by either of the parties, the American Arbitration Association
will compile a second list. This procedure will be followed until the parties
have selected an arbitrator. The results of the arbitrator's finding will be
binding on the parties.
ARTICLE XI
NOTICES
-------
Any notice hereunder shall be deemed to have been given by one party to
the other if it is in writing and it is (i) delivered or tendered in person, or
(ii) deposited in the United States Mail in a sealed envelope, with postage
prepaid, in either case addressed as follows:
If to Omega North Texas: Omega Health Systems of North Texas, Inc.
5100 Poplar Avenue, Suite 2100
Memphis, Tennessee 38137
Attn: Thomas P. Lewis
With a copy to: Baker, Donelson, Bearman & Caldwell
2000 First Tennessee Building
Memphis, Tennessee 38103
Attn: Robert Walker
If to P.A.: ECSC Retina, P.A.
5421 La Sierra Drive
Dallas, Texas 75231-4185
Attn: Wesley K. Herman, M.D.
With a copy to: Barry M. Bloom, P.C.
8300 Douglas Avenue, Suite 800
Dallas, Texas 75225
Attn: Barry M. Bloom
or to such other address as the parties shall have previously designated by
notice to the serving party, given in accordance with this ARTICLE XI. Notices
shall be deemed to have been given on the date of delivery if delivered
personally, or on the third day after mailing as provided above; provided,
however, that a notice not given as above shall, if it is in writing, be deemed
given if and when actually received by a party.
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ARTICLE XII
AMENDMENT AND WAIVER
--------------------
The parties hereto may by mutual agreement amend this Agreement in any
respect. Any party hereto may extend the time for the performance of any of the
obligations of the other, waive any inaccuracies and representations by the
other contained in this Agreement or in any document delivered pursuant hereto
which inaccuracies would constitute a breach of this Agreement, waive compliance
by the other with any of the covenants contained in this Agreement and
performance of any obligations by the other, waive the fulfillment of any
condition that is precedent to the performance by the party so waiving any of
its obligations under this Agreement. Any agreement on the part of any party for
any such amendment, extension or waiver must be in writing and signed by the
party agreeing to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
ARTICLE XIII
TERMINATION AND ABANDONMENT
---------------------------
XIII.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of P.A. and Omega North Texas;
(b) by Omega North Texas, if all of the conditions set forth in SECTION
8.1 of this Agreement shall not have been satisfied or waived on or prior to the
Closing; or
(c) by P.A., if all of the conditions set forth in SECTION 8.3 of this
Agreement shall not have been satisfied or waived on or prior to the Closing.
If this Agreement is terminated pursuant to this SECTION 13.1, it shall become
null and void and of no further force or effect, except as provided in SECTION
13.2.
XIII.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment of this Agreement by P.A. or Omega North Texas pursuant to SECTION
13.1 hereof, written notice thereof shall forthwith be given to the other party
or parties as provided herein and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
P.A. or Omega North Texas, and P.A. and Omega North Texas shall each return to
the other party any documents or copies thereof in possession of such party
furnished by such other party in connection with the transaction contemplated by
this Agreement. If this Agreement is terminated as provided herein, no party to
this Agreement shall have any liability or further obligation to any other party
to this Agreement with respect to this Agreement or the transactions
contemplated hereby except as provided in this SECTION 13.2; provided, however,
that no termination of this Agreement pursuant to the provisions of this ARTICLE
XIII shall relieve any party of liability for breach of any provision of this
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Agreement occurring prior to such termination; and provided, further, that any
and all confidential or proprietary information obtained from either party must
be returned to that party, and each party hereto agrees to maintain any and all
confidential or proprietary information obtained from the other party in
strictest confidence and not to divulge such information to any third party,
except as may be permitted or required by law.
ARTICLE XIV
INDEMNIFICATION
---------------
XIV.1 INDEMNIFICATION OF OMEGA NORTH TEXAS. P.A., Dr. Herman and Dr.
Pazandak shall indemnify, defend and hold Omega North Texas and its officers,
directors, shareholders, agents, employees, representatives, successors and
assigns harmless from and against any and all damage, loss, cost, obligation,
claims, demands, assessments, judgments or liability (whether based on contract,
tort, product liability, strict liability or otherwise), including taxes, and
all expenses (including interest, penalties and reasonable attorneys' and
accountants' fees and disbursements) incurred by any of the above-named persons,
resulting from or in connection with any one or more of the following:
(a) Misrepresentations, breach of warranties, failure to perform any
covenant or Agreement of P.A. contained herein;
(b) Debts, commitments, obligations of P.A. (except those specifically
assumed by Omega North Texas), any transaction, event or act that occurred
on or prior to the Closing that materially adversely affects the value of the
Assets;
(c) Claims, actions or suits by former employees of P.A.; or
(d) P.A.'s failure to discharge pension or benefit plan obligations.
Omega North Texas agrees to give prompt notice to P.A. of the assertion of any
claim, or the threat or commencement of any suit, action, proceeding or other
matter in respect of which indemnity may be sought under this SECTION 14.1. P.A.
may participate in the defense of any such suit, action, proceeding or other
matter at P.A.'s expense. P.A. shall not be liable under this SECTION 14.1 for
any settlement effected without P.A.'s consent of any claim, suit, action,
proceeding or other matter in respect of which indemnity may be sought under
this SECTION 14.1, which consent shall not be unreasonably withheld.
XIV.2 INDEMNIFICATION OF P.A. Omega North Texas and Omega shall indemnify,
defend and hold P.A. and its officers, directors, shareholders, agents,
employees, representatives, successors and assigns harmless from any and all
damage, loss, cost, obligation, claims, demands, assessments, judgments or
liability (whether based on contract, tort, product liability, strict liability
or otherwise), including taxes and all expenses (including interest, penalties
and reasonable attorneys' and accountants' fees and disbursements) incurred by
any of the above-named persons, resulting from or in connection with
misrepresentations, breach of warranties or failure to perform any covenant or
Agreement of Omega North Texas contained herein. P.A. agrees to give prompt
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notice to Omega North Texas of the assertion of any claim, or the threat or
commencement of any suit, action, proceeding or other matter in respect of which
indemnity may be sought under this SECTION 14.2. Omega North Texas may
participate in the defense of any such suit, action, proceeding or other matter
at Omega North Texas' expense. Omega North Texas shall not be liable under this
SECTION 14.2 for any settlement effected without Omega North Texas' consent of
any claim, suit, action, proceeding or other matter in respect of which
indemnity may be sought under this SECTION 14.2, which consent shall not be
unreasonably withheld.
ARTICLE XV
STOCK PLEDGE AND ESCROW
To secure the indemnity under this Agreement and certain other agreements,
P.A. pledges to Omega North Texas and places in escrow fifty percent (50%) of
the Omega Stock on terms as provided for in that certain Stock Pledge and Escrow
Agreement dated August 31, 1996, a copy of which is attached hereto as EXHIBIT
15.1.
ARTICLE XVI
MISCELLANEOUS
16.1 BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto, their successors and assigns.
16.2 ENTIRE AGREEMENT. This Agreement shall embody the entire agreement
between the parties hereto and cancels and supersedes all other previous
agreements and understandings relating to the subject matter of this Agreement,
written or oral, between the parties hereto. There are no agreements,
representations or warranties between the parties hereto as to the subject
matter hereof other than those expressly set forth or expressly provided herein.
All schedules called for by this Agreement and delivered to the parties shall be
considered a part hereof with the same force and effect as if the same had been
specifically set forth in this Agreement.
16.3 GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Texas. Any mediation or arbitration brought with respect to this Agreement shall
be conducted in Dallas County, Texas.
16.4 HEADINGS. The subject headings of the articles, sections and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
16.5 NO THIRD PARTY BENEFIT. This Agreement is binding upon, and is for
the benefit of, the parties hereto and their respective successors and
authorized assigns. Except as otherwise expressly provided, nothing in this
Agreement, express or implied, is intended or shall be construed to confer upon
any person other than the parties hereto, any right, remedy, or claim, legal or
equitable, under or by reason of this Agreement or any provision thereof. Except
as otherwise expressly provided, nothing in this Agreement, express or implied,
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is intended or shall be construed to confer upon any person other than the
parties hereto, any right, remedy, or claim, legal or equitable, under or by
reason of this Agreement or any provision thereof.
16.6 ASSIGNABILITY. Neither this Agreement nor any of the rights and
duties of any party hereto may be transferred or assigned to any person except
by a written agreement executed by each of the parties hereto, except that Omega
North Texas reserves the right to assign this Agreement to any Affiliate or
successor. As used in this SECTION 16.6, "Affiliate" shall mean Omega,
subsidiaries of Omega and subsidiaries of Omega North Texas.
16.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year hereinabove first set forth.
OMEGA HEALTH SYSTEMS OF NORTH TEXAS, INC.
By:
--------------------------------------
Thomas P. Lewis, President
ECSC RETINA, P.A.
By:
--------------------------------------
Wesley K. Herman, M.D., President
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Exhibit 2.4
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT (this "Agreement") effective as of August 31,
1996, is entered into by and among ECSC II, P.A. ("ECSC"), a Texas professional
association, and OMEGA HEALTH SYSTEMS OF NORTH TEXAS, INC. ("Manager"), a Texas
corporation.
W I T N E S S E T H :
WHEREAS, ECSC is presently engaged in the professional practice of
ophthalmology at the following locations: 5421 La Sierra Drive, Dallas, Texas;
2800 S. Hulen Street, Fort Worth, Texas; 4815 King Street, Greenville, Texas
75401; and 406 South Main, Weatherford, Texas 76086 (herein collectively
referred to as the "Center").
WHEREAS, in order to enable ECSC and the Center to benefit from the
experience and expertise of Manager, ECSC desires to engage Manager to operate
the Center, and Manager is willing to be engaged in such capacity.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto do
hereby contract and agree as follows:
SECTION 1. SERVICES.
1.1 ECSC hereby engages Manager as its sole and exclusive manager and
administrator for the purpose of rendering management, administrative,
marketing, purchasing, and all other management, support and administrative
services needed for the operation of the Center on the basis hereinafter set
forth. Manager hereby accepts such engagement.
1.2 As Manager for ECSC, Manager shall have authority and responsibility
to conduct, supervise, and manage the business functions and nonmedical services
of ECSC. Manager shall provide management services for the Center in a manner
consistent with good business practices in the community served by ECSC and
within the health care industry, and consistent with and subject to the
responsibilities of ECSC as a health care provider.
1.3 In the performance of its duties under the terms of this Agreement,
Manager will render all non-medical services, advice, supervision and assistance
as shall be reasonably necessary to operate the Center, including:
(a) providing at cost all facilities, supplies and equipment necessary to
enable ECSC to conduct an ophthalmological, medical and surgical practice;
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(b) maintaining the necessary accreditation and licensure of the Center;
(c) providing a Center Director and an Administrator, both of whom shall
be employees of Manager and both of whom shall be involved in the
management and the business operations of the Center as provided in
SECTION 3.11;
(d) hiring, training, supervising, directing and discharging all support
personnel and office staff, including the Center Director and the
Administrator;
(e) maintaining in force, during the term of this Agreement, a premises
liability insurance policy in an amount of not less than $1,000,000 and
excess liability (umbrella) coverage in an amount of not less than
$5,000,000 insuring ECSC, the Manager and the operations of the Center;
(f) administering all billing and collection of fees for all services
rendered at the Center pursuant to SECTION 2 below, and reporting such
billings and collections to ECSC on a monthly basis;
(g) preparing all reports, supporting data, and other material and
information required in connection with obtaining payment or reimbursement
under government or private contracts and programs;
(h) establishing staffing schedules, wage structures and personnel
policies for the Manager's support personnel, including, but not limited
to, vacation, holiday, sick and personal leave and a health insurance,
disability insurance and dental insurance program;
(i) negotiating, entering into, terminating and administering, on behalf
of ECSC, all contracts for goods or services; provided that Manager shall
not be responsible for the costs and expenses in connection with such
contracts and shall not be contractually bound thereby; and
(j) subject to final approval of ECSC, negotiating on behalf of ECSC
managed care contracts, and administering all managed care contracts in
which ECSC participates.
Manager shall exercise its best efforts at all times during the term of
this Agreement to operate the Center as a high quality facility for the
providing of services to patients and to conduct such operations as efficiently
and economically as practicable, and shall in no event utilize standards of
operation lower than those in effect as of the date of this Agreement. Manager
shall exercise good faith efforts not to expend more than a reasonable sum of
money in accordance with normal commercial practices for any goods purchased or
services engaged on behalf of ECSC.
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SECTION 2. MANAGEMENT SERVICE AND OTHER FEES.
2.1 ECSC and Manager hereby mutually recognize and acknowledge that
Manager will incur substantial costs in arranging for ECSC's use of the Center
and in providing the office space, support services, personnel, management,
administration and other items and services that are the subject matter of this
Agreement. As compensation for services rendered under the terms of this
Agreement, and subject to the conditions set forth below, ECSC shall pay to
Manager a fee of $42,333.00 per month (the "Service Fee"); provided, however,
with respect to any month during which this Agreement is not in effect for the
entirety of such month, the Service Fee for such month shall be reduced at the
rate of $1,411.10 for each day of such month that this Agreement is not in
effect. Such fee is acknowledged as the parties' negotiated agreement as to the
reasonable fair market value of the equipment, support services, personnel,
office space, management, administration and other items and services furnished
by Manager pursuant to this Agreement, considering the nature and volume of the
services required and the risks assumed by Manager.
2.2 (a) In addition to the Service Fee, ECSC shall pay to Manager an
"Administration Fee" (as hereinafter defined). ECSC and Manager recognize that
certain of such costs and expenses may vary to a considerable degree according
to the extent of ECSC's business and services. Furthermore, ECSC and Manager
agree that it will be impracticable to ascertain and segregate all of the exact
costs and expenses that will be incurred by Manager from time to time in
performance of its obligations under this Agreement. However, it is the intent
of the parties that the Administration Fee paid to Manager (as calculated in
SECTION 2.3 herein) shall reflect the risk taken by Manager and an incentive to
Manager to enhance the cost effectiveness of ECSC's operations .
(b) Payment of the Administration Fee is not intended to be and shall
neither be interpreted or applied as permitting Manager to share in ECSC's fees
for medical services or any other services, nor shall such fee be interpreted as
being paid in whole or in part for referrals of any kind whatsoever.
2.3 (a) Manager shall be entitled to an administration fee (the
"Administration Fee") on a monthly basis equal to twenty-six percent (26%) of
the amount by which and after the time the "Gross Collections" (as hereinafter
defined) of ECSC exceed $3,640,000 (the "Base Amount") each and every calendar
year during the term of this Agreement; provided further, the Administration Fee
to which Manager is entitled for the calendar year 1996 shall be calculated only
from the effective date of this Agreement and shall not take into account any
amount of Gross Collections of ECSC prior to such effective date; provided,
however, the Administration Fee for 1996 shall be pro-rated based on the
percentage of the calendar year involved as a percentage of the Base Amount;
provided further, however, the Administration Fee to which Manager is entitled
for the calendar year during which this Agreement terminates (regardless of the
reason for such termination) shall not take into account any amount of Gross
Collections subsequent to the date of termination.
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(b) On May 1, 1998, the parties agree to review the adequacy and
appropriatness of the Administration Fee and to adjust such fee based upon the
facts and circumstances then existing. In the event the parties cannot agree
upon an appropriate adjustment, the parties agree to submit the matter to
arbitration, and the costs of such arbitration shall be borne equally by the
parties. Thereafter, the parties agree to a similar annual review beginning each
May 1 thereafter during the term of this Agreement.
2.4 As a result of ECSC's licensed use of the Marks (as "Marks" is defined
in SECTION 19 hereof), Manager shall be paid a License Fee of $1,000.00 per
month; provided, however, with respect to any month during which this Agreement
is not in effect for the entirety of such month, the License Fee shall be
reduced at the rate of $33.00 for each day of such month that this Agreement is
not in effect.
2.5 The compensation provided to Manager under this Agreement shall
constitute full compensation for all services rendered by Manager under this
Agreement, and no further compensation shall be due. Manager shall not seek
additional compensation from any source for services rendered under this
Agreement. Except as otherwise specifically provided for in this Agreement,
amounts delivered or required to be delivered to ECSC pursuant to SECTION 2.6
hereof shall constitute the only amount that Manager is required to deliver to
ECSC under this Agreement; and ECSC shall not seek the payment of additional
amounts from any other source for medical services rendered by ECSC.
2.6 On the first (1st) day of each month during the term of this
Agreement, Manager shall be paid the Service Fee and the License Fee with
respect to the immediately preceding month (the "Month in Question"). No later
than the twentieth (20th) day of each month during the term of this Agreement,
Manager shall be paid the Administration Fee (if any) with respect to the Month
in Question. No later than the twentieth (20th) day of each month Manager shall
deliver to ECSC an amount equal to the difference between (a) the Gross
Collections during the Month in Question, minus (b) the sum of (i) the Direct
Operating Expenses (hereinafter defined) paid during the Month in Question, and
(ii) a reasonable reserve, not exceeding ten percent (10%) of the Direct
Operating Expenses for the Month in Question, to pay Direct Operating Expenses
subsequent to the Month in Question.
2.7 For purposes of this Agreement, the term "Direct Operating Expenses"
shall mean all costs and expenses of the Center, computed in accordance with
generally accepted accounting principles using a cash method of accounting,
including, but not be limited to, all employees and support staff salaries and
benefits, compensation for doctors employed by ECSC (other than Dr. Wesley K.
Herman ("Dr. Herman") and Dr. Bradford B. Pazandak ("Dr. Pazandak")), rent,
office and medical supplies and tools, taxes (including interest and penalties
thereon), health insurance, malpractice insurance, amounts paid in satisfaction
of malpractice claims not reimbursed by insurance, general liability insurance
(including extended (umbrella) coverage), disability insurance, marketing
expenses, interest expenses, utilities, maintenance, general and hazardous waste
disposal, "Expense Account Items" (as hereinafter defined), rentals, leases,
depreciation and amortization of leasehold improvements, furniture, fixtures and
equipment, other fixed assets, and intangibles purchased after the Closing Date,
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and the License Fee, the Service Fee and the Administration Fee, if any, paid to
Manager under this Agreement. The amount of depreciation and amortization
included in Direct Operating Expenses shall relate only to those assets acquired
by ECSC after August 31, 1996, and shall be based upon a five (5) year life for
such assets computed on a straight-line method. The corporate overhead of
Manager, beyond the Service Fee, Administration Fee, and License Fee shall not
be included as a Direct Operating Expense.
2.8 For purposes of this Agreement, the term "Gross Collections" shall
mean all revenues attributable to medical services and other related services
rendered on or after September 1, 1996 by the Center and/or its employees,
computed in accordance with generally accepted accounting principles using a
cash method of accounting, less (i) all refunds paid, and (ii) any amount(s)
paid toward the satisfaction of the insurance deductible applicable to the
defense of any medical malpractice claim made against the Center, ECSC or its
employees. Gross Collections shall not include loan proceeds, capital
contributions, casualty insurance proceeds, proceeds from sale of assets, and
any other extraordinary payments received not relating to the normal business of
ECSC.
2.9 Manager shall have the responsibility for billing and collecting for
services provided by ECSC. Except as provided for in the last paragraph of
SECTION 12 hereof, and to the extent permitted by applicable law, ECSC shall
have no right to receive, nor shall ECSC attempt to bill for or collect, payment
from the patient or any third party for services provided by ECSC. ECSC
acknowledges that Manager has the sole right of and responsibility for billing
and collecting for services provided by ECSC; however, ECSC shall be consulted
on all bad debt write offs, courtesy discounts and collection agency referrals.
Notwithstanding the foregoing, ECSC does not assign any sums or rights of
payment for which assignment is prohibited by law.
2.10 ECSC shall establish, and Manager shall jointly agree upon, fees,
charges and appropriate diagnosis codes, procedure codes and billing codes for
all services provided under this Agreement. In all cases, fees shall be
competitive with fees for similar services by others in the Service Area (as
hereinafter defined); provided, however, ECSC shall not be required to incur any
cost or expense to determine whether its fees are competitive as described, and,
unless otherwise consented to by ECSC in writing, any market study or other
analysis made to determine whether fees are competitive as described shall be at
the sole cost and expense of Manager. "Service Area" includes the following: (a)
the geographic areas within a twenty-five (25) mile radius of each of the main
office facilities of ECSC (presently located at 5421 La Sierra Drive, Dallas,
Texas, and at Hulen Office Plaza, 2800 South Hulen, Suite 100, Fort Worth,
Texas), (b) the geographic areas within a ten (10) mile radius of each of the
satellite office facilities of ECSC (presently located at 4815 King Street,
Greenville, Texas, and at 406 South Main Street, Weatherford, Texas), (c) the
geographic areas within twenty-five (25) miles from the city limits of the City
of Bonham, Fannin County, Texas, and (d) the geographic areas within a
twenty-five (25) mile radius of any additional satellite offices opened for
business by ECSC prior to the termination of this Agreement.
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SECTION 3. RESPONSIBILITIES.
3.1 During the Term of this Agreement, Manager shall provide all such
management, administrative, financial, fiscal, management information system,
and business services as are reasonably necessary and appropriate for the
day-to-day administration of the business aspects of ECSC's operations, in
accordance with the law and all rules, regulations and guidelines of applicable
governmental agencies.
3.2 (a) Manager shall employ or otherwise retain and shall be responsible
for selecting, training, supervising, and terminating all management,
administrative, clerical, secretarial, bookkeeping, accounting, payroll, billing
and collection and other personnel as Manager deems reasonably necessary and
appropriate for Manager's performance of its duties and obligations under this
Agreement. Manager specifically agrees to provide one full-time employee to
serve as Center Director of ECSC on such terms as determined by Manager in
consultation with ECSC and officed in Dallas, Texas. As part of Manager's
staffing obligations, Manager shall be solely responsible for determining the
salaries and fringe benefits of the above-described employees, for paying such
salaries and providing such fringe benefits, for withholding as required by law,
any sums of income tax, unemployment insurance, social security or any other
withholding pursuant to any applicable law or governmental requirement, for
determining bonuses for such employees and for providing worker's compensation
insurance for all of the above-described employees. In recognition of the fact
that management personnel provided to ECSC under this Agreement may perform
similar services from time to time for others, this Agreement shall not prevent
Manager from performing such similar services for others or restrict Manager
from using the personnel provided to ECSC under this Agreement to provide such
services to others. Manager will make every effort consistent with sound
business practices to honor the specific requests of ECSC with regard to the
assignment of Manager's employees but Manager reserves the sole right to
determine the assignment of its employees. Manager shall be responsible for any
appropriate disciplinary action required to be taken against any of the
above-described staff personnel.
(b) Manager shall have sole responsibility for administering payroll
services, providing any fringe benefits, withholding any sums for income tax,
unemployment insurance, social security as required by law, and withholding any
other sums required by applicable law or governmental requirement. Manager shall
have sole responsibility for preparing, maintaining and filing all requisite
reports and statements regarding income tax withholdings, unemployment
insurance, social security, equal employment opportunity, or other reports and
statements required by law with respect to personnel provided by Manager under
this Agreement.
(c) In recognition of the fact that Manager and the management and
administrative personnel provided to ECSC by Manager pursuant to this Agreement
may from time to time perform services for others, this Agreement shall not
prevent Manager or such personnel from performing services for others or
restrict Manager from so using Manager's personnel. Manager reserves the sole
right to determine the assignment of its personnel.
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3.3 The parties acknowledge and agree that the rights, powers, duties, and
responsibilities of ECSC and Manager may be limited by applicable federal,
state, and local laws and regulations affecting the operation of the Center and
the services provided at the Center. ECSC and Manager agree to and intend to
comply fully with such applicable laws and regulations in the performance of
their respective responsibilities.
3.4 ECSC is responsible for the quality of medical and surgical care
rendered at the Center and, therefore, retains full authority concerning medical
and ethical matters that arise within and in relation to ECSC's practice.
Manager and ECSC shall perform their obligations under this Agreement in a
manner consistent with ECSC's responsibility for patient care.
3.5 ECSC shall be responsible for hiring additional ophthalmologists as
needed to accommodate patient volume.
3.6 ECSC and its licensed ophthalmologists shall be responsible for
encouraging and providing quality patient care and developing a positive
professional relationship with other health care professionals involved in the
care of patients treated at the Center, including, where appropriate and
consistent with law, facilitating co-management of patients under the primary
care of practitioners practicing independently of the Center.
3.7 ECSC shall seek to secure any licenses that are needed to operate the
Center, as well as accreditation or certification by Medicare, Medicaid, JCAHO,
and other organizations, as appropriate.
3.8 ECSC shall acquire and maintain at all times during the term of this
Agreement, professional liability insurance coverage, subject to exclusions and
deductibles included in such policies. All such policies are to be written or
amended to include Manager as an additional named insured. Evidence of ECSC's
insurance coverage shall be supplied to Manager upon execution of this
Agreement, and at any time thereafter upon request, and such insurance coverage
shall (a) be paid as a Direct Operating Expense of the Center, (b) have minimum
limits of $1,000,000 per occurrence, $3,000,000 annual aggregate, and (c) be
provided through insurers acceptable to ECSC and Manager. Any investigational or
other care provided by ECSC and not covered by professional liability insurance
coverage may be undertaken with the approval of Manager, which approval shall
not be unreasonably withheld.
3.9 ECSC shall review and consult with Manager in the location of
additional facilities, selection of equipment and other key activities relating
to the growth of the Center. Notwithstanding the foregoing, however, nothing in
this SECTION 3.9 shall be construed to include (i) those medical decisions that
are the sole responsibility of ECSC or (ii) those non-medical decisions,
described in this Agreement that are the sole responsibility of Manager.
3.10 ECSC and its licensed ophthalmologists shall participate in
continuing education programs sponsored by the Center for the benefit of local
health care professionals, including formal and informal educational activities,
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observation of medical management of patients and, when in the opinion of ECSC
it is appropriate and consistent with applicable law and good surgical practice,
observation of surgical procedures. Such licensed ophthalmologists may also
participate in ophthalmology training programs so long as Manager is notified in
advance and scheduling conflicts are resolved.
3.11 Manager shall employ a Center Director. The Center Director will
oversee all business and financial activities of the Center and communicate with
Manager all business activities and/or financial information relative to the
Center as required by Manager. The Center Director will also provide direct
patient care to patients of the Center on a limited basis. In addition, Manager
shall employ an Administrator for the Center. The Administrator will directly
manage the day-to-day operations of the Center, including fiscal monitoring of
the Center, in-house accounting for the Center, and personnel management for the
Center. The Center Director and the Administrator will be jointly responsible
for the Center's strategic planning, financial management, budgeting, business
operations, marketing activities, personnel training, and development. The
Administrator will report to the Center Director.
3.12 ECSC shall provide and arrange for professional ophthalmic medical
services at the Center including, without limitation, secondary and tertiary
medical and surgical eye care services, on a full-time basis. "Full-time," as
that term is used in this Agreement, refers to twenty-four (24) hours per day,
seven (7) days per week, as patient demand warrants. On call services will be
provided or arranged by ECSC. Leave time and coverage shall be jointly arranged
by ECSC and Manager consistent with the terms of this Agreement and, except for
death, illness, injury, family tragedy, or as required under the Family and
Medical Leave Act, as amended, if applicable, or other applicable law, neither
Dr. Herman nor Dr. Pazandak shall be away from the Center for more than fifteen
(15) consecutive business days unless agreed upon by both the applicable
physician and Manager. Except as otherwise provided in this SECTION 3.12, each
of Dr. Herman and Dr. Pazandak will work at the Center (which also includes
professional services at other locations as necessitated by patient care needs
or availability of equipment and technology) for at least two hundred thirteen
(213) days (the "Required Work Days") during the "Calendar Year." For purposes
of this SECTION 3.12, "Calendar Year" means the twelve (12) month period
beginning January 1 of each year and ending at the close of business on December
31 of each year. For periods less than a full Calendar Year, the Required Work
Days will be prorated accordingly. In the event that either Dr. Herman or Dr.
Pazandak works over the Required Work Days in any Calendar Year, then any such
days, up to a maximum of five (5) days annually, may be carried over to the next
Calendar Year for the benefit of such person. ECSC and Dr. Herman and Dr.
Pazandak agree, subject to family commitments and other personal considerations,
to use their best efforts to have either Dr. Herman or Dr. Pazandak available to
the Center for professional services or consultation during normal business
hours. Notwithstanding the foregoing, nothing in this SECTION 3.12 shall be
construed to require either Dr. Herman or Dr. Pazandak to perform primary
eyecare services. In addition, Dr. Herman and Dr. Pazandak shall be allowed to
continue their work with Insight International, Inc., a Delaware non-stock,
non-profit corporation ("Insight International").
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3.13 During the term of this Agreement, Manager agrees, upon the
presentation of a premium invoice or evidence of an automated bank draft premium
transaction, to promptly reimburse ECSC for the cost of acquiring and/or
maintaining a $250,000 term life insurance policy on the life of Dr. Herman and
a $250,000 term life insurance policy on the life of Dr. Pazandak (the "Life
Insurance Policies"). Each of the Life Insurance Policies shall be owned by ECSC
but Dr. Herman shall have the right to designate the beneficiary of the Life
Insurance Policy insuring his life and Dr. Pazandak shall have the right to
designate the beneficiary of the Life Insurance Policy insuring his life.
Nothing in this SECTION 3.3 shall preclude or prevent ECSC from assigning,
cancelling or otherwise terminating one or both of the Life Insurance Policies,
and acquiring another Life Insurance Policy to replace the Life Insurance Policy
so assigned, cancelled or otherwise terminated; likewise, ECSC may assign,
cancel or otherwise terminate one or both of the Life Insurance Policies and
elect, in its sole direction, not to replace the Life Insurance Policies so
assigned, cancelled or otherwise terminated. The cost of acquiring, maintaining
and replacing the Life Insurance Policies shall be a Direct Operating Expense of
the Center. ECSC shall provide Manager with a copy of the Life Insurance
Policies in effect as they exist from time to time.
3.14 During the term of this Agreement, Manager shall be entitled to
obtain, at Manager's sole cost and expense, one or more policies of life
insurance on the lives of Dr. Herman and Dr. Pazandak naming Manager, to the
extent permitted by applicable law, as beneficiary (the "Key Man Insurance").
Dr. Herman and Dr. Pazandak shall cooperate as is reasonably necessary to assist
Manager in obtaining the Key Man Insurance, including, but not limited to,
providing authorization for release to the insurance company of the respective
medical records of each and submitting to medical examinations as may be
reasonably required by the insurance company. If either or both of Dr. Herman
and Dr. Pazandak are, for any reason, determined to be uninsurable, neither
ECSC, Dr. Herman nor Dr. Pazandak shall have any liability or responsibility to
Manager or to any other person or entity for Manager's failure or inability to
obtain the Key Man Insurance.
3.15 During the term of this Agreement, Manager agrees, upon the
presentation of a premium invoice or evidence of an automated bank draft premium
transaction, to promptly reimburse ECSC for the cost, not to exceed Ten Thousand
Dollars ($10,000) annually, of acquiring and/or maintaining an income disability
insurance policy with Dr. Herman as the named insured and an income disability
insurance policy with Dr. Pazandak as the named insured (the "Disability
Policies"). Each of the Disability Policies shall be owned by ECSC, but Dr.
Herman shall have the right to designate the beneficiary of his Disability
Policy and Dr. Pazandak shall have the right to designate the beneficiary of his
Disability Policy. Nothing in this SECTION 3.15 shall preclude or prevent ECSC
from assigning, cancelling or otherwise terminating one or both of the
Disability Policies and acquiring another Disability Policy to replace the
Disability Policy so assigned, cancelled or otherwise terminated; likewise, ECSC
may assign, cancel or otherwise terminate one or both of the Disability Policies
and elect, in its sole discretion, not to replace the Disability Policy so
assigned, cancelled or otherwise terminated. The cost of acquiring, maintaining
and/or replacing the Disability Policies shall be a Direct Operating Expense of
the Center. ECSC shall provide Manager with a copy of the Disability Policies in
effect as they exist from time to time.
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3.16 During the term of this Agreement, Manager agrees that ECSC shall be
paid Five Thousand Dollars ($5,000) per month for each of Dr. Herman and Dr.
Pazandak (i.e., $10,000 per month in the aggregate) for certain discretionary
costs and expenses specifically designated by ECSC as discretionary expense
account items (the "Expense Account Items"). Expense Account Items shall
include, but not be limited to, professional dues, subscriptions, licenses and
memberships in professional organizations and professional activities,
continuing education expenses (including all travel, meals and lodging related
thereto), entertainment and related expenses (including all travel, meals and
lodging related thereto) and such other costs and expenses deemed by Dr. Herman
or Dr. Pazandak to be Expense Account Items. Expense Account Items shall be
included as a Direct Operating Expense of the Center.
SECTION 4. GENERAL COVENANTS.
4.1 ECSC and Manager are independent legal entities. Except for the
principal and agent relationship created under SECTION 12 hereof, nothing in
this Agreement shall be construed to create the relationship of employer and
employee, joint venturers, partnership or any relationship other than that of
independent parties contracting with each other solely for the purposes of
carrying out the terms of this Agreement. Neither ECSC nor Manager nor any of
their respective agents or employees shall control or have any right to control
the manner and means by which the other party carries out its obligations under
this Agreement, nor shall either party, its respective agents or employees, be
liable to third parties for any act or omission of the other party. The
professional responsibility to patients for the delivery of medical and surgical
services under this Agreement shall at all times remain with ECSC, and ECSC
shall be expected to exercise independent professional judgment in the conduct
of any and all activities which may reasonably be considered as constituting the
practice of medicine. Neither Manager nor any of its employees or agents shall
in any way interfere with the professional judgment of ECSC in the provision of
professional medical services. Each party further 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 harmless the other from any and
all loss or liability arising with respect to such payments, withholds, and
benefits, if any.
4.2 Except as provided in SECTION 2 of this Agreement, all the costs and
expenses of providing, maintaining, repairing and operating the Center's
physical plant, shall be Direct Operating Expenses of the Center.
4.3 (a) Manager shall indemnify and hold harmless ECSC, its officers,
directors and employees from and against any and all liability, loss, damage,
claims, causes of action, costs and expenses (including reasonable attorneys'
fees), whether or not covered by insurance, caused, directly or indirectly, by
or as a result of the performance of any acts or omissions by Manager and/or
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Manager's shareholder or agents, employees and/or subcontractors during the term
hereof. ECSC agrees to give prompt notice to Manager of the assertion of any
claim, or the threat or commencement of any suit, action, proceeding or other
matter in respect of which indemnity may be sought under this SECTION 4.3(A).
Manager may participate in the defense of any such suit, action, proceeding or
other matter at Manager's expense. Manager shall not be liable under this
SECTION 4.3(A) for any settlement effected without Manager's consent of any
claim, suit, action, proceeding or other matter in respect of which indemnity
may be sought under this SECTION 4.3(A), which consent shall not be unreasonably
withheld. Should Manager refuse to pay any indemnity obligation owed to ECSC
under this SECTION 4.3(A) within the thirty (30) day cure period provided for in
SECTION 6.1 hereof, ECSC may (i) revoke its appointment of Manager as its
attorney-in-fact pursuant to SECTION 12 hereof and (ii) withhold the Service
Fee, the Administration Fee and the License Fee owed to Manager under SECTION 2
of this Agreement, until such time as Manager has paid to ECSC any amounts owed
under this SECTION 4.3(A).
(b) ECSC shall indemnify, hold harmless and defend Manager, Manager's
officers, directors and employees, from and against any and all liability, loss,
damage, claims, causes of action, costs, and expenses (including reasonable
attorneys' fees), caused, directly or indirectly, by or as a result of the
performance of any intentional acts, negligent acts or omissions by ECSC and/or
its shareholders, agents, employees and/or subcontractors (other than Manager)
during the term of this Agreement. Manager agrees to give prompt notice to ECSC
of the assertion of any claim, or the threat or commencement of any suit,
action, proceeding or other matter in respect of which indemnity may be sought
under this SECTION 4.3(B). ECSC may participate in the defense of any such suit,
action, proceeding or other matter at ECSC's expense. ECSC shall not be liable
under this SECTION 4.3(B) for any settlement effected without ECSC's consent of
any claim, suit, action, proceeding or other matter in respect of which
indemnity may be sought under this SECTION 4.3(B), which consent shall not be
unreasonably withheld.
SECTION 5. TERM.
This Agreement shall become effective August 31, 1996, shall continue for
a term ending August 30, 2021 (the "Initial Term"), and shall automatically
renew thereafter for consecutive terms of three (3) years each (the "Subsequent
Term"), unless and until (i) terminated pursuant to SECTION 6 of this Agreement
or (ii) unless and until either party gives one hundred eighty (180) days notice
of an intent to terminate this Agreement prior to the expiration of any
Subsequent Term.
SECTION 6. DEFAULTS OR TERMINATION.
6.1 Either party shall be entitled to terminate this Agreement immediately
on written notice to the other party in the event of the failure of either party
to pay the other any undisputed amount payable pursuant to this Agreement for a
period of thirty (30) days after such undisputed amount is due. Declaration of
default and termination shall not excuse the defaulting party of any obligation
for payments due hereunder for services rendered prior to the date of
termination.
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6.2 ECSC shall be entitled to terminate this Agreement on sixty (60) days
written notice to Manager of any of the following events (excluding any payment
default as provided for in SECTION 6.1) and the failure of Manager to cure any
such matter during such notice period:
(a) the failure of Manager to perform, keep, or fulfill any of its
covenants, undertakings, obligations, or conditions set forth in this
Agreement; or
(b) any act or omission of Manager which materially jeopardizes the
quality of patient care provided at the Center.
6.3 Manager shall be entitled to terminate this Agreement on sixty (60)
days written notice to ECSC of any of the following events (excluding any
payment default as provided for in SECTION 6.1) and the failure of ECSC to cure
any such matter during such notice period:
(a) any act or omission on the part of ECSC which jeopardizes the quality
and delivery of patient care;
(b) the failure of ECSC to perform, keep or fulfill any of the other
covenants, undertakings, obligations or conditions set forth in this
Agreement; or
(c) any act of ECSC involving dishonesty, moral turpitude or disloyalty to
the Center.
6.4 Upon notification by the appropriate authority, and pursuant to
SECTION 14.2 of those certain Employment Agreements by and between ECSC and Dr.
Herman and ECSC and Dr. Pazandak (the "Employment Agreements"), ECSC shall
immediately terminate the Employment Agreement of the offending party upon
written notice to ECSC that Dr. Herman or Dr. Pazandak is the subject of any of
the following:
(a) revocation, termination, a material restriction, or a suspension of
either Dr. Herman's or Dr. Pazandak's license to practice medicine in the
State of Texas, subject to no further administrative or judicial process;
(b) revocation, termination, a material restriction, or a suspension of
Dr. Herman's or Dr. Pazandak's DEA permit, subject to no further
administrative or judicial process;
(c) revocation, termination, a material restriction, or a suspension of
Dr. Herman's or Dr. Pazandak's surgical privileges at any hospital or
ambulatory surgery facility for disciplinary reasons, or the voluntary
relinquishment of such privileges to avoid disciplinary action, subject to
no further administrative or judicial process;
(d) exclusion from participation in Medicare, Medicaid or other similar
government program;
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(e) inability to obtain professional liability insurance coverage;
(f) a finding by any court, governmental agency, or professional society
of unprofessional or illegal conduct by ECSC, Dr. Herman or Dr. Pazandak
which materially adversely affects either Dr. Herman's or Dr. Pazandak's
ability to perform the obligations of a physician, subject to no further
administrative or judicial process;
(g) the conviction of a felony; or
(h) the death or disability of Dr. Herman or Dr. Pazandak. Disability is
here defined to mean the physical or mental inability of Dr. Herman or Dr.
Pazandak to perform for a period of ninety (90) consecutive days the
material duties of Dr. Herman's or Dr. Pazandak's occupation or any
covenant or duty of ECSC required by this Agreement.
Manager's failure to immediately exercise its right of termination
hereunder shall not be deemed a waiver of its right to do so; provided, however,
the Manager's right of termination pursuant to this SECTION 6 shall survive only
ninety (90) days following Manager's receipt of actual notice of an event in
this Section.
6.5 Upon any termination of this Agreement, the Manager shall pay to ECSC
and ECSC shall pay to the Manager any accrued but unpaid sums due under this
Agreement through the date of termination such as receivables billed but not
collected at the time of termination. Following the date of termination of this
Agreement, Manager will continue to use its best efforts to collect all accounts
receivable that existed as of the date of termination.
SECTION 7. ARBITRATION AND MEDIATION.
7.1 In the event a dispute arises out of or relating to this Agreement, or
the breach thereof, and if said dispute cannot be settled through negotiation,
the parties agree to attempt in good faith to settle the dispute by mediation
under the Commercial Mediation Rules of the American Arbitration Association.
Unless the parties reach an agreement reduced to writing, this mediation will be
non-binding, but the parties must participate in good faith in non-binding
mediation, before resorting to binding arbitration.
7.2 Any controversy or claim arising out of or relating to this Agreement,
or its breach, not satisfied through either negotiation or mediation, shall be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction.
As soon as reasonably practical after submission of a demand for binding
arbitration, Manager and ECSC shall select one arbitrator, agreeable to all
parties. This arbitrator will be selected from lists prepared by the American
Arbitration Association. From the American Arbitration Association list, the
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parties will submit to the American Arbitration Association a ranked list of
arbitrators which are acceptable. The highest ranking acceptable candidate will
be selected by the American Arbitration Association. If no arbitrators from the
list composed by the American Arbitration Association are acceptable by either
of the parties, the American Arbitration Association will compile a second list.
This procedure will be followed until the parties have selected an arbitrator.
The results of the arbitrator's finding will be binding on the parties.
7.3 The arbitration and mediation provisions in this Agreement shall not
apply to a suit instituted by Manager to enforce the provisions of those certain
Non-Competition Agreement, dated as of August 31, 1996 (the "Noncompete
Agreement") with Dr. Herman or Dr. Pazandak, respectively, or any other
non-competition agreement with a licensed professional employed by ECSC.
SECTION 8. RESTRICTIVE COVENANTS, CONFIDENTIALITY.
8.1 The parties recognize that the services to be provided by Manager
shall be feasible only if ECSC operates an active medical practice to which
ECSC, Dr. Herman, Dr. Pazandak, and any physicians associated with ECSC devote
their full time and attention. During the term of this Agreement and for a
period of five (5) years following termination of this Agreement for any reason,
except a termination pursuant to SECTION 6.2, or a termination by ECSC under
SECTION 6.1, ECSC will not establish, operate or provide ophthalmic physician
services at any medical office, clinic or other health care facility providing
services substantially similar to those provided by Manager pursuant to this
Agreement anywhere within the Service Area, as defined in SECTION 2.10 hereof.
Notwithstanding the foregoing, Dr. Herman and Dr. Pazandak shall be allowed to
continue their work with Insight International.
8.2 ECSC and the Manager shall obtain and enforce written agreements from
Dr. Herman and Dr. Pazandak and any other physicians associated with ECSC
pursuant to which these physicians agree not to establish, operate or provide
ophthalmic physician services at any medical office, clinic or out-patient
and/or ambulatory treatment or diagnostic facility providing services
substantially similar to those provided by Manager pursuant to this Agreement
within the Service Area and for a period of five (5) years after any termination
of their respective Employment Agreements, except a termination pursuant to
SECTION 6.2, or a termination by ECSC under SECTION 6.1, ECSC shall obtain and
enforce formal written agreements from any future physicians associated with
ECSC as described in this SECTION 8.2.
8.3 Except a termination pursuant to SECTION 6.2 or a termination by ECSC
under SECTION 6.1, and except for (i) those entities listed on SCHEDULE 8.3;
(ii) those entities in which Dr. Herman or Dr. Pazandak own not more than a one
percent (1%) interest; and (iii) the practice of ophthalmology and related
activities by ECSC at the Center, during the term of their respective Employment
Agreements, and for a period of five (5) years following a termination thereof,
neither ECSC, Dr. Herman or Dr. Pazandak will engage in the practice of
ophthalmology, either directly or indirectly, actively or passively, under
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contract or otherwise, as an employee, owner, partner, agent, stockholder,
director, or otherwise, within the Service Area, as defined in SECTION 2.10
hereof.
8.4 In addition to, and separate from, the foregoing, upon termination of
this Agreement (except for a termination pursuant to SECTION 6.2 or a
termination by ECSC under SECTION 6.1, or a termination by Dr. Herman or Dr.
Pazandak pursuant to Section 14.3 of Dr. Herman's or Dr. Pazandak's respective
Employment Agreement) and subject to the limitations set forth in SECTION 8.1
hereof, ECSC will not, within the Service Area: (i) solicit for treatment any
person who has received medical treatment from ECSC during the term of this
Agreement, regardless of whether such person was treated by ECSC prior to the
effective date of this Agreement; or (ii) offer employment to, solicit, engage
by contract, or enter into any business relationship relating to the practice of
ophthalmology with any person, including the Center Director or the
Administrator, who is now or at any time during the term of this Agreement
becomes an employee or service contractor of Manager. In the event ECSC employs,
engages by contract, or enters into any business relationship not relating to
the practice of ophthalmology with any person, including the Center Director or
the Administrator, who at that time is an employee or service contractor of
Manager, ECSC shall give concurrent written notice of such action to Manager.
8.5 ECSC understands and agrees that any breach of the covenants contained
in this SECTION 8 will cause irreparable injury and damages to Manager for which
there is no adequate remedy at law, and as to which money damages cannot be
readily ascertained. Accordingly, ECSC consents in such event to the granting of
injunctive relief against any continuing breach, together with such other relief
available at law or equity.
In the event Manager is granted temporary injunctive relief as provided
herein, whatever portion of the five (5) year term (if applicable) stated in
SECTION 8.1 had not expired at the time the breach first occurred shall be
tolled by the breach, and shall begin to run again as of the first to occur of:
(i) the date the temporary injunctive relief expires or is withdrawn or (ii) the
date permanent injunctive relief is granted. If ECSC is found to have violated
the covenants of this SECTION 8, ECSC shall be liable to Manager for all costs
reasonably incurred by Manager in pursuing enforcement of the provisions of this
section, including, but not limited to, reasonable attorneys' fees and court
costs.
8.6 The parties acknowledge and agree that the provisions of this SECTION
8 have been specifically bargained for, are reasonably necessary to protect the
legitimate business interests of Manager, and shall survive termination of this
Agreement for any reason (except for a termination pursuant to SECTION 6.2 or a
termination by ECSC under SECTION 6.1.).
8.7 ECSC acknowledges that as a result of the business arrangement
outlined in this Agreement, ECSC will learn certain proprietary information
solely through its relationship with Manager. This information includes
information relating to billing procedures, patient lists, and other non-medical
patient records constituting proprietary information which is the property of
Manager. ECSC hereby agrees to protect the confidentiality of this information
and consents to injunctive relief and liquidated damages as described in this
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SECTION 8, in the event ECSC breaches this obligation. Subject to those
disclosures required by law, Manager agrees to protect the confidentiality of
any proprietary or other confidential information Manager learns as a result of
its business arrangement with ECSC. Notwithstanding the foregoing, it shall not
be a breach of this section for Manager to share information related to ECSC's
practice with Manager's Affiliates. "Manager's Affiliates" shall mean Omega
Health Systems, Inc., a Delaware corporation; subsidiaries of Manager; or
subsidiaries of Omega Health Systems, Inc.
SECTION 9. UTILIZATION MANAGEMENT; QUALITY ASSURANCE.
ECSC shall establish a utilization management and quality assurance
program to assure the appropriateness and quality of services rendered to
patients at the Center. Manager and ECSC mutually agree to participate in and
cooperate with such programs.
SECTION 10. FURNITURE, FIXTURES, AND EQUIPMENT.
All furniture, fixtures, equipment, and other property purchased or
otherwise provided by Manager to the Center under the terms of this Agreement
shall be and remain the property of Manager. Upon any termination or expiration
of this Agreement, ECSC shall be entitled to remove and retain only such
furniture, equipment, and other property as shall have been purchased with
ECSC's own funds, and shall have no claim or property interest in any of the
furniture, fixtures, or equipment provided by Manager. Any property provided by
ECSC and purchased with ECSC's own funds shall nevertheless become a part of the
premises, and shall not be removed unless such property can be removed without
substantial damage to the premises.
SECTION 11. PATIENT FILES AND RECORDS.
11.1 ECSC and Manager shall cooperate fully in the preparation and
maintenance of appropriate clinical records with regard to all professional
services provided by ECSC under this Agreement. All such records shall be
maintained as a part of the clinical records system in accordance with prudent
record keeping procedures and as required by law. Both parties shall use their
best efforts to assure the adequacy of documentation for professional services
provided under this Agreement for third-party reimbursement purposes.
11.2 In the event of (i) any termination or expiration of this Agreement
for any reason and (ii) the passage of forty-five (45) days following the date
upon which this Agreement terminated or expired, all clinical records prepared
and maintained pursuant to this Agreement shall remain in the custody of a
licensed ophthalmologist approved by Manager, subject to applicable law. In the
event of any such termination or expiration, and the subsequent transfer of any
records to such ophthalmologist, ECSC, at its expense and upon written request,
shall be entitled to a copy of any and all such records prepared and maintained
with regard to services rendered under this Agreement.
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11.3 ECSC and Manager each agree to take all necessary precautions to
prevent the unauthorized disclosure of any and all records prepared or
maintained under this Agreement and to keep such records confidential.
SECTION 12. APPOINTMENT OF MANAGER AS ATTORNEY-IN-FACT.
In connection with Manager's billing and collection authority and
responsibility and the discharge of its responsibilities under this Agreement,
and to the extent permitted by applicable law, ECSC appoints Manager for the
term hereof its true and lawful attorney-in-fact for the following purposes:
(a) To bill ECSC's patients in ECSC's name and on ECSC's behalf;
(b) To collect accounts receivable generated by such billings in ECSC's
name and on ECSC's behalf;
(c) To have access to ECSC's designated bank account for ECSC's medical
practice and to deposit in such account collected fees generated from ECSC's
medical practice. It is expressly understood that the extent to which, and
methods of which, Manager will endeavor to collect such accounts, the settling
of disputes with respect to charges and the writing off of charges that may be
or appear to be uncollectible shall be mutually agreed upon in each instance by
ECSC and Manager. Neither Manager's nor ECSC's decision in this regard shall be
unreasonably withheld or delayed. Manager does not guarantee the extent to which
any charges billed will be collected. Manager and ECSC shall consult with each
other prior to the institution of litigation to collect any account. ECSC shall
initiate and be responsible for all such litigation and the costs thereof. All
costs of collection are a Direct Operating Expense of the Center regardless of
whether the collection is successful;
(d) To receive payments from Blue Cross/Blue Shield, insurance companies,
Medicare, Medicaid and all other third-party payers; and
(e) To take possession of and endorse in the name of ECSC any notes,
checks, money orders, insurance payments, and any other instruments received in
payment of the accounts receivable.
To the extent permitted by applicable law, in the event of (i) a payment
default under SECTION 6.1 of this Agreement (a "Payment Default") not cured
within the period specified in SECTION 6.1, or (ii) a default under SECTION 6.2
of this Agreement ("Other Default") not cured within the period specified in
SECTION 6.2, ECSC's appointment of Manager as a true and lawful attorney-in-fact
may be terminated upon fifteen (15) days written notice to Manager by ECSC.
Notwithstanding the foregoing, and to the extent permitted by applicable law,
should ECSC attempt to effect such a termination of Manager's appointment as
attorney-in-fact prior to the expiration of the cure periods specified in
SECTION 6.1 or SECTION 6.2, ECSC agrees to pay to Omega all amounts owed or
payable to Dr. Herman or to Dr. Pazandak under SECTION 2 of each of Dr. Herman's
and Dr. Pazandak's respective Employment Agreements, up to the amount, if any,
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to which Manager is entitled under SECTION 2 of this Agreement, until such time
as Manager is reappointed as ECSC's attorney-in-fact or this Management
Agreement is terminated in accordance with SECTION 6 hereof. In no event shall a
default by Manager under this Agreement and/or the cessation of Manager as
attorney-in-fact for ECSC, as provided in this SECTION 12, in any way change or
diminish the obligations of Manager under this Agreement.
SECTION 13. MEDICAL OFFICE SPACE.
Manager agrees to provide to ECSC a leasehold interest for medical office
space (the "Medical Office Space") necessary for ECSC to carry on its medical
practice at the following locations: 5421 La Sierra Drive, Dallas, Texas; 2800
Hulen Street, Fort Worth, Texas; 4815 King Street, Greenville, Texas; 406 South
Main, Weatherford, Texas; and such other and/or additional locations as ECSC may
designate. The leasehold interest in the Medical Office Space ("ECSC's Leasehold
Interest") shall be provided to ECSC by separate respective subleases of
Manager's leasehold interest in such Medical Office Space ("Manager's Leasehold
Interest"), and shall be evidenced by a sublease agreement (the "Sublease
Agreement") between ECSC and Manager, the terms and provisions of which shall be
substantially the same as the terms and provisions contained in the applicable
agreement between Manager and the party from whom Manager has leased or
subleased Manager's Leasehold Interest (the "Manager's Lease"); provided,
however, anything in the Manager's Lease to the contrary notwithstanding, each
Sublease Agreement shall terminate upon the termination of this Agreement. If
any Manager's Leasehold Interest is terminated pursuant to the applicable
Manager's Lease, Manager, with the prior written consent of ECSC, shall (i)
enter into a lease of new Medical Office Space comparable to the Medical Office
Space in which the Manager's Leasehold Interest terminated and (ii) enter into a
Sublease Agreement with ECSC with respect to such new Medical Office Space.
SECTION 14. FEDERAL AND STATE REGULATORY COMPLIANCE; PATIENT REFERRAL.
The parties enter into this Agreement with the intention of conducting
their relationship in full compliance with applicable state, local and federal
law, including the Medicare/Medicaid Anti-Fraud and Abuse Amendments and the
Texas Health & Safety Code. 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 law or Texas Health & Safety Code provisions.
Nothing in this Agreement shall be construed to suggest that either party or any
related person or entity has, shall, or is obligated to compensate either party
or any related person or entity for referrals of patients for items or services
to the Center or to any other provider of goods or services. The parties and
related persons and entities shall be free to refer patients to whomever they
see fit in the exercise of professional judgment, according to the convenience
or preferences of the patient, or otherwise.
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SECTION 15. ACCESS TO RECORDS.
To the extent required by Section 1861(v)(1)(I) of the Social Security
Act, each party shall, upon proper request, allow the United States Department
of Health and Human Services, the Comptroller General of the United States, and
their duly authorized representatives access to this Agreement and to all books,
documents, and records necessary to verify the nature and extent of the costs of
services provided by either party under this Agreement, at any time during the
term of this Agreement and for an additional period of four (4) years following
the last date services are furnished under this Agreement. If either party
carries out any of its duties under this Agreement through an agreement between
it and an individual or organization related to it or through a subcontract with
an unrelated party, that party to this Agreement shall require that a clause be
included in such agreement (the value of which is in excess of $10,000.00) to
the effect that until the expiration of four (4) years after the furnishing of
services pursuant to such agreement, the related organization shall make
available, upon request by the United States Department of Health and Human
Services, the Comptroller General of the United States, or any of their duly
authorized representatives, all agreements, books, documents, and records of
such related organization that are necessary to verify the nature and extent of
the costs of services provided under that agreement.
SECTION 16. ASSIGNMENT.
Neither party shall have the right to assign any of its rights,
obligations, or performance of services hereunder to any third party without the
prior written consent of the other party, except that Manager shall have the
right to assign its rights and obligations under this Agreement to any of
Manager's Affiliates, as well as any person or entity purchasing substantially
all of the assets or stock of Manager (a "Change in Control Event"). Manager
shall make best efforts to notify ECSC, in advance, of any Change in Control
Event, and shall seek input from ECSC including, but not limited to, the
reputation of the third party and its standing in the medical community. Nothing
in this Section shall be deemed to prohibit ECSC from obtaining short term
on-call services from other physicians as contemplated by SECTION 3.12.
SECTION 17. NOTICES.
Any notice hereunder shall be deemed to have been given by one party to
the other if it is in writing and it is (i) delivered or tendered in person, or
(ii) deposited in the United States Mail in a sealed envelope, with postage
prepaid, in either case addressed as follows:
To Manager: Omega Health Systems of North Texas, Inc.
5100 Poplar Avenue, Suite 2100
Memphis, Tennessee 38137
Attn: Mr. Thomas P. Lewis
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With a copy to: Baker, Donelson, Bearman & Caldwell
165 Madison Avenue, 20th Floor
Memphis, Tennessee 38103
Attn: Robert Walker
To ECSC: ECSC II, P.A.
5421 La Sierra Drive
Dallas, Texas 75231-4185
Attn: Wesley K. Herman
With a copy to: Barry M. Bloom, P.C.
8300 Douglas Avenue, Suite 800
Dallas, Texas 75225
Attn: Barry M. Bloom
or to such other address as the parties shall have previously designated by
notice to the serving party, given in accordance with this SECTION 17. Notices
shall be deemed to have been given on the date of delivery if delivered
personally, or on the third day after mailing as provided above; provided,
however, that a notice not given as above shall, if it is in writing, be deemed
given if and when actually received by a party.
SECTION 18. AMENDMENTS.
18.1 No waiver, alteration, amendment or modification of provisions
contained in this Agreement shall be binding unless made in writing and signed
by both parties.
18.2 Manager and ECSC acknowledge that the structure, terms and
requirements of management agreements for medical professionals are periodically
reviewed by government regulators and that as new regulations are published,
changes in this Agreement may be required to bring it into conformance or
compliance with these new or amended regulations. Both parties agree to
implement any necessary changes with the goal of, to the extent permitted by
applicable law, not altering the basic rights or financial advantages accruing
to either party.
SECTION 19. TRADEMARKS AND TRADE NAMES.
By this Agreement and as supported by the consideration herein
expressed, Manager grants and conveys to ECSC an exclusive license (the
"License") to use the trademarks, service marks, trade names, etc. owned by
Manager, as identified on SCHEDULE 19.1 attached hereto (the "Marks"). The
License shall be granted pursuant to an agreement substantially in the form of
that agreement attached hereto as EXHIBIT 19.
SECTION 20. CHOICE OF LAW; VENUE.
The parties agree that the laws of the State of Texas shall apply to any
controversy arising out of or relating to this Agreement or its breach. Any
mediation or arbitration brought with respect to the Agreement shall be
conducted in Dallas County, Texas.
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SECTION 21. ENTIRE AGREEMENT.
The parties intend that this Agreement constitutes the final and complete
agreement between them and supersedes all previous and collateral agreements of
understandings relating thereto. This Agreement shall be binding upon and inure
to the benefit of each of the parties, their respective heirs, successors and
assigns. The parties acknowledge that they have access to counsel. The parties
agree that this Agreement should be construed fairly and not against either
party as the drafter.
It is agreed that if any provision of this Agreement is rendered invalid
or unenforceable by the decision of any court of competent jurisdiction, that
invalid or unenforceable provision shall be severed from this Agreement and all
other provisions of this Agreement shall remain in full force and effect, except
that if the effect of such severance is to substantially deprive either party of
any material benefit to which it is entitled under this Agreement, the party so
deprived may at its option terminate this Agreement immediately upon written
notice to the other party.
IN WITNESS WHEREOF, the parties have executed duplicate originals of this
Agreement as the of the date first above written.
MANAGER:
OMEGA HEALTH SYSTEMS OF NORTH TEXAS, INC.
By:
---------------------------------------
Thomas P. Lewis, President
ECSC:
ECSC II, P.A.
By:
---------------------------------------
Wesley K. Herman, President
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Exhibit 2.5
PARTNERSHIP AGREEMENT
OF
SURGEYECARE GENERAL PARTNERSHIP
-------------------------------
OMEGA SURGICAL ASSOCIATES OF NORTH TEXAS, INC., a Texas corporation
("Omega"), and SURGEYECARE, INC., a Texas Corporation ("SEC") (Omega and SEC
being sometimes hereinafter collectively referred to as the "Partners" and
individually referred to as a "Partner"), hereby form a general partnership
under the Texas Revised Partnership Act, Vernon's Annotated Texas Statutes
Article 6132b-1.01 et seq. (the "Act") by entering into this Partnership
Agreement of SurgEyeCare General Partnership, dated to be effective as of the
31st day of August, 1996.
ARTICLE I - DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms shall, for purposes of this Agreement, have the meanings designated in
this Article I:
Section 1.1 ACT DEFINED. The term "Act" shall mean: the Texas Revised
Partnership Act, Article 6132b-1.01 et seq., Texas Revised Civil Statutes, as
from time to time amended.
Section 1.2 AFFILIATE DEFINED. The term "Affiliate" shall mean: any Person
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with another Person.
Section 1.3 AGREEMENT DEFINED. The term "Agreement" shall mean: this
Partnership Agreement of SurgEyeCare General Partnership, as originally executed
and as subsequently amended from time to time.
Section 1.4 BANKRUPTCY DEFINED. The term "Bankruptcy" shall mean:
bankruptcy under the Federal Bankruptcy Code or insolvency under any state
insolvency act.
Section 1.5 BUSINESS DAY DEFINED. The term "Business Day" shall mean: any
day other than a Saturday, Sunday and those legal public holidays specified in 5
U.S.C. ss.6103(a), as amended from time to time.
Section 1.6 CAPITAL ACCOUNT DEFINED. The term "Capital Account" shall
mean: the Capital Account maintained for each Partner pursuant to Section 6.4 of
this Agreement.
Section 1.7 CAPITAL CONTRIBUTION DEFINED. The term "Capital Contribution"
shall mean: the total amount of cash or property contributed to the Partnership
by all the Partners or any one Partner, as the case may be.
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Section 1.8 CODE DEFINED. The term "Code" shall mean: the Internal
Revenue Code of 1986, as it has been and may be amended.
Section 1.9 INTEREST DEFINED. The term "Interest" shall mean: all rights
and interests of a Partner under this Agreement and the Act, including (i) the
right of a Partner, expressed as a percentage in Section 6.2A, to receive
distributions of revenues, allocations of income and loss and distributions of
liquidation proceeds under this Agreement, and (ii) all management rights,
voting rights or rights to consent.
Section 1.10 MANAGING PARTNER DEFINED. The term "Managing Partner" shall
mean Omega until such time, if any, as the Partners designate another Partner as
such.
Section 1.11 OMEGA DEFINED. The term "Omega" shall mean: Omega
Surgical Associates of North Texas, Inc., a Texas corporation, which is one
of the Partners under this Agreement.
Section 1.12 NOTIFICATION DEFINED. The term "Notification" shall mean: a
writing containing any information required by this Agreement to be communicated
to any Person, which may be personally delivered, sent by registered or
certified mail, postage prepaid, to such Person, at the last known address of
such Person on the Partnership records. Any such Notification shall be deemed to
be given (i) when delivered, in the case of personal delivery, and (ii) on the
earlier of actual receipt by the addressee or three (3) days following the date
on which it is deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and sent as aforesaid, in the case of mail. Any
communication containing information sent to any Person other than as required
by the foregoing sentences, but which is actually received by such Person, shall
constitute Notification as of the date of such receipt for all purposes of this
Agreement.
Section 1.13 PARTNERS DEFINED. The term "Partners" shall mean: at any
time, the Persons who then own Interests in the Partnership. The initial
Partners are: Omega and SEC.
Section 1.14 PARTNERSHIP DEFINED. The term "Partnership" shall mean:
SurgEyeCare General Partnership, a Texas general partnership, as said general
partnership may from time to time be constituted.
Section 1.15 PARTNERSHIP PROPERTY OR PROPERTIES DEFINED. The term
"Partnership Property" and the term "Partnership Properties" shall mean: all
interests, properties and rights of any type owned by the Partnership, whether
owned by the Partnership at the date of its formation or thereafter acquired.
Section 1.16 PERSON DEFINED. The term "Person" shall mean: Any natural
person, limited liability company, limited liability partnership, general
partnership, limited partnership, corporation, joint venture, trust, business
trust, cooperative or association.
Section 1.17 SEC DEFINED. The term "SEC" shall mean: SurgEyeCare, Inc., a
Texas corporation, which is one of the Partners under this Agreement.
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Section 1.18 TRANSFER DEFINED. The term "Transfer" shall mean: Any change
in the record ownership of an Interest, whether made voluntarily or
involuntarily by operation of law, including, but not limited to, the following:
A. a sale or gift to any Person;
B. if a Partner of the Partnership is an individual, a transfer to
the personal representative of the estate of such individual upon such
individual's death, and any subsequent transfer from such personal
representative to the heirs or devisees of the deceased individual under
such individual's will or by the applicable laws of descent and
distribution;
C. if a Partner of the Partnership is an individual, a transfer
to a judicially appointed personal representative as a result of the
adjudication by a court of competent jurisdiction that the transferor
individual is mentally incompetent to manage his person or property;
D. if a Partner of the Partnership is an individual, a transfer, to
the extent permitted by law, to the transferor individual's spouse or
former spouse, or heirs of such spouse or former spouse, in connection
with a division of their community or other property upon the death of the
transferor individual, divorce or the death of such spouse;
E. a general assignment for the benefit of creditors, or any
assignment to a creditor resulting from the creditor's foreclosure upon or
execution against such Interest;
F. the filing by the transferor Partner of a voluntary
Bankruptcy petition; or
G. the entry of a judicial order granting the relief requested
by the petitioner in an involuntary Bankruptcy proceeding filed against
the transferor Partner.
ARTICLE II - THE PARTNERSHIP
Section 2.1 FORMATION OF PARTNERSHIP. The Partners hereby form, constitute
and establish a general partnership pursuant to the Act and, as provided below,
subject to the terms of this Agreement. Except as herein stated, the Act shall
govern the rights and liabilities of the Partners.
Section 2.2 QUALIFICATION IN OTHER JURISDICTIONS. Prior to the Partnership
conducting business in any jurisdiction other than Texas, the Managing Partner
shall cause the Partnership to comply with all requirements, if any, necessary
to qualify the Partnership as a foreign partnership in that jurisdiction.
Section 2.3 TERM. Pursuant to the Act, the term of the Partnership shall
commence effective as of the date first above written. The Partnership shall
exist until August 1, 2021, unless sooner terminated in accordance with this
Agreement.
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Section 2.4 MERGER. The Partnership may merge with or into another
partnership (general or limited) or other entity, or enter into an agreement to
do so with the consent of all of the Partners.
ARTICLE III - NAME; PLACE OF BUSINESS; PRINCIPAL OFFICE
Section 3.1 NAME. The name of the Partnership is SurgEyeCare General
Partnership.
Section 3.2 ASSUMED NAMES. The Managing Partner may cause the Partnership
to do business under one or more assumed names. In connection with the use of
any such assumed names, the Managing Partner shall cause the Partnership to
comply with the Texas Assumed Business or Professional Name Act, as amended.
Section 3.3 PRINCIPAL OFFICE AND OTHER OFFICES. The principal office of
the Partnership shall be 5421 La Sierra Drive, Dallas, Texas 75231, or such
other place as the Managing Partner may designate from time to time, and the
Partnership shall maintain records there. The Partnership may have such other
offices as the Partners may designate from time to time.
ARTICLE IV - PURPOSES
Section 4.1 PARTNERSHIP PURPOSES. The purpose of the Partnership is to
engage in the business of operating an ambulatory surgical center, and to do all
acts or things necessary or appropriate to accomplish such purpose.
ARTICLE V - PARTNERS
Section 5.1 INITIAL PARTNERS. The names and addresses of the initial
Partners of the Partnership are as set forth on SCHEDULE 5.1 of this Agreement.
At the date hereof, there are no other Partners of the Partnership and no other
Person has any right to take part in the ownership or management of the
Partnership.
Section 5.2 ADMISSION OF ADDITIONAL PARTNERS. Additional Partners of
the Partnership may be admitted as follows:
A. ACQUISITION FROM THE PARTNERSHIP. If the proposed additional
Partner desires to purchase his Interest from the Partnership, such
purchase may be made and the admission of the additional Partner shall
become effective only if the identity of the proposed additional Partner
and the amount of the Capital Contribution to be made by him in exchange
for his Interest is first unanimously approved by the existing Partners.
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B. ACQUISITION FROM A PARTNER. If the proposed additional Partner
desires to acquire his Interest in a Transfer from an existing Partner,
such Transfer may be made and the admission of the additional Partner
shall become effective only in accordance with Sections 11.2, 11.3 and
11.4 hereof. All other attempted Transfers of any interest or right, or
any part thereof, in or in respect of the Partnership shall be null and
void ab initio.
ARTICLE VI - CAPITAL CONTRIBUTIONS AND INTERESTS
Section 6.1 INITIAL CAPITAL CONTRIBUTIONS. The Initial Capital
Contributions (herein so called) of each Partner shall be as follows:
A. CONTRIBUTION OF OMEGA. The Initial Capital Contribution of
Omega, which has been delivered to the Partnership concurrently with
the execution of this Agreement by the Partners, is cash in the amount
of Four Million Five Hundred Fifty Thousand U.S. Dollars ($4,550,000);
and,
B. CONTRIBUTION OF SEC. The Initial Capital Contribution of SEC,
which has been delivered to the Partnership concurrently with the
execution of this Agreement by the Partners, consists of substantially all
the assets of SEC, as set forth on SCHEDULE 6.1B(1), excepting those
assets that are excluded, as set forth on SCHEDULE 6.1B(2), and certain
liabilities of SEC, as set forth on SCHEDULE 6.1B(3), which liabilities
are acquired and assumed by the Partnership, all of which assets and
liabilities have a net fair market value, as agreed to by the Partners, of
Six Million One Hundred Thousand U.S. Dollars ($6,100,000), Two Hundred
Fifty Thousand Dollars ($250,000) of which the Partners agree is allocable
to the fixed assets contributed by SEC.
Section 6.2 INTERESTS. The following provisions shall apply with
regard to Interests in the Partnership:
A. PERCENTAGE INTERESTS. Upon making the respective Initial
Capital Contribution specified in Section 6.1, each Partner shall own
the percentage Interest set forth opposite such Partner's name as
follows:
PARTNER INTEREST
------- --------
Omega Surgical Associates of North Texas, Inc. 75%
SurgEyeCare, Inc . 25%
The respective percentage Interest of each Partner may not be reduced
without such Partner's express written consent.
B. CERTIFICATES REPRESENTING INTERESTS. The Interests of the
Partners may be evidenced by certificates issued by the Partnership,
which, if issued, shall be in such form and incorporate such legends,
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recitals and provisions as the Partners shall deem necessary or advisable.
If certificates are issued, the Partners shall establish reasonable
procedures for the delivery and reissuance of certificates in connection
with Transfers of Interests, split-ups or combinations of certificates,
loss or destruction of certificates and other eventualities. Among other
matters, such procedures may set forth required fees, indemnifications,
documentation and signatures (including guarantees thereof) to be obtained
from parties requesting reissuance of certificates. Such procedures need
not be incorporated into this Agreement, but a copy thereof shall be
delivered to all Partners.
Section 6.3 NO FURTHER CAPITAL CONTRIBUTIONS. Without the approval of all
the Partners, no Partner shall be obligated or allowed to make any Capital
Contribution other than the respective Initial Capital Contribution of each
Partner as set forth in Section 6.1. This provision of this Agreement may not be
amended without the express written consent of all Partners.
Section 6.4 CAPITAL ACCOUNTS. A capital account shall be established
and maintained for each Partner. Each Partner's capital account (a) shall be
increased by (i) the amount of money contributed by that Partner to the
Partnership, (ii) the fair market value of property contributed by that Partner
to the Partnership (net of liabilities secured by the contributed property that
the Partnership is considered to assume or take subject to Section 752 of the
Code), and (iii) allocations to that Partner of Partnership income and gain (or
items thereof), including income and gain exempt from tax and income and gain
described in Treas. Reg. ss.1.704-1(b)(2)(iv)(g), but excluding income and gain
described in Treas. Reg. ss.1.704-1(b)(4)(i), and (b) shall be decreased by (i)
the amount of money distributed to that Partner by the Partnership, (ii) the
fair market value of property distributed to that Partner by the Partnership
(net of liabilities secured by the distributed property that the Partner is
considered to assume or take subject to Section 752 of the Code), (iii)
allocations to that Partner of expenditures of the Partnership described in
Section 705(a)(2)(B) of the Code, and (iv) allocations of Partnership loss and
deduction (or items thereof), including loss and deduction described in Treas.
Reg. ss.1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii)
above and loss or deduction described in Treas. Reg. ss.1.704-1(b)(4)(i) or
ss.1.704-1(b)(4)(iii). The Partners' capital accounts also shall be maintained
and adjusted as permitted by the provisions of Treas. Reg.
ss.1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treas. Reg.
ss.1.704-1(b)(2)(iv) and ss.1.704-1(b)(4), including adjustments to reflect the
allocations to the Partners of depreciation, depletion, amortization, and gain
or loss as computed for book purposes rather than the allocation of the
corresponding items as computed for tax purposes, as required by Treas. Reg.
ss.1.704-1(b)(2)(iv)(g). A Partner that has more than one Interest shall have a
single capital account that reflects all its Interests, regardless of the class
of Interests owned by that Partner and regardless of the time or manner in which
those Interests were acquired. On the transfer of all or part of an Interest,
the capital account of the transferor that is attributable to the transferred
Interest or part thereof shall carry over to the transferee Partner in
accordance with the provisions of Treas. Reg. ss.1.704-1(b)(2)(iv)(l).
Section 6.5 RETURN OF CAPITAL CONTRIBUTIONS. Anything in this Agreement to
the contrary notwithstanding, concurrently with the execution of this Agreement
and the receipt by the Partnership of the Initial Capital Contribution of both
Partners, the Partnership shall distribute to SEC cash in the amount of Four
Million Four Hundred Seventy-six Thousand Four Hundred Thirty-eight U.S. Dollars
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($4,476,438); otherwise, the Capital Contributions of the Partners shall not be
subject to withdrawal except with the approval of all of the Partners, or upon
dissolution of the Partnership. Distributions of Partnership net profits, if
any, that are not to be applied to the business of the Partnership, shall be
made to the Partners in accordance with their respective Distributive Shares.
Except as otherwise provided herein or in the Act, no Partner shall have the
right to withdraw, or receive any return of, such Partner's Capital
Contribution.
Section 6.6 INTEREST. No interest shall be paid by the Partnership on
Capital Contributions or on balances in Partners' Capital Accounts.
Section 6.7 LOANS FROM PARTNERS. Loans by a Partner to the Partnership
shall not be considered Capital Contributions. If any Partner shall advance
funds to the Partnership in excess of the amounts required hereunder to be
contributed by such Partner to the capital of the Partnership, the making of
such advances shall not result in any increase in the amount of the Capital
Account of such Partner. The amounts of any such advances shall be a debt of the
Partnership to such Partner and shall be payable or collectible only out of the
Partnership assets in accordance with the terms and conditions upon which such
advances are made. Any advances made to the Partnership pursuant to this Section
6.7 shall bear interest until repaid at the rate charged by Compass Bank, N.A.,
in Dallas, Texas, to its best corporate customers (the "Prime Rate") plus one
percentage point; for example, if the Prime Rate is 8%, interest on such
advances made pursuant to this Section 6.7 shall be at 9%. The repayment of
loans from a Partner to the Partnership upon liquidation shall be subject to the
order of priority set forth in Section 13.4A hereof.
ARTICLE VII - ALLOCATIONS AND DISTRIBUTIONS
Section 7.1 ALLOCATION OF INCOME AND LOSS. Except as otherwise provided
for herein, the following provisions shall apply with regard to the allocation
of income and loss of the Partnership:
A. ALLOCATIONS GENERALLY. Except as may be required by Section
704(c) of the Code and Treas. Reg. ss.1.704-1(b)(2)(iv)(f)(4), the income,
gains, losses, deductions and credits (or items thereof) of the
Partnership shall be shared by the Partners in accordance with their
respective percentage Interests. It is the intention of the Partners that
allocations of income, gains, losses, deductions and credits (or items
thereof) pursuant to this Section 7.1 be in accordance with the Partners'
Interests for tax purposes.
B. ALLOCATIONS WITH RESPECT TO TRANSFERRED INTERESTS. All items of
income, gain, loss, deduction, and credit allocable to any Interest that
may have been transferred shall be allocated between the transferor and
the transferee based on the portion of the calendar year during which each
was recognized as owning that Interest, without regard to the results of
Partnership operations during any particular portion of that calendar year
and without regard to whether cash distributions were made to the
transferor or the transferee during that calendar year; provided, however,
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that this allocation must be made in accordance with a method permissible
under Section 706 of the Code and the regulations thereunder.
Section 7.2 DETERMINATION OF INCOME AND LOSS. At the end of each fiscal
year of the Partnership, income, gain, loss, deduction and credit (or items
thereof) shall be determined by the Managing Partner pursuant to this Agreement
for the accounting period then ending and shall be allocated to the Partners in
accordance with Section 7.1.
Section 7.3 CASH DISTRIBUTIONS. Commencing no later than the end of the
Partnership's first fiscal quarter, the Managing Partner shall, at least
quarterly, balance the Partnership's accounts and distribute to the Partners, in
accordance with their respective Interests, the amount by which cash on hand
exceeds the amount necessary to meet the current costs, expenses and liabilities
of the Partnership (including, without limitation, a reasonably adequate reserve
for working capital and contingencies). The Partnership shall not make any
distribution to the Partners if, immediately after giving effect to the
distribution, all liabilities of the Partnership, other than liabilities to
Partners with respect to their Interests and liabilities for which the recourse
of creditors is limited to specified property of the Partnership, exceed the
fair value of Partnership Property, except that the fair value of Partnership
Property that is subject to a liability for which recourse of creditors is
limited shall be included in the Partnership assets only to the extent that the
fair value of that Partnership Property exceeds that liability.
Section 7.4 DISTRIBUTIONS OF OTHER PROPERTY. From time to time, the
Managing Partner also may cause property of the Partnership other than cash to
be distributed to the Partners, which distribution must be made in accordance
with their respective Interests and may be made subject to existing liabilities
and obligations. Immediately prior to such distribution, the capital accounts of
the Partners shall be adjusted as provided in Treas. Reg.
ss.1.704-1(b)(2)(iv)(f).
Section 7.5 MINIMUM GAIN LIMITATIONS/ QUALIFIED INCOME OFFSET.
A. MINIMUM GAIN DEFINED. The term "Minimum Gain" means the amount
determined by computing, with respect to each nonrecourse liability of the
Partnership, the amount of gain (of whatever character), if any, that
would be realized by the Partnership if the Partnership disposed of (in a
taxable transaction) the Partnership Property subject to such nonrecourse
liability in full satisfaction thereof, and by then aggregating the
amounts so computed.
B. NONRECOURSE DEDUCTIONS DEFINED. The term "Nonrecourse Deduction"
means, for a taxable year, an amount of the net increase, if any, in the
amount of Minimum Gain of the Partnership during that taxable year plus
the amount, if any, by which the net increase in Minimum Gain of the
Partnership during any prior taxable year exceeds the total amount of
items of Partnership loss, deduction and expenditures set forth in Section
705(a)(2)(B) of the Code for such year. The nonrecourse deductions for a
taxable year shall consist first of depreciation or cost recovery
deductions, if any, with respect to items of Partnership Property subject
to one or more nonrecourse liabilities of the Partnership to the extent of
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the increase in the Minimum Gain attributable to the nonrecourse
liabilities to which each such item of property is subject, with the
remainder Nonrecourse Deductions, if any, made up of a prorata portion of
the Partnership's other items of deduction, loss and expenditures set
forth in Section 705(a)(2)(B) of the Code for that year.
C. DEFICIT CAPITAL ACCOUNT DEFINED. For purposes of this
Section 7.5, the term "Deficit Capital Account" means the deficit balance,
if any, of a Partner's Capital Account as determined pursuant to Section
6.4 adjusted by (i) adding (crediting) to such Capital Account the amount
of such Partner's share of the Minimum Gain, and (ii) subtracting
(debiting) from such Capital Account the amount of such Partner's share of
the items described in Treas. Reg. ss.ss. 1.704-1(b)(2)(ii)(d)(4), (5),
and (6).
D. PARTNER'S SHARE OF MINIMUM GAIN. A Partner's share of Minimum
Gain of the Partnership at the end of any Partnership taxable year equals
the aggregate Nonrecourse Deductions allocated to such Partner (and such
Partner's predecessor in interest) up to that time, less such Partner's
(and such Partner's predecessor in interest) aggregate share of the net
decreases in Minimum Gain of the Partnership up to that time. A Partner's
share of the net decrease in Minimum Gain of the Partnership during a
Partnership taxable year equals an amount that bears the same relation to
the net decrease in Minimum Gain of the Partnership during such year as
such Partner's share of Minimum Gain of the Partnership at the end of the
prior taxable year of the Partnership bears to the amount of Minimum Gain
of the Partnership at the end of such prior taxable year.
E. LIMITATION ON LOSS ALLOCATIONS. Notwithstanding anything in this
Article VII to the contrary, any allocation of loss or deduction of the
Partnership (other than a Nonrecourse Deduction) shall be allocated to a
Partner only to the extent that such allocation does not cause such
Partner to have a Deficit Capital Account.
F. MINIMUM GAIN CHARGEBACK. Notwithstanding anything in the
foregoing sections of this Article VII to the contrary, in the event that
there is a net decrease in Minimum Gain of the Partnership during the
Partnership's taxable year, all Partners with a Deficit Capital Account
will be allocated, before any other allocations of Partnership items for
such taxable year under this Agreement, items of income and gain for such
year (and, if necessary, subsequent years) in an amount needed to
eliminate such deficit as quickly as possible. The Minimum Gain chargeback
allocated in any taxable year shall consist first of gains recognized from
the disposition of items of Partnership Property subject to one or more
nonrecourse liabilities of the Partnership to the extent of the decrease
in Minimum Gain attributable to the disposition of such items of property
with the remainder of such Minimum Gain chargeback, if any, made up of a
prorata portion of the Partnership's other items of income and gain for
that year.
G. QUALIFIED INCOME OFFSET. Notwithstanding anything in the
foregoing sections of this Article VII to the contrary, in the event that
any Partner unexpectedly receives any adjustments, allocations, or
distributions described in Treas. Reg. ss.ss.1.704-1(b)(2)(ii)(d)(4), (5)
or (6), which causes a deficit balance in such Partner's Capital Account
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(or causes an increase in an existing deficit balance in such Partner's
Capital Account), items of income and gain shall be allocated to such
Partner in an amount and manner sufficient to eliminate the deficit
balance in such Partner's Capital Account as quickly as possible;
provided, however, that allocations of income or gain shall only be
required pursuant to this Subsection G of Section 7.5 if and to the extent
that the foregoing adjustments, allocations or distributions cause a
Deficit Capital Account of the Partners receiving such adjustments,
allocations, or distributions determined at the end of the taxable year of
the Partnership to which such allocations relate.
Section 7.6 COMPLIANCE WITH SECTION 704 OF THE CODE. The provisions of
this Agreement relating to maintenance of Capital Accounts and the computation
and allocation of net income, gains, and losses are intended to comply with
Section 704 of the Code and the Regulations thereunder (including, without
limitation, the provisions regarding substantial economic effect, qualified
income offset, allocations of nonrecourse deductions, minimum gain chargeback,
and other considerations under Section 704 of the Code and the Regulations
thereunder), and shall be interpreted and applied in a manner consistent with
Section 704 of the Code and such Regulations in order to achieve the agreed
allocation of cash among the Partners. In the event the Partners determine that
it is prudent or necessary to modify the manner in which the Capital Accounts,
or any debits or credits thereto, are computed or allocated in order to comply
with Section 704 of the Code and/or the Regulations thereunder and/or to make
any optional elections thereunder, the Partnership may make such modification
and/or election, including an amendment to this Agreement if the Partners deem
it necessary. The Partners shall also make any appropriate modifications to this
Agreement in the event unanticipated events might otherwise cause this Agreement
not to comply with Section 704 of the Code and/or the Regulations thereunder.
Further, notwithstanding anything to the contrary contained in this Agreement,
if the Regulations thereunder require an allocation of net income, gains, and
losses in a manner different from that set forth in Article VII (other than this
Section 7.6) of this Agreement, such allocations shall be taken into account for
the purpose of equitably adjusting subsequent allocations of net income, gains,
and losses so that the net cumulative allocations, in the aggregate, allocated
to each Partner pursuant to Article VII of this Agreement, including this
Section 7.6 shall, as quickly as possible and to the extent possible, and
without violating the constraints contained in this Section 7.6, be the same as
if no such allocations had been made under this Section 7.6 so that the agreed
upon allocation of cash among the Partners will be respected.
Section 7.7 SAVINGS CLAUSE. The tax allocation provisions contained in
Article VII of this Agreement are intended to produce final Capital Account
balances that are at levels ("Target Final Balances") which permit liquidating
distributions that are made in accordance with such final Capital Account
balances to be equal to distributions that would occur on final liquidation of
the Partnership. To the extent that the tax allocation provisions contained in
Article VII of this Agreement would not produce the Target Final Balances, the
provisions of this Agreement shall be amended to produce such Target Final
Balances. Notwithstanding the other provisions of this Agreement, allocations of
net income, gains, and losses shall be made prospectively as necessary to
produce such Target Final Balances (and, to the extent such prospective
allocations would not reach such result, the prior tax returns of the
Partnership shall be amended to reallocate Partnership net income, gains, and
losses to produce such Target Final Balances).
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Section 7.8 DEPRECIATION RECAPTURE. To the extent not inconsistent with
the foregoing provisions of this Article VII, any gain of the Partnership
attributable to depreciation recapture shall be allocated among the Partners in
proportion with the depreciation deductions previously allowable to the Partners
with respect to the assets generating such recapture.
ARTICLE VIII - OWNERSHIP OF PARTNERSHIP PROPERTY
Section 8.1 PARTNERSHIP PROPERTY. Partnership Property shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership Property or
any portion thereof. Title to any or all Partnership Property may be held in the
name of the Partnership or one or more nominees, as the Partners may determine.
All Partnership Property shall be recorded as the property of the Partnership on
its books and records, irrespective of the name in which legal title to such
Partnership Property is held.
ARTICLE IX - FISCAL MATTERS; BOOKS AND RECORDS
Section 9.1 BANK ACCOUNTS; INVESTMENTS. Capital Contributions, revenues
and any other Partnership funds shall be deposited in a bank account established
by the Managing Partner in the name of the Partnership, or shall be invested by
the Managing Partner in furtherance of the purposes of the Partnership. No other
funds shall be deposited into Partnership bank accounts or commingled with
Partnership investments. Funds deposited in the Partnership's bank accounts may
be withdrawn only to be invested in furtherance of the Partnership purposes, to
pay Partnership debts or obligations or to be distributed to the Partners
pursuant to this Agreement.
Section 9.2 RECORDS REQUIRED; RIGHT OF INSPECTION. During the term of the
Partnership and for a period of four (4) years thereafter, the Managing Partner
shall maintain in the Partnership's principal office in the United States
specified in Section 3.3 hereof all records of the Partnership, including,
without limitation, a current list of the names, addresses and Interests held by
each of the Partners (including the dates on which each of the Partners became a
Partner), copies of federal, state and local information or income tax returns
for each of the Partnership's six (6) most recent tax years, copies of this
Agreement, including all amendments or restatements, and correct and complete
books and records of account of the Partnership. On written request to the
Managing Partner stating the purpose, a Partner or an assignee of a Partner's
Interest (an "eligible Person") may examine and copy in person or by the
eligible Person's representative, at any reasonable time, for any proper
purpose, and at the eligible Person's expense, records required to be maintained
and such other information regarding the business, affairs and financial
condition of the Partnership as is just and reasonable for the eligible Person
to examine and copy. Upon written request by any eligible Person, the Managing
Partner shall provide to the eligible Person without charge true copies of (i)
this Agreement and all amendments or restatements, and (ii) any of the tax
returns of the Partnership described above.
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Section 9.3 BOOKS AND RECORDS OF ACCOUNT. The Managing Partner shall
maintain adequate books and records of account for the Partnership that shall be
maintained on the cash method of accounting and on a basis consistent with
appropriate provisions of the Code, containing, among other entries, a Capital
Account for each Partner.
Section 9.4 TAX RETURNS AND INFORMATION. The Partners intend for the
Partnership to be treated as a partnership for tax purposes. The Managing
Partner shall prepare or cause to be prepared and filed all federal, state and
local income and other tax returns that the Partnership is required to file.
Within the shorter of (i) such period as may be required by applicable law or
regulation, or (ii) seventy-five (75) days after the end of each calendar year,
the Managing Partner shall send or deliver to each Person who was a Partner at
any time during such year such tax information as shall be reasonably necessary
for the preparation by such Person of his federal income tax return and state
income and other tax returns.
Section 9.5 DELIVERY OF FINANCIAL STATEMENTS TO PARTNERS. As to each
fiscal year of the Partnership and as to each month during such fiscal year of
the Partnership, the Managing Partner shall send to each Partner a copy of (i) a
balance sheet of the Partnership as of the end of such period, (ii) an income
statement of the Partnership for such period, and (iii) a statement showing the
revenues distributed by the Partnership to Partners in respect of such period.
Such financial statements shall be delivered by no later than ninety (90) days
following the end of the fiscal year to which the statements apply and no later
than thirty (30) days following the end of the month to which such financial
statements apply. Unless a Partner requests in writing prior to the end of the
fiscal year to which the financial statements apply that the financial
statements shall be audited (in which case Section 9.6 below shall apply), such
statements need not be audited.
Section 9.6 AUDITS AT REQUEST OF PARTNER. Any Partner shall have the right
to have an audit conducted of the Partnership books, which audit may be
requested with respect to the financial statements under Section 9.5 above. The
cost of the audit shall be borne by the Partner or Partners requesting that the
audit be performed or, with the consent of the Partners, by the Partnership. The
audit shall be performed by an accounting firm acceptable to the Partner
requesting the audit and all of the other Partners. Not more than one (1) audit
shall be required by any or all of the Partners for any fiscal year.
Section 9.7 FISCAL YEAR. The Partnership's fiscal year shall end on
December 31 of each calendar year.
Section 9.8 TAX ELECTIONS. The Managing Partner shall make the
following elections on the appropriate tax returns of the Partnership:
A. to adopt the calendar year as the Partnership's fiscal year;
B. to adopt the cash method of accounting and to keep the
Partnership's books and records on the income-tax method;
C. if a distribution of Partnership property as described in Section
734 of the Code occurs or if a transfer of Interest as described in
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Section 743 of the Code occurs, on written request of any Partner, to
elect, pursuant to Section 754 of the Code, to adjust the basis of
Partnership properties;
D. to elect to amortize the organizational expenses of the
Partnership ratably over a period of sixty (60) months as permitted by
Section 709(b) of the Code; and
E. any other election the Managing Partner may deem appropriate
and in the best interests of the Partners and/or the Partnership.
Neither the Partnership nor any Partner may make an election for the Partnership
to be excluded from the application of the provisions of subchapter K of chapter
1 of subtitle A of the Code or any similar provisions of applicable state law.
Section 9.9 "TAX MATTERS PARTNER". The Managing Partner shall be the "tax
matters partner" of the Partnership pursuant to Section 6231(a)(7) of the Code.
The Managing Partner shall take such action as may be necessary to cause each
other Partner to become a "notice partner" within the meaning of Section 6223 of
the Code. The Managing Partner shall inform each other Partner of all
significant matters that may come to its attention in its capacity as "tax
matters partner" by giving notice thereof on or before the fifth Business Day
after becoming aware thereof and, within that time, shall forward to each other
Partner copies of all significant written communications it may receive in that
capacity. The Managing Partner may not take any action contemplated by Sections
6222 through 6232 of the Code without the consent of the Partners, but this
sentence does not authorize the Managing Partner to take any action left to the
determination of an individual Partner under Sections 6222 through 6232 of the
Code.
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ARTICLE X - MANAGEMENT OF THE PARTNERSHIP
Section 10.1 MANAGEMENT. The following shall apply with respect to the
management of the Partnership:
A. PARTNERS. The powers of the Partnership shall be exercised by or
under the authority of, and the business and affairs of the Partnership
shall be managed under the direction of, the Managing Partner. Any Person
dealing with the Partnership, other than a Partner, may rely on the
authority of the Managing Partner and its managers and officers in taking
any action in the name of the Partnership without inquiry into the
provisions or compliance herewith, regardless of whether that action is
actually taken in accordance with the provisions of this Agreement.
B. OFFICERS. The Managing Partner may designate one or more
individuals as officers of the Partnership, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to them
from time to time. Officers need not be Partners or residents of the State
of Texas. Any officer may be removed by the Managing Partner at any time,
with or without cause. Each officer shall hold office until his or her
successor shall be duly designated and shall qualify or until the earlier
of the officer's death, resignation or removal. Any number of offices may
be held by the same Person. The salaries or other compensation, if any, of
the officers and agents of the Partnership shall be fixed by the Managing
Partner with the prior consent of the Partners.
Section 10.2 POWERS OF THE MANAGING PARTNER GENERALLY. Except with the
written consent of all Partners, the Managing Partner shall have no power to
cause the Partnership to do any act outside the purpose of the Partnership as
set forth in Article IV hereof. Subject to the foregoing limitation and all
other limitations in this Agreement, the Managing Partner shall have full,
complete and exclusive power to manage and control the Partnership, and shall
have the authority to take any action it deems to be necessary, convenient or
advisable in connection with the management of the Partnership (but solely for
Partnership purposes as set forth in Section 4.1), including, but not limited
to, the power and authority on behalf of the Partnership:
A. to expend the Partnership's Capital Contributions and
revenues and to execute and deliver all checks, drafts, endorsements and
other orders for the payment of Partnership funds;
B. to employ agents, employees, accountants, lawyers, clerical
help, and such other assistance and services as may seem proper, and to
pay therefor such remuneration as is reasonable and appropriate;
C. to purchase, lease, rent, or otherwise acquire or obtain the use
of office equipment, materials, supplies, and all other kinds and types of
real or personal property, and to incur expenses for travel, telephone,
telegraph and for such other things, services and facilities, as may be
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deemed necessary, convenient or advisable for carrying on the business of
the Partnership;
D. to carry, at the expense of the Partnership, insurance of the
kinds and in the amounts that is advisable or make other arrangements for
payment of losses or liabilities to protect the Partnership or the
Partners, officers, agents and employees of the Partnership against loss
or liability;
E. to do all acts, take part in any proceedings, and exercise
all rights and privileges as could an absolute owner of Partnership
Property, subject to the limitations expressly stated in this Agreement
and the faithful performance of the Managing Partner's fiduciary
obligations to the Partnership and the Partners;
F. to borrow money in the name of the Partnership and to pledge
Partnership Property as collateral therefor, provided, that the aggregate
outstanding principal amount of loans in the name of the Partnership shall
not at any time exceed one hundred thousand dollars ($100,000) unless
consented to by all of the Partners;
G. to sell, assign, or convey the personal property of the
Partnership, at its fair market value as in good-faith determined by the
Managing Partner; and,
H. to take such other action and perform such other acts as the
Managing Partner deems reasonably necessary, convenient or advisable in
carrying out the business of the Partnership.
The enumeration of powers in this Agreement shall not limit the general or
implied powers of the Managing Partner or any additional powers provided by law.
Notwithstanding the foregoing, the Managing Partner may NOT cause the
Partnership to do any of the following without the express written consent of
all of the Partners:
A. Purchase any real property for or on behalf of the
Partnership;
B. Sell any real property owned by the Partnership;
C. Merge with or into another partnership, corporation, limited
liability company or other entity, regardless of whether the
Partnership is the surviving entity of such merger;
D. Reorganize the Partnership;
E. Take any action in contravention of this Agreement or the
Act;
F. Make an assignment for the benefit of creditors of the
Partnership or file a voluntary petition under the federal Bankruptcy Code
or any state insolvency law on behalf of the Partnership;
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G. Confess any judgment against the Partnership;
H. Dispose or otherwise transfer any name, trademark, tradename,
service mark, or any other intangible asset used in the business of the
Partnership;
I. to borrow money in the name of the Partnership or pledge
Partnership Property as collateral therefor if such borrowing causes the
aggregate outstanding principal amount of all loans in the name of the
Partnership at such time to exceed one hundred thousand dollars
($100,000);
J. Assign, transfer, pledge, compromise or release any
individual claim of or debt owing to the Partnership that is in excess of
five thousand dollars ($5,000) except for payment in full;
K. Convey, sell or assign any Partnership property for less than
fair market value as in good-faith determined by the Managing Partner;
L. Do any act that would make it impossible to carry on the
normal and ordinary business of the Partnership;
M. Pay, accrue, or incur, at any time prior to September 1, 1997, in
the name of the Partnership, or on behalf of the Partnership, any
individual expense (exclusive of (i) the "Management Fee" (as defined in
Section 3(a) of the"Management Agreement" (defined in Section 16.1
hereof)) and (ii) the distributions to Partners as provided for in Article
VII and Article XIII hereof) that is in excess of One Hundred Dollars
($100), unless such expense is of the type and amount paid, accrued or
incurred by SEC in the operation of SEC's ambulatory surgery center for
the period beginning September 1, 1995, and ending on August 31, 1996; or,
N. Amend, modify, supplement or otherwise change any of the
terms or conditions of the "Management Agreement" (defined in Section
16.1).
ARTICLE XI - RIGHTS, POWERS AND OBLIGATIONS OF PARTNERS
Section 11.1 AUTHORITY. Except as otherwise specifically provided in this
Agreement, no Partner has the authority or power to act for or on behalf of the
Partnership, to do any act that would be binding on the Partnership, or to incur
any expenditures on behalf of the Partnership.
Section 11.2 TRANSFERS OF INTERESTS. A Partner may make a Transfer of his
Interest, in whole or in part, only upon compliance with the following
procedure:
A. DOCUMENTATION. The Partner or the transferee must file with
the Partnership a written and dated instrument of such Transfer, in
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form and substance reasonably satisfactory to the other Partners,
executed by both the transferor and the transferee, which instrument shall
(i) contain the acceptance by the transferee of all of the terms and
provisions of this Agreement, to the extent applicable to an assignee of
an Interest, (ii) contain such representations as may be necessary or
advisable to assure that such Transfer need not be registered under any
applicable federal or state securities laws, (iii) instruct the
Partnership as to the Interest transferred and to whom and at what address
Partnership distributions and Notifications in respect of such Interest
should henceforth be sent, and (iv) contain any information required under
the Code that is requested by the other Partners.
B. OPINION OF COUNSEL. Unless expressly waived by the other
Partners, the transferor Partner or the transferee shall deliver to the
Partnership an opinion of counsel acceptable to the other Partners that
(i) such Transfer is exempt from the registration requirements of the
Securities Act of 1933, as amended, applicable state securities laws, and
any rules or regulations promulgated thereunder, and will not otherwise
cause the Partnership to be in violation of such laws and regulations,
(ii) the Transfer will not result in the termination of the Partnership
within the meaning of section 708(b) of the Code, and (iii) the Transfer
will not adversely affect the status of the Partnership as a partnership
under the Code.
C. APPROVAL OF PARTNERS. The transferor Partner and the transferee
shall have received a written acknowledgment from the other Partners that
the Transfer has been approved by all Partners of the Partnership;
provided, however, that the Interest of any individual Partner shall be
transferrable without the approval of the other Partners if both of the
following factors apply: (i) such Transfer occurs by reason of the
dissolution and liquidation of the Partner and each transferee is a
shareholder or successor in interest to the Partner; and (ii) each
transferee otherwise complies with the provisions of paragraphs A and B of
this Section 11.2.
Section 11.3 EFFECT OF TRANSFER OF INTEREST. A Transfer of an Interest
pursuant to Section 11.2 above does not entitle the transferee to become, or to
exercise rights or powers of, a Partner. A Transfer only entitles the transferee
to receive cash distributions and allocations of Partnership profits and losses
to the extent of the Interest transferred. Until the transferee is admitted as a
Partner pursuant to Section 11.4 below, the transferor Partner shall continue to
be a Partner and to be entitled to exercise any rights or powers of a Partner
with respect to the Interest transferred.
Section 11.4 ADMISSION OF TRANSFEREE AS PARTNER. A transferee of a
Partner's Interest desiring to be admitted as a Partner must execute a
counterpart of, or an agreement adopting, this Agreement. The admission of such
transferee is subject to the unanimous approval of the Partners. Upon admission
of the transferee as a Partner, the transferee shall have, to the extent of the
Interest transferred, the rights and powers, and shall be subject to the
restrictions and liabilities of, a Partner under this Agreement and the Act. The
transferee shall also be liable, to the extent of the Interest transferred, for
the unfulfilled obligations, if any, of the transferor Partner to make Capital
Contributions, but shall not be obligated for liabilities unknown to the
transferee at the time the transferee was admitted as a Partner and that could
not be ascertained from this Agreement. Whether or not the transferee of an
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Interest becomes a Partner, the transferor Partner is not released from any
liability to the Partnership under this Agreement or the Act.
Section 11.5 TIME; OUTSIDE ACTIVITIES. Each Partner shall be required to
spend such time on Partnership matters as is reasonably required for the
purposes of the Partnership. All Partners shall be free to devote their
remaining time and attention to any other business matters. Each of the Partners
hereto may engage in whatever other activities such Partner chooses, provided
that such activities, including the activities of an affiliate of such Partner,
are not directly or indirectly, in competition with the business of the
Partnership within twenty-five (25) miles of the ambulatory surgical center
operated by the Partnership which is, at the time of the execution of this
Agreement, located at 5421 La Sierra Drive, Dallas, Texas. Except as provided
herein, nothing shall be deemed to prevent such Partners from engaging in such
permitted activities, individually, jointly with others, or as a part of any
other limited or general partnership, joint venture, or other entity to which
such Partner is or may become a party, or from dealing with the Partnership as
independent parties or through any other entity in which such Partner may be
interested.
ARTICLE XII - MEETINGS OF PARTNERS
Section 12.1 PLACE OF MEETINGS. All meetings of Partners shall be held in
Dallas, Texas, during usual and customary business hours, or at such other time
or location as may be agreed to by the Partners.
Section 12.2 ANNUAL MEETING. Commencing with the calendar year next
following the calendar year in which the Partnership was organized, annual
meetings of the Partners shall be held on the first Tuesday in May each year at
such hour as may be designated in the notice of the meeting, if such day is a
Business Day, and if not a Business Day, then on the next following day that is
a Business Day. If the annual meeting is not held on the date above specified,
the Managing Partner shall cause a meeting in lieu to be shall be held as soon
thereafter as convenient, and any business transacted or election held at that
meeting shall be as valid as if held at the annual meeting. Failure to hold the
annual meeting at the designated time shall not work a dissolution of the
Partnership.
Section 12.3 SPECIAL MEETINGS. Special meetings of the Partners may be
called by resolution of the Partners holding ten percent (10%) or more of the
Interests, for the purpose of addressing any matter upon which the Partners may
vote under this Agreement. Partners may call a meeting by delivering to the
other Partners one or more written requests signed by the requisite number of
Partners, stating that the signing Partners wish to call a meeting and
indicating the specific purpose for which the meeting is to be held. Action at
the meeting shall be limited to those matters specified in the call of the
meeting.
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Section 12.4 NOTICE. A Notification of all meetings, stating the place,
day, and hour of the meeting and in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten (10) nor more than sixty (60) days before the meeting to each Partner
entitled to vote.
Section 12.5 WAIVER OF NOTICE. Attendance of a Partner at a meeting shall
constitute a waiver of Notification of the meeting, except where such Partner
attends for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened. Notification
of a meeting may also be waived in writing. Attendance at a meeting is not a
waiver of any right to object to the consideration of matters required to be
included in the Notification of the meeting but not so included, if the
objection is expressly made at the meeting.
Section 12.6 QUORUM. A quorum at any meeting of the Partners shall exist
if there is present at such meeting, whether present in person or by proxy,
Partners representing more than fifty percent (50%) of the total percentage
Interests.
Section 12.7 VOTING. Voting of the Partners with respect to issues
relative to the Partnership shall be as follows:
A. VOTING AND VOTING POWER. All Partners shall be entitled to
vote at meetings. Partners may vote either in person or by proxy at any
meeting. Each Partner's percentage voting power at a meeting shall be in
proportion to his percentage Interest.
B. VOTING ON MATTERS. With respect to any matter for which the
affirmative vote of Partners owning a specified portion of the Interests
is required by the Act or this Agreement, the affirmative vote of the
Partners owning such specified portion at a meeting at which a quorum is
present shall be the act of the Partners.
C. CHANGE IN VOTING PERCENTAGES. No provision of this Agreement
requiring that any action be taken only upon approval of Partners holding
a specified percentage of Interests may be modified, amended or repealed
unless such modification, amendment or repeal is approved by Partners
holding at least such percentage of Interests.
Section 12.8 CONDUCT OF MEETINGS. The Partners shall designate a Person to
serve as chairman of any meeting and shall further designate a Person to take
minutes of any meeting.
Section 12.9 ACTION BY WRITTEN CONSENT. Any action that may be taken at a
meeting of the Partners may be taken without a meeting if a consent in writing,
setting forth the action to be taken, shall be signed by Partners holding the
percentage of Interests required to approve such action under the Act or this
Agreement. Such consent shall have the same force and effect as a vote of the
signing Partners at a meeting duly called and held pursuant to this Article XII.
No prior notice from the signing Partners to the other Partners shall be
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required in connection with the use of a written consent pursuant to this
Section. Notification of any action taken by means of a written consent of less
than all of the Partners shall, however, be sent, within a reasonable time after
the date of the consent, to all of the Partners who did not sign the consent.
Section 12.10 PROXIES. A Partner may vote either in person or by proxy
executed in writing by the Partner. A facsimile, telegram, telex, cablegram or
similar transmission by the Partner, or a photographic, photostatic, facsimile
or similar reproduction of a writing executed by the Partner shall be treated as
an execution in writing for purposes of this Section. Proxies for use at any
meeting of Partners or in connection with the taking of any action by written
consent shall be filed with the General Partner, before or at the time of the
meeting or execution of the written consent, as the case may be. All proxies
shall be received and taken charge of and all ballots shall be received and
canvassed by the Managing Partner who shall decide all questions touching upon
the qualification of voters, the validity of the proxies, and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions. No proxy shall be valid after eleven (11)
months from the date of its execution unless otherwise provided in the proxy. A
proxy shall be revocable unless the proxy form conspicuously states that the
proxy is irrevocable and the proxy is coupled with an interest. Should a proxy
designate two or more Persons to act as proxies, unless such instrument shall
provide to the contrary, a majority of such Persons present at any meeting at
which their powers thereunder are to be exercised shall have and may exercise
all the powers of voting or giving consents thereby conferred, or if only one be
present, then such powers may be exercised by that one; or, if an even number
attend and a majority do not agree on any particular issue, the Partnership
shall not be required to recognize such proxy with respect to such issue if such
proxy does not specify how the Interests that are the subject of such proxy are
to be voted with respect to such issue.
Section 12.11 INFORMATION. In addition to the other rights specifically
set forth in this Agreement, each Partner is entitled to all information
relating to the business of the Partnership.
ARTICLE XIII - DISSOLUTION AND WINDING UP
Section 13.1 EVENTS CAUSING DISSOLUTION. The Partnership shall be
dissolved upon the first of the following events to occur:
A. the expiration of the term of the Partnership set forth in
Section 2.3 of this Agreement;
B. the written consent of all Partners at any time to dissolve
and wind up the affairs of the Partnership;
C. the Bankruptcy or dissolution of a Partner or the occurrence of
any other event that terminates the continued membership of a Partner in
the Partnership, unless (i) there are at least two remaining Partners and
the business of the Partnership is continued by the consent of all
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remaining Partners, or (ii) within ninety (90) days of the occurrence of
such event, all remaining Partners agree in writing to continue the
business of the Partnership; or
D. the occurrence of any other event that causes the
dissolution of a partnership under the Act.
Section 13.2 WINDING UP. If the Partnership is dissolved pursuant to
Section 13.1, the Partnership's affairs shall be wound up as soon as reasonably
practicable in the manner set forth below.
A. APPOINTMENT OF LIQUIDATOR. The winding up of the
Partnership's affairs shall be supervised by a Liquidator. The Liquidator
shall be selected by the Partners or, if the Partners prefer, a liquidator
or liquidating committee selected by the Partners.
B. POWERS OF LIQUIDATOR. In winding up the affairs of the
Partnership, the Liquidator shall have full right and unlimited
discretion, for and on behalf of the Partnership:
1. to prosecute and defend civil, criminal or
administrative suits;
2. to collect Partnership assets, including obligations
owed to the Partnership;
3. to settle and close the Partnership's business;
4. to dispose of and convey all Partnership Property for
cash, and in connection therewith to determine the time, manner and
terms of any sale or sales of Partnership Property, having due
regard for the activity and condition of the relevant market and
general financial and economic conditions;
5. to pay all reasonable selling costs and other
expenses incurred in connection with the winding up out of the
proceeds of the disposition of Partnership Property;
6. to discharge the Partnership's known liabilities and,
if necessary, to set up, for a period not to exceed five (5) years
after the date of dissolution, such cash reserves as the Liquidator
may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership;
7. to distribute any remaining proceeds from the sale of
Partnership Property to the Partners;
8. to prepare, execute, acknowledge and file any
certificates, tax returns or instruments necessary or advisable
under any applicable law to effect the winding up and termination of
the Partnership; and
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9. to exercise, without further authorization or consent
of any of the parties hereto or their legal representatives or
successors in interest, all of the powers conferred upon a Partner
under the terms of this Agreement to the extent necessary or
desirable in the good faith judgment of the Liquidator to perform
its duties and functions. The Liquidator shall not be liable as a
partner to the Partners and shall, while acting in such capacity on
behalf of the Partnership, be entitled to the indemnification rights
set forth in the Act and in Article XIV hereof.
Section 13.3 COMPENSATION OF LIQUIDATOR. The Liquidator appointed as
provided herein shall be entitled to receive such reasonable compensation for
its services as shall be agreed upon by the Liquidator and the Partners.
Section 13.4 DISTRIBUTION OF PARTNERSHIP PROPERTY AND PROCEEDS OF SALE
THEREOF. The distribution of Partnership Property and the proceeds from the sale
thereof shall be in accordance with the following:
A. ORDER OF DISTRIBUTION. Upon completion of all desired sales of
Partnership Property, and after payment of all selling costs and expenses,
the Liquidator shall distribute the proceeds of such sales, and any
Partnership Property that is to be distributed in kind, to the following
groups in the following order of priority:
1. to the extent permitted by law, to satisfy Partnership
liabilities to creditors, including Partners who are creditors
(other than for past due Partnership distributions), whether by
payment or establishment of reserves;
2. to satisfy Partnership obligations to Partners to pay
past due Partnership distributions;
3. to the Partners, in accordance with the positive
balances in their respective Capital Accounts; and
4. to the Partners in accordance with their respective
Interests.
B. INSUFFICIENT ASSETS. The claims of each priority group specified
above shall be satisfied in full before satisfying any claims of a lower
priority group. If the assets available for disposition are insufficient
to dispose of all of the claims of a priority group, the available assets
shall be distributed in proportion to the amounts owed to each creditor or
the respective Capital Account balances or Interests of each Partner in
such group.
Section 13.5 FINAL AUDIT. Within a reasonable time following the
completion of the liquidation, the Liquidator shall supply to each of the
Partners a statement which shall set forth the assets and the liabilities of the
Partnership as of the date of complete liquidation and each Partner's prorata
portion of distributions pursuant to Section 13.4.
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Section 13.6 DEFICIT CAPITAL ACCOUNTS. Notwithstanding anything to the
contrary contained in this Agreement, to the extent that the deficit, if any, in
the Capital Account of any Partner results from or is attributable to deductions
and losses of the Partnership (including non-cash items such as depreciation),
or distributions of money pursuant to this Agreement, such deficit shall not be
an asset of the Partnership and such Partners shall not be obligated to
contribute such amount to the Partnership to bring the balance of such Partner's
Capital Account to zero.
ARTICLE XIV - LIABILITY, INDEMNIFICATION AND INSURANCE
Section 14.1 LIABILITY OF PARTNERS. No Partner nor any shareholder,
director, officer, agent, affiliate or employee of any Partner shall be liable,
responsible or accountable in damages or otherwise to the Partnership or any
other Partner for any action taken or failure to act on behalf of the
Partnership within the scope of the authority conferred on such Partner by this
Agreement or by law unless such act or omission constituted willful or wanton
misconduct or was performed or omitted fraudulently or in bad faith or
constituted gross negligence. No Partner nor any shareholder, director, officer,
agent, affiliate or employee of any Partner shall be personally liable for the
return or repayment of all or any portion of the capital or profits of any other
Partner (or transferee thereof), it being expressly agreed that any such return
of capital or profits made pursuant to this Agreement shall be made solely from
the assets of the Partnership. Nothing herein shall be interpreted to (i) limit
the liability of any Partner with respect to debts and obligations to third
parties under Section 3.04 of the Act, (ii) limit the obligation of any Partner
to transfer to the Partnership the full amount of such Partner's Initial Capital
Contribution and subsequent capital contributions, if any, or (iii) limit the
liability of any Partner with respect to the fiduciary duty of such Partner to
the Partnership or to the other Partners.
Section 14.2 REIMBURSEMENT AND INDEMNIFICATION OF PARTNERS. The
Partnership shall promptly reimburse and indemnify each Partner in respect of
reasonable payments made and personal liabilities reasonably incurred by such
Partner for services performed for the benefit of or on behalf of the
Partnership business, or for the preservation of the Partnership's business or
property. Without limiting the generality of the foregoing, in any threatened,
pending, or contemplated action, suit or proceeding to which a Partner and/or
any officer, director, shareholder, agent, affiliate or employee of such Partner
(collectively, the "Indemnified Parties"), was or is a party or is threatened to
be made a party by reason or because of the fact that such Partner is or was a
Partner in the Partnership (including any action by or in the right of the
Partnership), the Partnership shall indemnify the Indemnified Parties against
expenses, including attorneys' fees, judgments and amounts paid in settlement
incurred by the Indemnified Parties in connection with such action, suit or
proceeding if the Indemnified Parties acted in accordance with the standards set
forth in Section 4.04 of the Act. The termination of any action, suit or
proceeding by judgment, order or settlement shall not, of itself, create a
presumption that the Indemnified Parties did not act in accordance with such
standards. Nothing herein shall be interpreted to indemnify or limit the
liability of any Partner with respect to debts or obligations of the
Partnership. Nothing herein shall be considered to guarantee that the
Partnership or any of the Partners shall gain or derive any profit or benefit
from the operations of the Partnership's business or that such operations shall
result in any particular outcome.
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Section 14.3 LIMIT ON LIABILITY OF PARTNERS. The indemnification set forth
in this Article XIV shall in no event cause the Partners to incur any personal
liability beyond their total Capital Contributions, nor shall it result in any
liability of the Partners to any third party.
Section 14.4 INSURANCE. To the extent not prohibited by applicable law,
the Partnership may purchase and maintain insurance or another arrangements on
behalf of any Person who is or was an Indemnified Party against any liability
asserted against him or incurred by him in such a capacity or arising out of his
status as an Indemnified Party.
ARTICLE XV - RESTRICTIONS ON TRANSFER OF SEC
INTEREST; AND PURCHASE OF SEC INTEREST
Section 15.1 ARTICLE XV DEFINITIONS. Solely for purposes of this
Article XV, the following terms shall have the meanings indicated:
A. "Annual Net Earnings" means (i) the gross receipts of the Partnership
received in the ordinary course of business during the calendar year in
question (the "Annual Period"), computed in accordance with generally
accepted accounting principles using a cash method of accounting, minus
(ii) the difference between (a) the direct operating expenses of the
Partnership paid in the ordinary course of business during the Annual
Period, computed in accordance with generally accepted accounting
principles using a cash method of accounting, minus (b) all amounts paid
to "Omega North Texas" (herein after defined) with respect to the Annual
Period pursuant to the "Management Agreement" (as defined in Section 16.1
hereof).
B. "Buyout Amount" means an amount equal to seven (7) times the average
Annual Net Earnings of the Partnership based upon the Partnership's Annual
Net Earnings for each of the two (2) calendar years immediately preceding
the "Trigger Date" (hereinafter defined).
C. "Disability" means, as applied to either Dr. Herman or Dr.
Pazandak, the physical or mental inability of the person in question to
perform for a period of ninety (90) consecutive days the material duties
of such person's occupation or any covenant or duty of "ECSC II"
(hereinafter defined) required under that certain management agreement by
and between ECSC II and Omega North Texas.
D. "Dr. Herman" means Wesley K. Herman, M.D.
E. "Dr. Pazandak" means Bradford B. Pazandak, M.D.
F. "ECSC II" means ECSC II, P.A., a Texas professional association.
G. "Herman Allocable Portion" means fifty percent (50%) of the
Interest of SEC in the Partnership as such Interest exists on the date of
the execution of this Agreement.
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H. "Herman Allocable Portion As Adjusted" means the Herman Allocable
Portion minus the Interest of SEC previously required to be sold to Omega
pursuant to the first sentence of Section 15.4.
I. "Herman Employment Agreement" means that certain Professional
Employment Agreement by and between ECSC II and Dr. Herman.
J. "Omega North Texas" means Omega Health Systems of North Texas,
Inc., a Texas corporation.
K. "Pazandak Allocable Portion" means fifty percent (50%) of the
Interest of SEC in the Partnership as such Interest exists on the date of
the execution of this Agreement.
L. "Pazandak Allocable Portion As Adjusted" means
the Pazandak Allocable Portion minus the
Interest of SEC previously required to be sold
to Omega pursuant to the first sentence of
Section 15.5.
M. "Pazandak Employment Agreement" means that certain Professional
Employment Agreement by and between ECSC II and Dr. Pazandak.
N. "Required Work Days" means 213 days.
O. "Trigger Date" means as follows: (i) with respect to Section 15.3,
"Trigger Date" means the date that SEC gives the "SEC Sale Notice"
(hereinafter defined) to Omega; (ii) with respect to the first sentence of
Section 15.4, "Trigger Date" means the effective date that the Required
Work Days is reduced to the "Herman Work Days" (as hereinafter defined);
(iii) with respect to the penultimate sentence of Section 15.4, "Trigger
Date" means the date that the first of the following events occur: (a) the
death of Dr. Herman, (b) the Disability of Dr. Herman, or (c) the full
retirement of Dr. Herman from ECSC II; (iv) with respect to the first
sentence of Section 15.5, "Trigger Date" means the effective date that the
Required Work Days is reduced to the "Pazandak Work Days" (as hereinafter
defined); and, (v) with respect to the penultimate sentence of Section
15.5, "Trigger Date" means the date that the first of the following events
occur: (a) the death of Dr. Pazandak, (b) the Disability of Dr. Pazandak,
or (c) the full retirement of Dr. Pazandak from ECSC II.
Section 15.2 RESTRICTIONS ON SEC INTEREST PRIOR TO SEPTEMBER 1, 2001.
Prior to September 1, 2001, SEC shall not sell, encumber, or transfer all, or
any part of, its Interest in the Partnership, except (i) with the consent of all
of the Partners, (ii) upon the occurrence of an event specified in Section 15.4,
or (iii) upon the occurrence of an event specified in Section 15.5.
Section 15.3 SALE OPTION OF SEC ON OR AFTER SEPTEMBER 1, 2001. On
September 1, 2001, or at any time thereafter, SEC may elect to sell its Interest
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in the Partnership to Omega upon written notice to Omega (the "SEC Sale
Notice"). Upon the expiration of one hundred eighty (180) days following the SEC
Sale Notice (the "Sale Date"), Omega shall purchase from SEC, and SEC shall sell
to Omega, SEC's Interest at the Buyout Amount.
Section 15.4 MANDATORY SALE AND PURCHASE FROM EVENT INVOLVING DR. HERMAN.
In the event that at any time beginning September 1, 2001, Dr. Herman decides to
partially retire from ECSC II by choosing to reduce the number of Required Work
Days, in the manner provided in Section 13 of the Herman Employment Agreement,
to a lesser number of days (the "Herman Work Days"), SEC is obligated to sell,
and Omega is obligated to buy, a portion of the SEC Interest that is equal to
the "Herman Partial Retirement Portion" (hereinafter defined). The "Herman
Partial Retirement Portion" means a portion of the Partnership that is owned by
SEC that is the result of (A) an amount equal to fifty percent (50%) of the
product of (1) the result of (a) 1.000 minus (2) a fraction (expressed as a
decimal), the denominator of which is the Required Work Days and the numerator
of which is the Herman Work Days multiplied by (b) twenty-five one hundredths
(.25), minus (B) an amount (if any) equal to the SEC Interest that Omega was
previously required to buy from SEC pursuant to the first sentence of this
Section 15.4. For example, and for purposes of illustration only, if the Herman
Work Days equals 106 days and Omega was not previously required to buy a portion
of the SEC Interest pursuant to the first sentence of this Section 15.4, SEC
would be required to sell, and Omega would be required to buy, a 6.25% Interest
in the Partnership ([{[1.000 - .500] x .25} x .50] - 0.00 = .0625), and the
Herman Allocable Portion As Adjusted would then equal a 6.25% interest in the
Partnership (.125 - .0625 = .0625). Further, upon the occurrence of any one of
the following events: (i) the death of Dr. Herman; (ii) the Disability of Dr.
Herman; or (iii) the full retirement of Dr. Herman from ECSC II, SEC is
obligated to sell, and Omega is obligated to buy, that portion of SEC's Interest
that is equal to the smaller of (a) the Herman Allocable Portion or (b) the
Herman Allocable Portion As Adjusted. Upon the expiration of sixty (60) days
following the Trigger Date, Omega shall purchase from SEC, and SEC shall sell to
Omega, at the Buyout Amount, the portion of the SEC Interest that SEC is
required to sell, and that Omega is required to buy, under the provisions of
this Section 15.4.
Section 15.5 MANDATORY SALE AND PURCHASE FROM EVENT INVOLVING DR.
PAZANDAK. In the event that any time beginning September 1, 2001, Dr. Pazandak
decides to partially retire from ECSC II by choosing to reduce the number of
Required Work Days, in the manner provided in Section 13 of the Pazandak
Employment Agreement, to a lesser number of days (the "Pazandak Work Days"), SEC
is obligated to sell, and Omega is obligated to buy, a portion of the SEC
Interest that is equal to the "Pazandak Partial Retirement Portion" (hereinafter
defined). The "Pazandak Partial Retirement Portion" means a portion of the
Partnership that is owned by SEC that is the result of (A) an amount equal to
fifty percent (50%) of the product of (1) the result of (a) 1.000 minus (2) a
fraction (expressed as a decimal), the denominator of which is the Required Work
Days and the numerator of which is the Pazandak Work Days multiplied by (b)
twenty-five one hundredths (.25), minus (B) an amount (if any) equal to the SEC
Interest that Omega was previously required to buy from SEC pursuant to the
first sentence of this Section 15.5. For example, and for purposes of
illustration only, if the Pazandak Work Days equals 53 days and Omega was
previously required to buy a 3.125% interest in the Partnership from SEC
pursuant to the first sentence of this Section 15.5, SEC would be required to
sell, and Omega would be required to buy, a 6.25% Interest in the Partnership
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([{[1.000 - .250] x .25} x .50] - .03125 = .0625), and the Pazandak Allocable
Portion As Adjusted would then equal a 3.125% interest in the Partnership ([.125
- - .03125] - .0625 = .03125). Further, upon the occurrence of any one of the
following events: (i) the death of Dr. Pazandak; (ii) the Disability of Dr.
Pazandak; or (iii) the full retirement of Dr. Pazandak from ECSC II, SEC is
obligated to sell, and Omega is obligated to buy, that portion of SEC's Interest
that is equal to the smaller of (a) the Pazandak Allocable Portion or (b) the
Pazandak Allocable Portion As Adjusted. Upon the expiration of sixty (60) days
following the Trigger Date, Omega shall purchase from SEC, and SEC shall sell to
Omega, at the Buyout Amount, the portion of the SEC Interest that SEC is
required to sell, and that Omega is required to buy, under the provisions of
this Section 15.5.
Section 15.6 PAYMENT OF THE BUYOUT AMOUNT. The Buyout Amount shall be paid
by Omega to SEC by delivery to SEC of (i) an amount of cash equal to at least
fifty percent (50%) of the Buyout Amount, and (ii) an amount equal to the
difference between the Buyout Amount minus the amount of cash paid to SEC under
(i) of this Section 15.6 which shall, at the option of Omega, be paid in cash,
in unregistered common stock (the "Stock") of Omega Health Systems, Inc., a
Delaware corporation ("OHS"), or in a combination of both. For purposes of this
Section 15.6, the Stock shall be valued at the average of the closing price of
the publicly traded common stock of OHS for the twenty (20) trading days ending
four (4) trading days prior to the date that the certificates representing the
Stock are required to be delivered to SEC.
ARTICLE XVI - MANAGEMENT AGREEMENT
Section 16.1 Concurrently with the execution of this Agreement by the
Partners, the Partnership has enter into a Management Agreement with Omega
Health Systems of North Texas, Inc. ("Omega North Texas"), a Texas corporation
and an Affiliate of Omega, in the form attached hereto as EXHIBIT 16 (the
"Management Agreement"). Anything in this Agreement to the contrary
notwithstanding, after the Partnership has entered into the Management
Agreement, none of the terms or conditions of the Management Agreement shall be
be amended, modified, supplemented or otherwise changed except with the prior
written consent of all of the Partners.
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ARTICLE XVII - MISCELLANEOUS PROVISIONS
Section 17.1 ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the Partners relating to the subject matter hereof and all prior
agreements relative hereto which are not contained herein are terminated.
Section 17.2 LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the local, internal laws of the State of Texas. In
particular, this Agreement is intended to comply with the requirements of the
Act. In the event of a direct conflict between the provisions of this Agreement
and the MANDATORY provisions of the Act, the Act will control.
Section 17.3 CONFERENCE TELEPHONE MEETINGS. Meetings of the Partners may
be held by means of conference telephone or similar communications equipment so
long as all Persons participating in the meeting can hear each other.
Participation in a meeting by means of conference telephone shall constitute
presence in person at such meeting, except where a Person participates in the
meeting for the express purpose of objecting to the transaction of any business
thereat on the ground that the meeting is not lawfully called or convened.
Section 17.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the Partners and their respective heirs, legal
representatives, successors and assigns.
Section 17.5 SEVERABILITY. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement or the
application thereof to any Person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, but the extent of such invalidity or
unenforceability does not destroy the basis of the bargain among the Partners as
expressed herein, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
Section 17.6 AMENDMENT. Except as expressly provided herein, this
Agreement may be amended only by a written amendment hereto executed by all of
the Partners.
Section 17.7 HEADINGS. The Article, Section and Subsection headings
appearing in this Agreement are for convenience of reference only and are not
intended, to any extent or for any purpose, to limit or define the text of any
Article, Section or Subsection.
Section 17.8 CONSTRUCTION. Whenever required by the context, as used in
this Agreement, the singular number shall include the plural, and vice versa,
and the gender of all words used shall include the masculine, feminine and the
neuter. Unless expressly stated herein, all references to Articles, Sections
and/or Subsections refer to Articles, Sections and/or Subsections of this
Agreement, and all references to Schedules and/or Exhibits are to Schedules
and/or Exhibits attached hereto, each of which is made a part hereof for all
purposes.
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Section 17.9 OFFSET. Whenever the Partnership is to pay any sum to any
Partner, any amounts that Partner owes the Partnership may be deducted from that
sum before payment.
Section 17.10 EFFECT OF WAIVER OR CONSENT. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations with respect to the Partnership is not a consent or
waiver to or of any other breach or default in the performance by that Person of
the same or any other obligations of that Person with respect to the
Partnership. Failure on the part of a Person to complain of any act of any
Person or to declare any Person in default with respect to the Partnership,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of its rights with respect to that default until the applicable
statute-of-limitations period has run.
Section 17.11 FURTHER ASSURANCES. In connection with this Agreement and
the transactions contemplated hereby, each Partner shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
Section 17.12 WAIVER OF CERTAIN RIGHTS. Each Partner irrevocably waives
any right it may have to maintain any action for dissolution of the Partnership
or for partition of the property of the Partnership.
Section 17.13 INVESTMENT REPRESENTATIONS; RESTRICTIONS ON TRANSFER. Each
Partner, by such Partner's execution of this Agreement, represents and agrees
that such Partner is purchasing such Partner's Interest in the Partnership for
investment purposes only, and without a view toward the distribution or resale
thereof. Pursuant to Sections 11.2, 11.3 and 11.4 hereof, Interests in the
Partnership shall be nontransferable except in accordance therewith; and, no
assignee of a Partnership Interest in the Partnership shall become a substitute
Partner without the consent of the transferor and all of the Partners.
Section 17.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute a single document. This Agreement shall be binding
upon each Partner upon execution, regardless of whether any other Partner has
executed the same or a different counterpart. A photocopy or telecopy of an
executed
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counterpart of this Agreement shall be sufficient to bind the Partner(s) whose
signature(s) appear thereon.
IN WITNESS WHEREOF, the Partners have executed this Agreement to be
effective as of the date first above written.
PARTNERS:
SEC: OMEGA:
SURGEYECARE, INC., a OMEGA SURGICAL ASSOCIATES
Texas corporation OF NORTH TEXAS, INC., a Texas
corporation
By:__________________________ By:__________________________
Bradford B. Pazandak, Thomas P. Lewis,
President President
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