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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-20260
Commission File No. 1-11440
INTEGRAMED AMERICA, INC.
(Exact name of Registrant as specified in its charter)
Delaware 06-1150326
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
One Manhattanville Road 10577
Purchase, New York (Zip code)
(Address of principal executive offices)
(914) 253-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The aggregate number of shares of the Registrant's Common Stock, $.01
par value, outstanding on November 1, 1999 was 4,791,860.
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<PAGE>
INTEGRAMED AMERICA, INC.
FORM 10-Q
TABLE OF CONTENTS
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at September 30, 1999 (unaudited)
and December 31, 1998........................................ 3
Consolidated Statement of Operations for the three and
nine-month periods ended September 30, 1999
and 1998 (unaudited)......................................... 4
Consolidated Statement of Cash Flows for the nine-month
periods ended September 30, 1999 and 1998 (unaudited)........ 5
Notes to Consolidated Financial Statements (unaudited)...... 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................8-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. 13
Item 2. Changes in Securities......................................... 13
Item 3. Defaults upon Senior Securities............................... 13
Item 4. Submission of Matters to a Vote of Security Holders........... 13
Item 5. Other Information............................................. 13
Item 6. Exhibits and Reports on Form 8-K.............................. 13
SIGNATURES ............................................................... 14
INDEX TO EXHIBITS ................................................... 15
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEET
(all amounts in thousands, except share and per share amounts)
<CAPTION>
September 30, December 31,
------------ -----------
1999 1998
------------ -----------
(unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents..................................................... $ 3,882 $ 4,241
Patient accounts receivable, less allowance for doubtful accounts
of $ 731 and $526 in 1999 and 1998, respectively............................ 10,472 10,749
Management fees receivable, less allowance for doubtful accounts
of $0 and $305 in 1999 and 1998, respectively............................... 993 1,963
Other current assets.......................................................... 1,169 1,736
------- -------
Total current assets...................................................... 16,516 18,689
------- -------
Fixed assets, net............................................................. 6,388 5,116
Intangible assets, net........................................................ 19,600 19,269
Other assets.................................................................. 322 619
------- -------
Total assets.............................................................. $42,826 $43,693
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 588 $ 684
Accrued liabilities........................................................... 4,516 3,480
Due to Medical Practices...................................................... 1,385 1,877
Current portion of long-term notes payable and other obligations.............. 1,275 2,099
Patient deposits.............................................................. 2,010 2,888
------- -------
Total current liabilities................................................. 9,774 11,028
------- -------
Long-term notes payable and other obligations.................................... 4,509 5,282
Commitments and Contingencies
Shareholders' equity:
Preferred Stock, $1.00 par value -- 3,165,644 shares authorized
in 1999 and 1998, 2,500,000 undesignated; 665,644 shares
designated as Series A Cumulative Convertible of which
165,644 shares were issued and outstanding in 1999 and 1998, respectively... 166 166
Common Stock, $.01 par value -- 50,000,000 shares authorized in
1999 and 1998; and 5,368,960 and 5,343,092 shares issued in 1999
and 1998, respectively...................................................... 55 53
Capital in excess of par...................................................... 54,172 53,712
Accumulated deficit........................................................... (24,117) (25,548)
Treasury Stock, at cost -- 511,100 and 340,500 shares in 1999 and
1998, respectively.......................................................... (1,733) (1,000)
------- -------
Total shareholders' equity................................................ 28,543 27,383
------- -------
Total liabilities and shareholders' equity................................ $42,826 $43,693
======= =======
See accompanying notes to the consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
INTEGRAMED AMERICA, INC.,
CONSOLIDATED STATEMENT OF OPERATIONS
(all amounts in thousands, except per share amounts)
<CAPTION>
For the For the
three-month period nine-month period
ended September 30, ended September 30,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues, net.......................................................... $11,862 $9,756 $33,255 $27,927
Costs of services incurred on behalf of Network Sites:
Employee compensation and related expenses........................ 4,620 3,734 12,883 11,050
Direct materials.................................................. 1,785 1,153 4,091 3,359
Occupancy costs................................................... 766 725 2,674 2,120
Depreciation...................................................... 402 343 1,011 976
Other expenses.................................................... 1,899 1,564 5,373 3,960
------- ------ ------- -------
Total costs of services......................................... 9,472 7,519 26,032 21,465
------- ------ ------- -------
Network Sites' contribution............................................ 2,390 2,237 7,223 6,462
General and administrative expenses.................................... 1,611 1,385 4,504 3,856
Amortization of intangible assets...................................... 274 234 779 681
Interest income........................................................ (46) (24) (88) (45)
Interest expense....................................................... 121 126 382 306
------- ------ ------- -------
Total other expenses............................................ 1,960 1,721 5,577 4,798
Restructuring and other charges........................................ -- -- -- 2,084
------- ------ ------- -------
Income (loss) from continuing operations before income taxes........... 430 516 1,646 (420)
Provision for income taxes............................................. 45 94 217 245
------- ------ ------- -------
Income (loss) from continuing operations............................... 385 422 1,429 (665)
Loss from actual and phase-out period operating losses of
AWM Division...................................................... -- -- -- 923
(Recapture) loss from disposal of AWM Division......................... -- (350) -- 3,578
------- ------ ------- -------
Net income (loss)...................................................... 385 772 1,429 (5,166)
Less: Dividends paid and/or accrued on Preferred Stock................. 33 33 99 99
------- ------ ------- -------
Net income (loss) applicable to Common Stock........................... $ 352 $ 739 $ 1,330 $(5,265)
======= ======= ======= =======
Basic and diluted earnings (loss) per share of Common Stock:
Continuing operations............................................. $ 0.07 $ 0.07 $ 0.27 $ (0.15)
Discontinued operations........................................... -- 0.07 -- (0.86)
------- ------ ------- -------
Net earnings (loss)............................................... $ 0.07 $ 0.14 $ 0.27 $ (1.01)
======= ====== ======= =======
Weighted average shares -- basic....................................... 4,863 5,343 4,910 5,226
======= ====== ======= =======
Weighted average shares -- diluted..................................... 4,981 5,405 5,002 5,226
======= ====== ======= =======
See accompanying notes to the consolidated financial statements
</TABLE>
4
<PAGE>
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
(all amounts in thousands)
<CAPTION>
For the
nine-month period
ended September 30,
------------------
1999 1998
---- ----
(unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss)................................................................ $1,429 $(5,166)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
Operating activities:
Depreciation and amortization................................................ 2,035 1,938
Write-off of fixed and other assets.......................................... -- 5,541
Changes in assets and liabilities net of effects from acquired businesses --
Decrease (increase) in assets:
Patient accounts receivable.................................................. 277 (2,733)
Management fees receivable................................................... 352 (1,075)
Other current assets......................................................... 567 199
Other assets................................................................. 81 (111)
Increase (decrease) in liabilities:
Accounts payable............................................................. (96) (1,222)
Accrued liabilities.......................................................... (131) (343)
Due to Medical Practices..................................................... (492) 352
Patient deposits............................................................. 350 878
------ ------
Net cash provided by (used in) operating activities................................... 4,372 (1,742)
------ -------
Cash flows (used in) provided by investing activities:
Purchase of net liabilities of acquired businesses............................. -- 487
Payment for exclusive management rights and acquired physician practices....... (213) (3,165)
Purchase of fixed assets and leasehold improvements............................ (2,005) (1,216)
Proceeds from sale of fixed assets............................................. -- 135
------ ------
Net cash used in investing activities................................................. (2,218) (3,759)
------ ------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of Common Stock......................................... -- 5,500
Used for stock issue costs..................................................... -- (74)
Proceeds from bank under Credit Facility....................................... -- 6,000
Proceeds from IVP Pharmaceutical Care, Inc..................................... 150 --
Principal repayments on debt................................................... (1,780) (2,833)
Principal repayments under capital lease obligations........................... (51) (84)
Repurchase of Common Stock..................................................... (733) --
Dividends paid on Convertible Preferred Stock.................................. (99) --
Proceeds from exercise of Common Stock options................................. -- 99
------ ------
Net cash (used in) provided by financing activities................................... (2,513) 8,608
------ ------
Net (decrease) increase in cash....................................................... (359) 3,107
Cash at beginning of period........................................................... 4,241 1,930
------ ------
Cash at end of period................................................................. $3,882 $5,037
====== ======
See accompanying notes to the consolidated financial statements
</TABLE>
5
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- INTERIM RESULTS:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying unaudited interim financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position at September 30,1999, and the results of
operations and cash flows for the interim periods presented. Operating results
for the interim periods are not necessarily indicative of results that may be
expected for the year ending December 31, 1999. These financial statements
should be read in conjunction with the financial statements and notes included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998.
NOTE 2 -- EARNINGS PER SHARE:
The calculation of the number of shares for basic and diluted EPS for the
three and nine-month periods ended September 30, 1999 and 1998 is as follows
(000's omitted):
<TABLE>
<CAPTION>
For the For the
three-month nine-month
period ended period ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Weighted average shares outstanding................... 4,863 5,343 4,910 5,226
Effect of dilutive options and warrants............... 118 62 92 --
----- ----- ----- -----
Weighted average shares and dilutive potential
common shares..................................... 4,981 5,405 5,002 5,226
===== ===== ===== =====
</TABLE>
Income (loss) from continuing operations was the same for both basic and
diluted calculations for all periods presented.
The company determines earnings (loss) per share in accordance with
Financial Accounting Standards No. 128, "Earnings Per Share," which the Company
adopted in December 1997. All historical earnings (loss) per share have been
presented in accordance with FAS 128.
For the three and nine-month periods ending September 30, 1999 and 1998,
the following approximate amounts of common stock from their assumed conversion
were excluded in computing the diluted per share amounts as they were
antidilutive.
<TABLE>
<CAPTION>
For the three-month period ended September 30, For the nine-month period ended September 30,
---------------------------------------------- ---------------------------------------------
Exercise Exercise Exercise Exercise
Price Range 1999 Price Range 1998 Price Range 1999 Price Range 1998
----------- ---- ----------- ---- ----------- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options........... $4.00-$5.00 403,000 $4.00-$4.12 350,000 $4.00-$5.00 429,000 $4.00-$4.12 350,000
Warrants.......... $4.94-$8.54 75,000 $4.94-$7.20 78,250 $4.94-$8.54 75,000 $4.94-$7.20 78,250
Preferred Stock... -- 133,000 -- 523,000 -- 133,000 -- 523,000
</TABLE>
6
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 -- MANAGEMENT AGREEMENT:
In April 1999, the Company formed a new wholly owned subsidiary, IntegraMed
Pharmaceutical Services, Inc. ("IPSI"). IPSI is a licensed pharmacy based in
Carrolton, Texas. The primary business of IPSI is the retail distribution of
infertility related pharmaceuticals and products to the Reproductive Science
Centers. IPSI was formed in conjunction with IVP Pharmaceutical Care, Inc., a
licensed pharmacy specializing in dispensing pharmaceutical products, which will
provide certain management services to IPSI.
Effective May 1, 1999, the Company entered into a new management agreement
with the Medical Practice at the Reproductive Science Associates Network Site
located in Kansas City, Missouri. Under this new agreement, the Company may
enter into management agreements with other medical practices, offering them use
of the Network Site medical offices and space. The Company did not pay a right
to manage fee in connection with this agreement, rather, the management right
payable of $213,000 to the Kansas City medical Practice was netted against the
management fee receivable (from the Practice). This transaction yielded a net
receivable due to the Company of $835,000. The Company recognizes this
receivable as a further investment by the Company in the Kansas City Medical
Practice, and has reclassed $835,000 from management fees receivable to
intangible assets in the accompanying Consolidated Balance Sheet.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes included in this quarterly
report and with the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
Results of Operations
The following table shows the percentage of net revenue represented by
various expense and other income items reflected in the Company's Consolidated
Statement of Operations.
<TABLE>
<CAPTION>
For the For the
three-month nine-month
period ended period ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues, net................................................... 100.0% 100.0% 100.0% 100.0%
Costs of services incurred on behalf of Network Sites:
Employee compensation and related expenses................... 39.0% 38.4% 38.8% 39.6%
Direct materials............................................. 15.0% 11.8% 12.3% 12.0%
Occupancy costs.............................................. 6.5% 7.4% 8.0% 7.6%
Depreciation................................................. 3.4% 3.5% 3.0% 3.5%
Other expenses............................................... 16.0% 16.0% 16.2% 14.2%
---- ---- ---- ----
Total costs of services................................... 79.9% 77.1% 78.3% 76.9%
Network Sites' contribution..................................... 20.1% 22.9% 21.7% 23.1%
General and administrative expenses............................. 13.6% 14.1% 13.7% 13.9%
Amortization of intangible assets............................... 2.3% 2.4% 2.3% 2.4%
Interest income................................................. (0.4)% (0.2)% (0.3)% (0.2)%
Interest expense................................................ 1.0% 1.3% 1.1% 1.1%
---- ---- ---- ----
Total other expenses......................................... 16.5% 17.6% 16.8% 17.2%
---- ---- ---- ----
Restructuring and other charges................................. 0.0% 0.0% 0.0% 7.5%
Income (loss) from continuing operations before income taxes.... 3.6% 5.3% 4.9% (1.5)%
Provision for income taxes...................................... 0.4% 1.0% 0.6% 0.9%
---- ---- ---- ----
Income (loss) from continuing operations........................ 3.2% 4.3% 4.3% (2.4)%
Recapture (loss) from discontinued operations................... 0.0% 3.6% 0.0% (16.1)%
---- ---- ---- ----
Net income (loss)............................................... 3.2% 7.9% 4.3% (18.5)%
==== ==== ==== ====
</TABLE>
Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998
Revenues for the third quarter ended September 30, 1999 were approximately
22% greater than the same period in 1998. Major Network Site contributors were
Fertility Centers of Illinois, Shady Grove Fertility Centers, and RSC of Boston,
each of which comprised more than 10% of total Company revenue. Management fees
and reimbursed cost of services derived from network revenues at these sites
increased 21%, 29% and 13%, respectively. Increases in patient volume were the
primary cause of the Network Site revenue increases. IntegraMed Pharmaceutical
Services, which was launched in the second quarter of 1999, accounted for
$812,000, or 7%, of third quarter revenue.
8
<PAGE>
Total costs of services were 79.9% of revenues in the third quarter of
1999, compared to 77.1% in the third quarter of 1998. Employee compensation and
related expenses increased slightly, primarily due to increased levels of
compensation and new hires. Direct materials increased as a percentage of
revenues, primarily due to the cost of products sold at IntegraMed
Pharmaceutical Services.
Network Sites' contribution reflects an increase of 7% for the third
quarter of 1999 compared to the third quarter of 1998. Increases in patient
billings were the primary reason for this increase. As a percentage of revenue,
Network Sites' contribution decreased for the third quarter of 1999 as compared
to the third quarter of 1998, principally due to the activation of clauses in
certain management contracts which decrease management fees payable to the
Company as Network Site contribution increases. These clauses are designed to
reward the participating physicians for increased practice growth. In addition,
margins at the Company's pharmaceutical venture are, as anticipated,
significantly lower than those of our core business.
General and administrative expenses for the third quarter of 1999 were
approximately 16% higher than the third quarter of 1998. The increase was
largely due to staffing, consulting, and other cost increases related to the
development, implementation and maintenance of the Company's proprietary
ARTWorks suite of fertility care information systems.
Net interest expense decreased in the third quarter ended September 30,
1999 due to reductions in short and long-term debt.
The provision for income taxes is primarily related to state taxes as the
Company has utilized available net operating loss carryforwards to eliminate any
Federal tax provision. The provision for income taxes decreased 52% in the third
quarter of 1999 compared to the third quarter of 1998 due to a change in
effective tax rates as a result of tax planning initiatives.
In late September 1999, the Company was informed by a hospital, with which
it has a contract that generates a significant amount of revenue and Network
Site contribution, that three of the associated practice physicians had resigned
and established their own practice. The hospital is aggressively recruiting
replacement physicians. While the ultimate impact of these events cannot be
determined, it is likely that there will be a negative effect on revenues and
net earnings of the fourth quarter of 1999 and the first quarter of 2000.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Revenues increased 19% for the nine months ended September 30, 1999,
compared to the nine months ended September 30, 1998. Major Network Site
contributors were Fertility Centers of Illinois, Shady Grove Fertility Centers,
and RSC of Boston, each of which comprised more than 10% of total Company
revenue. Management fees and reimbursed costs derived from network revenues at
these sites increased 19%, 67% and 19%, respectively. Increases in patient
volume were the primary cause of the Network Site revenue increases at the
Fertility Center of Illinois and the RSC of Boston. Shady Grove results include
only six months of activity for the nine months ended September 30, 1998 as its
management contract with the Company was signed in March 1998. IntegraMed
Pharmaceutical Services, which was launched in the second quarter of 1999,
accounted for $925,000, or 3%, of revenue for the nine months ended September
30, 1999. Revenue increases were partially offset by the loss of $2.2 million in
revenues related to terminated management agreements.
For the nine months ended September 30, 1999 compared to the nine months
ended September 30, 1998, total costs of services as a percentage of revenues
increased to 78.3% from 76.9%. Employee compensation and related expenses
declined as a percentage of revenue but increased in total by 17% due to
increased levels of compensation and new hires at the clinical level which were
related to volume. Other expenses as a percentage of revenue increased from
14.2% to 16.2% and in total by 36%. This was principally due to increases in
9
<PAGE>
consulting and information system expenses for the first three quarters of 1999,
as well as increases in bad debt provisions and management fees related to the
pharmaceutical venture. Direct materials, occupancy costs and depreciation
remained relatively constant as a percentage of revenues. Direct materials
increased 22% in total primarily due to the cost of products sold at IntegraMed
Pharmaceutical Services. Occupancy costs increased 26% in total due to Shady
Grove's relocation to a newly constructed facility. The above cost increases
were partially offset by the elimination of approximately $3.0 million of costs
related to the terminated management agreements.
General and administrative expenses for the nine months ended September 30,
1999 declined slightly as a percentage of revenue but in total were
approximately 17% higher than for the nine months ended September 30, 1998. The
increase was largely due to staffing, consulting, and other cost increases
related to the development, implementation and maintenance of the Company's
proprietary ARTWorks suite of fertility care information systems.
The provision for income taxes is primarily related to state taxes as the
Company has utilized available net operating loss carryforwards to eliminate any
Federal tax provision. The provision for income taxes decreased 11% for the nine
months ended September 30, 1999 compared to the nine months ended September 30,
1998 due to a change in effective tax rates as a result of tax planning
initiatives.
Liquidity and Capital Resources
Historically, the Company has financed its operations primarily through
sales of equity securities. More recently, the Company used bank resources to
finance working capital and acquisitions. The Company anticipates that its
acquisition strategy will continue to require substantial capital investment. In
order to effect future acquisitions, the Company may pursue a course of equity
or debt financing, or may choose to utilize its existing $9 million bank line of
credit. Capital is needed not only for additional acquisitions, but also for the
effective integration, operation and expansion of the Company's existing Network
Sites.
As of September 30, 1999, the Company had working capital of approximately
$6.7 million, compared to $7.7 million at December 31, 1998. The net decrease in
working capital was primarily due to fixed asset and leasehold improvement
purchases of $2,005,000, the repurchase of 170,600 shares of the Company's
Common Stock for an aggregate purchase price of $733,000 and the $773,000
reduction in long-term debt. These outflows were partially offset by inflows
from patient and management fee receivables.
In November 1999, the Board of Directors of the Company authorized the
repurchase of up to an additional $2,000,000 of the Company's Common Stock, from
time to time, at fair market value, on the open market or through privately
negotiated transactions.
Year 2000 Issue
The Company's management has recognized the importance that its operations
and relationships with its vendors and other third parties not be adversely
impacted by software processing errors arising from calculations using the year
2000 and beyond ("Y2K"). As such, the Company has appointed a Y2K Task Force to
identify and assess the risks associated with its information systems and
operations, and its interactions with vendors and third-party insurance payors
("the Y2K Project"). The Y2K Project is comprised of five phases as follows: 1)
identification of risks, 2) assessment of risks, 3) development of remediation
and contingency plans, 4) implementation, and 5) testing. The Company has
identified and assessed the Y2K risks. The Company is currently working on the
last three phases of the Y2K Project.
The Company believes that the Y2K risks associated with its information
systems and certain medical equipment may be potentially significant. In nearly
all cases, the Company is relying on assurances from third party vendors that
certain information systems and medical equipment will be Y2K compliant. In
10
<PAGE>
addition, in the normal course of business, the Company has made capital
investments in certain vendor supplied software applications and hardware
systems to address the financial and operational needs of its business. These
systems, which will improve the efficiencies and productivity of the replaced
systems, have been represented to be Y2K compliant by the vendors and have been
installed as of November 1999. The Company has tested, such vendor supplied
systems and equipment, but cannot be sure that its tests will be adequate or
that, if problems are identified, they will be addressed in a timely and
satisfactory manner.
The Company is also highly dependent upon receiving payments from third
party payors for insurance reimbursement for claims submitted by the managed
Medical Practices, and as such, the ability of such payors to process claims
submitted by Medical Practices accurately and timely, constitutes a significant
risk to the Company's cash flow. The Corporate Office has been in communication
with these payors throughout the country to ensure that these payors will be Y2K
compliant and will be able to process the Medical Practices' claims
uninterrupted. The network sites will continue with "follow-ups" to this
corporate initiated process where compliance is in question. In addition, the
Company deals with numerous financial institutions, all of which have indicated
that the Y2K compliance issue is being addressed proactively and should not
present a problem on or after January 1, 2000.
As the Company and its managed Medical Practices are primarily reliant on
third party vendors and payors to be Y2K compliant, the Company does not
anticipate that it will incur a material incremental cost associated with
addressing Y2K problems. To date, all of the Company's capital projects
regarding information systems were part of its long-term capital strategic plan.
The timing of implementation of these capital projects was not accelerated as a
result of the Y2K issue, with the exception of the timing of the installation of
a new financial system at the FCI Network Site which was accelerated from the
year 2000 to 1999. The Company estimates that it will incur an aggregate cost of
$315,000 related to the Y2K Project as follows: (i) approximately $140,000
related to computer hardware and software and medical equipment replacements and
upgrades, of which approximately 90% will be capitalizable due to the added
value of such replacements and upgrades; (ii) approximately $130,000 of
non-incremental employee opportunity costs for time spent by information systems
and Y2K Task Force employees who would have ordinarily been spending their time
elsewhere; and (iii) approximately $45,000 in incremental staffing costs. By
accelerating the implementation of the new financial system at the FCI Network
Site, approximately $110,000 of capitalizable equipment and software costs and
approximately $50,000 of training costs will be incurred in 1999 instead of the
year 2000.
In the event any third parties cannot timely provide the Company with
information systems, equipment or services that meet the Y2K requirements, the
Company's ability and that of its managed Medical Practices to offer services
and to process sales, and the Company's cash flows, could be disrupted. In
addition, if the Company fails to satisfactorily resolve Y2K issues related to
its operations in a timely manner, it could be exposed to liability,
particularly to the managed Medical Practices and their patients. As developed
to date, the Company's contingency plan provides for the following: (i)
stockpiling higher than normal inventories of critical supplies; (ii) ensuring
an adequate line of bank credit if third party payor payments are disrupted; and
(iii) ensuring all critical staff are available or scheduled for work prior to,
during and immediately after December 31, 1999.
Management believes that the Company is taking reasonable and adequate
measures to address Y2K issues. However, there can be no assurance that the
Company's information systems, medical equipment and other non-information
technology systems will be Y2K compliant on or before December 31, 1999, or that
vendors and third-party insurance payors are, or will be, Y2K compliant, or that
the costs required to address the Y2K issue will not have a material adverse
effect on the Company's business, financial condition or results of operations.
11
<PAGE>
Like virtually every company, and indeed every aspect of contemporary
society, the Company is at risk for the failure of major infrastructure
providers to adequately address potential Y2K problems. The Company is highly
dependent on a variety of public and private infrastructure providers to conduct
its business in numerous jurisdictions throughout the country. Failures of the
banking system, basic utility providers, telecommunication providers and other
services, as a result of Y2K problems, could have a material adverse effect on
the ability of the Company to conduct its business. While the Company is
cognizant of these risks, a complete assessment of all such risks is beyond the
scope of the Company's Y2K Project or ability of the Company to address. The
Company has focused its resources and attention on the most immediate and
controllable Y2K risks.
Forward Looking Statements
This Form 10-Q and discussions and/or announcements made by or on behalf of
the Company, contain certain forward-looking statements regarding events and/or
anticipated results within the meaning of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the attainment of which
involve various risks and uncertainties. Forward-looking statements may be
identified by the use of forward-looking terminology such as, "may", "will,"
"expect," "believe," "estimate," "anticipate," "continue," or similar terms,
variations of those terms or the negative of those terms. The Company's actual
results may differ materially from those described in these forward-looking
statements due to the following factors: the Company's ability to acquire
additional management agreements, including the Company's ability to raise
additional debt and/or equity capital to finance future growth, the loss of
significant management agreement(s), the profitability or lack thereof at
Reproductive Science Centers managed by the Company, the Company's ability to
transition sole practitioners to group practices, increases in overhead due to
expansion, the exclusion of infertility and ART services from insurance
coverage, government laws and regulations regarding health care, changes in
managed care contracting, the timely development of and acceptance of new
infertility, ART and/or genetic technologies and techniques and the risks
relating to Y2K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
12
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; no material developments in previously reported
matters.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
(a)Exhibits
See Index to Exhibits on page 15.
(b)Reports on Form 8-K
None.
13
<PAGE>
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.
INTEGRAMED AMERICA, INC.
(Registrant)
Date: November 15, 1999 By: /s/John W. Hlywak, Jr.
-----------------------------------
John W. Hlywak, Jr.
Sr. Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
14
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------ -------
10.88(b) -- Management Agreement between IntegraMed America, Inc. and MPD
Medical Associates, P.C. dated July 1, 1999.
10.105(c) -- Amendment No. 3 to the Management Agreement between IntegraMed
America, Inc. and Shady Grove Reproductive Science Center, P.C.
dated September 1, 1999.
10.113(b) -- Master Lease Agreement between Fleet Capital Corporation and
IntegraMed America, Inc.
27 -- Financial Data Schedule
15
MANAGEMENT AGREEMENT
Between
INTEGRAMED AMERICA, INC.
And
MPD MEDICAL ASSOCIATES, P.C.
THIS MANAGEMENT AGREEMENT is dated as of July 1, 1999, by and between
IntegraMed America, Inc., a Delaware corporation, with its principal place of
business at One Manhattanville Road, Purchase, New York 10577 ("Management
Company") and MPD Medical Associates, P.C., a New York professional services
corporation, with its principal place of business at 200 Old Country Road,
Mineola, New York 11501 ("PC").
RECITALS
PC is a medical practice specializing in gynecology and the treatment
of infertility, including the utilization of in vitro fertilization and assisted
reproductive technology services (all such medical services are collectively
referred to herein as "Infertility Services").
Management Company is in the business of owning certain assets and
providing billing and collection, and management and administrative services to
medical practices specializing in the provision of Infertility Services, and
furnishing such medical practices with the necessary facilities, equipment,
personnel, supplies and support staff (collectively, "Management Services") in
order to assist such medical practices in the business aspects of the practice
of their discipline.
PC and Management Company entered into a management agreement dated as
of June 2, 1997, as amended by agreement dated as of January 1, 1998
(collectively the "Former Agreements") pursuant to which Management Company,
agreed to provide, among other things, Management Services.
PC wishes to continue engaging Management Company to provide the
Management Services and Management Company desires to provide such Management
Services upon the terms and conditions herein set forth. PC and Management
Company have determined the fair market value for the full complement of
Management Services rendered by Management Company and have determined and
agreed to a management fee that will allow PC and Management Company to
establish a relationship permitting each party to this agreement to devote its
skills and expertise to the appropriate responsibilities and functions.
<PAGE>
PC and Management Company desire to amend and restate the terms and
conditions of the Former Agreements.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, PC and Management
Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
1.1.1 "Assets" shall mean those fixed assets utilized in
connection with the operation of PC's medical practice.
1.1.2 "Adjustments" shall mean adjustments for refunds,
discounts, contractual adjustments, professional courtesies and other
activities that do not generate a collectible fee as reasonably
determined by Management Company and PC.
1.1.3 "Collections" shall mean the aggregate, over a six (6)
month period, of all Physician and Other Professional Collections.
1.1.4 "Cost of Services" shall mean all ordinary and necessary
expenses of PC and all direct ordinary and necessary operating expenses
of Management Company, without mark-up, incurred in connection with
billing, collection, management and administrative services provided by
Management Company in the management of PC's medical practice, as more
specifically defined in Section 2.1.
1.1.5 "Facilities" shall mean the medical office and clinical
space of PC, including the Mineola and Suffolk Facilities, as defined
in Section 3.2 and any satellite locations, related businesses and all
medical group business operations of PC, which are utilized by PC in
its medical practice.
1.1.6 "Fiscal Year" shall mean the 12 month period beginning
January 1 and ending December 31 of each year.
1.1.7 "Infertility Services" shall mean medical care in
gynecology and the treatment of human infertility, including but not
limited to, the provision of in vitro fertilization and other assisted
reproductive services provided by PC or any Physician Employee and
Other Professional Employee.
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1.1.8 "Management Fee" shall mean an annual fee paid by PC to
Management Company in an amount defined in 6.1.3 of this Agreement.
1.1.9 "Professional Employees" shall mean nurse anesthetists,
physician assistants, nurses, nurse practitioners, psychologists,
embryologists, tissue bank and laboratory personnel and other such
professional employees who may generate professional charges. Such
Professional Employees shall be the employees, or independent
contractors, as the case may be, of the PC.
1.1.10 "Physician Employees" shall mean those individuals who
are employees or members of PC or are otherwise under contract with PC
to provide professional services to PC patients and are duly licensed
as physicians in the State of New York.
1.1.11 "Physician and Professional Collections" shall mean all
fees and revenues actually collected each month by or on behalf of PC
as a result of professional medical services personally furnished to
patients by the PC and other fees or income collected by the PC in its
capacity as a group of professionals, whether rendered in an inpatient
or outpatient setting, including but not limited to, medical director
fees or technical fees from medical ancillary services, consulting fees
and speaking fees.
1.1.12 "Other Employees" shall mean any employee who is not a
Professional Employee or Physician Employee. Each Other Employee shall
be an Management Company employee, unless such employee cannot be
employed by Management Company, in which event such employee shall be
employed by PC.
ARTICLE 2
COST OF SERVICES AND MANAGEMENT FEE
2.1 "Cost of Services" (as defined in Section 1.1.4) includes without
limitation, the following costs and expenses, whether incurred by Management
Company or PC:
2.1.1 Salaries, fringe benefits and direct costs of all Other
Employees of Management Company working directly in the management, operation or
administration of the practice and all salaries, and fringe benefits of all PC
employees (including, without limitation, Professional Employees but excluding
Physician Employees) providing services at PC, along with payroll taxes or all
other taxes and charges now or hereafter applicable to such personnel;
2.1.2 Expenses incurred in the recruitment of additional
physicians for PC, including, but not limited to employment agency fees,
relocation and interviewing expenses and any actual out-of-pocket expenses of
Management Company personnel in connection with such recruitment effort;
3
<PAGE>
2.1.3 Direct marketing expenses of PC, such as direct costs of
printing marketing materials prepared by Management Company;
2.1.4 Any sales and use taxes assessed against PC related to
the operation of PC's medical practice;
2.1.5 Lease payments, depreciation expense (determined
according to GAAP), taxes and interest directly relating to the Facilities and
equipment, and other expenses of the Facilities described in Section 3.2 below;
2.1.6 Legal fees paid by Management Company or PC to outside
counsel in connection with matters specific to the operation of PC such as
regulatory approvals required as a result of the parties entering into this
Agreement; provided however, legal fees incurred by the parties hereto as a
result of a dispute between the parties shall not be considered a Cost of
Services.
2.1.7 Fringe benefits provided to Physician Employees;
2.1.8 All insurance necessary to operate PC including fire,
theft, general liability and malpractice insurance for Physician-Employees of
the PC;
2.1.9 Professional licensure fees and board certification fees
of Physician Employees and Professional Employees rendering Infertility Services
on behalf of PC;
2.1.10 Membership in professional associations and continuing
professional education for Physician Employees and Professional Employees;
2.1.11 The direct costs in maintaining a Quality Assurance
Program described in Section 3.7 herein;
2.1.12 Cost of filing fictitious name permits pursuant to this
Agreement;
2.1.13 The cost of medical supplies, including but not limited
to drugs, pharmaceuticals, products, substances, items, laboratory supplies,
office supplies, inventory and utilities; and
2.1.14 Such other costs and expenses directly incurred by
Management Company or PC necessary for the management or operation of PC.
2.2 Notwithstanding anything to the contrary contained herein, Cost of
Services shall not include costs of the following:
2.2.1 Costs or expenses not included in the annual budget
prepared by Management Company pursuant to Section 3.4 herein, unless approved
by the Joint Practice Management Board;
4
<PAGE>
2.2.2 The Management Fee;
2.2.3 Any proportion of Management Company's costs
attributable to its operation of its corporate offices or payment of its
officers or employees who work out of its corporate offices;
2.2.4 Any federal or state income taxes of Management Company
other than as provided above.
2.3 The "Management Fee" shall cover and include all indirect costs of
Management Company including legal, accounting, financial, marketing, management
and administrative assistance provided by Management Company's corporate and
regional staff.
ARTICLE 3
DUTIES AND RESPONSIBILITIES OF MANAGEMENT COMPANY
3.1 MANAGEMENT SERVICES AND ADMINISTRATION.
3.1.1 PC hereby appoints Management Company as PC's sole and
exclusive manager and administrator of all of its day-to-day business functions
and grants Management Company all the necessary authority to carry out its
duties and responsibilities pursuant to the terms of this Agreement. PC and only
PC will perform the medical functions of its practice. Management Company will
have no authority, directly or indirectly, to perform, and will not perform, any
medical function. Management Company may, however, advise PC as to the
relationship between its performance of medical functions and the overall
administrative and business functioning of its practice.
3.1.2 Management Company shall, on behalf of PC, bill patients
and collect professional fees for Infertility Services rendered by PC at the
Facilities, outside the Facilities for PC's hospitalized patients, and for all
other Infertility Services rendered by any Physician Employee or Professional
Employee. PC hereby appoints Management Company for the term hereof to be its
true and lawful attorney-in-fact, for the following purposes: (i) to bill
patients in PC's name and on its behalf; (ii) to collect accounts receivable
resulting from such billing in PC's name and on its behalf; (iii) to receive
payments from insurance companies, prepayments received from health care plans,
and all other third- party payors; (iv) to take possession of and endorse in the
name of PC (and/or in the name of any Physician Employee or Other Professional
Employee rendering Infertility Services to patients of PC) any notes, checks,
money orders, and other instruments received in payment of accounts receivable;
and (v) with the consent of the PC, not to be unreasonably withheld, to initiate
the institution of legal proceedings in the name of PC to collect any accounts
and monies owed to PC, to enforce the rights of PC as creditor under any
contract or in connection with the rendering of any service, and to contest
adjustments and denials by governmental agencies (or its fiscal intermediaries)
as third-party payors.
5
<PAGE>
3.1.3 Management Company shall supervise and maintain (on
behalf of PC) all files and records relating to the operations of the
Facilities, including but not limited to accounting and billing records, patient
medical records, and collection records. Patient medical records shall at all
times be and remain the property of PC and shall be located at the Facilities
and be readily accessible for patient care. Management Company's management of
all files and records shall comply with all applicable state and federal laws
and regulations, including without limitation, those pertaining to
confidentiality of patient records. The medical records of each patient shall be
expressly deemed confidential and shall not be made available to any third party
except in compliance with all applicable laws, rules and regulations. Management
Company shall have access to such records in order to provide the services
hereunder, to perform billing functions, and to prepare for the defense of any
lawsuit in which those records may be relevant. The obligation to maintain the
confidentiality of such records shall survive termination of this Agreement. PC
shall have unrestricted access to all of its records at all times.
3.1.4 Management Company shall supply to PC all reasonably
necessary clerical, accounting, bookkeeping and computer services, printing,
postage and duplication services, medical transcribing services, and any other
necessary or appropriate administrative services reasonably necessary for the
operation of PC's medical practice at the Facilities.
3.1.5 Should PC so direct, Management Company shall design and
implement a marketing and public relations program on behalf of PC, with
appropriate emphasis on public awareness of the availability of Infertility
Services from PC, designed to achieve objectives defined by PC. The public
relations program shall be conducted in compliance with applicable laws and
regulations governing advertising by the medical profession. PC shall approve
all advertising and marketing materials prior to use.
3.1.6 Management Company shall assist PC in recruiting
additional physicians, including such administrative functions as advertising
for and identifying potential candidates, checking credentials, and arranging
interviews; provided, however, PC shall interview and make the ultimate decision
as to the suitability of any physician to become associated with PC. All
physicians recruited by Management Company and accepted by PC shall be employees
of or independent contractors to PC.
3.1.7 Management Company shall negotiate, but shall not enter
into, and shall administer all managed care contracts on behalf of PC and shall
consult with PC on all administrative matters relating thereto. The
establishment, or continuation, of all managed contracts between the PC or any
of its Physician Employees and any managed care entity or organization, shall be
based on their financial terms and shall only be with the mutual consent of the
PC and Management Company.
3.1.8 Management Company shall, upon direction of PC, arrange
for legal and accounting services as may be reasonably required in the ordinary
course of the PC's operation, including the cost of enforcing any physician
contract containing restrictive covenants; provided, however, that Management
Company shall have no authority to arrange for any legal or accounting services
to the extent that the interests of Management Company and the PC in the matter
in question shall be adverse nor shall Management Company have any obligation to
make any Advance, as such term is used in Section 6.2, for such services.
Nothing contained herein is intended to authorize Management Company to settle
any claim made by or against PC.
6
<PAGE>
3.1.9 Management Company shall, upon the request of the PC,
negotiate for and cause premiums to be paid with respect to the insurance
provided for in Article 10.
3.1.10 Management Company shall, take such other reasonable
actions to collect fees and pay expenses of the Facilities in a timely manner as
are deemed reasonably necessary to facilitate the operation of PC's medical
practice at the Facilities.
3.1.11 Management Company shall, pay Cost of Services in the
ordinary course of PC's medical practice, it being understood that Management
Company shall make such payments in the first instance, from Physicians and
Other Collections, after deduction of Management Fees, and, if necessary, by
Advances as contemplated by Section 6.3 hereof.
3.1.12 If, at the end of any quarter, after the payment of all
Service Fees and draws of the Physician Shareholders, there shall be profits to
the PC, Management Company shall, at the direction of the PC, make any
distributions of such profits as requested by the PC, provided that such
distributions leave a reasonable reserve towards the next quarter's Service
Fees.
3.2 FACILITIES.
3.2.1 Facilities. Management Company shall provide the office
space and facilities necessary for the operation of PC's medical practice in
Mineola ["Mineola Facilities"] and Suffolk County [Suffolk Facilities'] [the
Mineola Facilities and Suffolk Facilities are collectively referred to herein as
the "Facilities"], as set forth in Exhibit 3.2 hereto, including but not limited
to, the use of the Facilities, all repairs, maintenance and improvements
thereto, utility (telephone, electric, gas, water) services, customary
janitorial services, refuse disposal and all other services reasonably necessary
in conducting the Facilities' physical operations. Management Company shall
provide for the cleanliness of the Facilities, and timely maintenance and
cleanliness of the equipment, furniture and furnishings located therein.
Management Company shall consult with PC regarding the condition, use and needs
for the Facilities, equipment, services and improvements thereto. The
"build-out" costs for the Suffolk Facilities of approximately One Hundred
Thousand Dollars ($100,000.00) shall be amortized over a ten (10) year period
from completion of the Suffolk Facilities for occupancy ("Construction
Investment").
3.2.2 Upon the mutual agreement of the parties, Management
Company and the PC shall establish such other sites for the operation of the
practice of the PC and, in the absence of a formal written agreement governing
the establishment thereof, all costs shall be added to the Management Company
Construction Investment and Management Company and the PC shall assume all of
the obligations, as to such sites as each has with respect to the Facilities.
7
<PAGE>
3.3 EXECUTIVE DIRECTOR AND OTHER PERSONNEL.
3.3.1 EXECUTIVE DIRECTOR. Management Company will hire an
Executive Director, subject to the approval of the Joint Practice Management
Board, to manage and administer all of the day-to-day business functions of the
Facilities. The Executive Director, subject to the terms of this Agreement,
shall implement the policies agreed upon by the Joint Practice Management Board
and will perform the administrative duties assigned by Management Company.
3.3.2 PERSONNEL. Management Company shall provide all Other
Employees, who shall include non-professional support personnel and
administrative personnel, clerical, secretarial, bookkeeping, billing and
collection personnel reasonably necessary for the operation of PC at the
Facilities. Such personnel shall be under the direction, supervision and control
of Management Company. If PC is dissatisfied with the services of any Other
Employee, PC shall consult with Management Company, and Management Company shall
in good faith determine whether the employment of that employee warrants
termination. Management Company's obligations to utilize nonprofessional
personnel shall be governed by the overriding principle and goal of facilitating
the PC's provision of high quality medical care and laboratory services.
Management Company shall make every effort, consistent with sound business
practices, to honor the specific requests of PC with regard to the assignment of
Management Company's employees, including the Executive Director.
3.4 FINANCIAL PLANNING AND GOALS. Management Company shall prepare, for
the approval of PC, annual capital and operating budgets reflecting the
anticipated revenues and expenses, sources and uses of capital for growth of
PC's practice and for the provision of Infertility Services at the Facilities.
Management Company shall present the budgets to PC for its approval at least
thirty (30) days prior to the commencement of the Fiscal Year. PC shall specify
the targeted profit margin for PC's practice at the Facilities which shall be
reflected in the overall budget, and Management Company shall manage the PC and
use all reasonable efforts to attempt to reach such target. If the parties do
not agree on the budget for any Fiscal Year, the budget for the preceding Fiscal
Year shall serve as the budget until such time as the Budget is the subject of
agreement. Management Company's ability to disapprove an item in the Budget
shall be limited to its refusal to advance monies to the PC pursuant to Section
6.3 of this Agreement , and payments to Management Company of Service Fees,
pursuant to Section 6.1 of this Agreement, shall have priority to the payment of
any items to which Management Company makes objection.
3.5 FINANCIAL STATEMENTS. Management Company shall prepare annual
financial statements for operations of PC at the Facilities within ninety (90)
days of the close of the Fiscal Year. Management Company shall prepare monthly
financial statements containing a balance sheet and statement of operations,
which shall be delivered to PC within thirty (30) days after the close of each
calendar month.
8
<PAGE>
3.6 INVENTORY AND SUPPLIES. Management Company shall order and purchase
inventory and supplies, and such other materials which are requested by PC to
enable PC to deliver Infertility Services in a cost-effective manner.
3.7 LICENSES AND PERMITS Management Company shall, on behalf of and in
the name of the PC, coordinate and assist the PC in its application for and
efforts to obtain and maintain all federal state and local licenses,
certifications and regulatory permits required for or in connection with the
operation of the PC and equipment located at the Facilities, other than those
relating to the practice of medicine or the administration of drugs by Physician
Employees.
3.8 QUALITY IMPROVEMENT. Management Company shall assist PC in
fulfilling its obligations to maintain a Quality Improvement Program and in
meeting the goals and standards of such program.
ARTICLE 4
DUTIES AND RESPONSIBILITIES OF PC
4.1 PROFESSIONAL SERVICES. PC shall provide to its patients medical
treatment, including but not limited to, Infertility Services which can be
covered by the Management Company insureds insurance program.
4.2 MEDICAL PRACTICE. PC shall use and occupy the Facilities
exclusively for the purpose of providing medical services. The medical practice
conducted at the Facilities shall be conducted solely by physicians or
Professional Employees employed by or serving as independent contractors to PC.
4.3 DIRECTION OF PRACTICE
4.3.1 PC, as a continuing condition of Management Company's
obligations under this Management Agreement, shall at all time during
the Term be and remain
legally organized and operated to provide Infertility Services in a
manner consistent with state and federal laws.
4.3.2 PC covenants that should a physician become a
shareholder of the PC, that a condition precedent to the issuance of
the shares shall be the ratification of this Management Agreement.
9
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4.3.3 PC covenants to use diligent efforts to cooperate with
Management Company in order to obtain necessary licenses. Management
Company shall be primarily responsible for the administrative
responsibility of pursuing, in behalf of, and in the name of, the PC,
any and all necessary licenses to operate the laboratory and tissue
bank services existing on the date hereof at the Mineola Facility, and
any licenses required at the Suffolk Facility or any other Facility in
accordance with all applicable laws and regulations. PC agrees that the
Medical Director(s) or Tissue Bank Director(s) shall be Physician
Employees or Professional Employees of the PC and that should there be
a vacancy in any such position, the PC will cause another Physician
Employee or Professional Employee to fill such vacancy.
4.3.4 PC acknowledges that it bears all medical obligations to
patients treated at the facilities and covenants that it is responsible
for all tissue, specimens, embryos or biological material ["Biological
Materials"] kept at the Facilities on behalf of the patients (or former
patients) of the PC. In the event of a termination or dissolution of
the PC, or the termination of this Management Agreement for any reason,
the PC and its members shall have the obligation to account to patients
and to arrange for the storage or disposal of such Biological Materials
["Relocation Program"]. Management Company, in such event, shall, at
the request of the PC, assist in the administrative details of such a
Relocation Program for so long as the PC shall request and the
Management Fee shall be paid during that time. These obligations shall
survive the termination of this Agreement.
4.3.5 PC covenants not to liquidate or dissolve as a
Professional Corporation except on six months prior written notice to
Management Company. In the event that any liquidation or dissolution of
the PC occurs, for a reason other than the death or disability of all
of the shareholders, Management Company's obligations under this
Agreement shall cease.
4.4 COLLECTION EFFORTS. PC covenants agrees that during the term of
this Agreement it will use its diligent efforts to cause its Physician Employees
and Professional Employees to execute such documents and take such steps
reasonably necessary to assist billing and collecting for patient services
rendered by PC and its Physician Employees and Professional Employees.
Article 5
Joint Duties and Responsibilities
5.1 FORMATION AND OPERATION OF JOINT PRACTICE MANAGEMENT BOARD.
Management Company and PC will establish a joint practice management board
("Joint Practice Management Board") which will be responsible for developing
management and administrative policies for the effectuation of this Agreement.
The Joint Practice Management Board will consist of designated management
representatives from Management Company, one or more PC owners, as determined by
10
<PAGE>
PC, such other PC physicians, as appropriate and determined by PC, and the
Executive Director. Management Company's role on the Joint Practice Management
Board will be advisory, except in circumstances where matters for consideration
involve Cost of Services items to be paid by Management Company or Advances by
Management Company, in which event, Management Company shall be entitled to vote
on such matters. For such matters requiring a formal vote, PC shall have one (1)
vote and Management Company shall have one (1) vote. A tie vote will be the same
as a vote against any matter or issue. The Management Company's negative vote
shall mean only that the Management Company shall not advance money for such
matters, by way of either payment of Costs of Services for such matters or
through the making of Advances, and such negative vote shall not, in any manner,
prevent PC from adopting or pursuing such matter.
5.2 DUTIES AND RESPONSIBILITIES OF THE JOINT PRACTICE MANAGEMENT Board.
The Joint Practice Management Board shall have, among others, the following
duties and responsibilities:
5.2.1 ANNUAL BUDGETS AND PROFITABILITY. All annual capital and
operation budgets prepared by Management Company shall be subject to
the review, amendment, approval and disapproval of the Joint Practice
Management Board. PC covenants and agrees to use its best efforts to
assist the Joint Management Board in achieving the projected budgets,
in place from time to time. PC and Management Company agree that,
recognizing changes in circumstances, annual budgets and forecast are
subject to revisions and, accordingly, they will cause the Joint
Practice Management Board to modify the annual budgets, as needed,
including without limitation, staff reductions, to ensure that PC
operates in a profitable mode which means that PDE is positive on a
monthly basis. Further, PC agrees that in the event PC incurs
operational losses at any point during the term of this Agreement,
nothing herein shall obligate Management Company to incur losses under
this Agreement in order to sustain PC's operations.
5.2.2 CAPITAL IMPROVEMENTS AND EXPANSION. Except as otherwise
provided herein, any renovation and expansion plans, and capital
equipment expenditures with respect to PC shall be reviewed and
approved by the Joint Practice Management Board and shall be based upon
the best interests of PC, and shall take into account capital
priorities, economic feasibility, physician support, productivity and
then current market and regulatory conditions.
5.2.3 ADVERTISING BUDGET. All annual advertising and other
marketing budgets prepared by Management Company shall be subject to
the review, amendment, approval and disapproval of the Joint Practice
Management Board.
5.2.4 EXECUTIVE DIRECTOR AND KEY PERSONNEL.
(a) The selection and retention of the Executive Director
pursuant to Section 3.3.1 by Management Company shall be subject to the
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approval of the Joint Practice Management Board. If PC is dissatisfied
with the services provided by the Executive Director, PC shall consult
with Management Company who shall, in good faith, determine whether the
performance of the Executive Director could be brought to acceptable
levels through counsel and assistance, or whether the Executive
Director should be terminated.
(b) Management Company shall follow the recommendations of the
Joint Practice Management Board with respect to the hiring, terminating
or relocating of key personnel at PC Facilities, provided such
recommendations do not cause Management Company to violate any federal,
state or local laws or regulations.
ARTICLE 6
FINANCIAL ARRANGEMENTS
6.1 SERVICE FEES. The compensation set forth in this Article 6 shall be
paid to Management Company in consideration of the substantial commitment made
and services to be rendered by Management Company hereunder and shall not be
interpreted or applied as permitting Management Company to share in the fees of
the PC. Prior to entering into this Agreement, the parties have computed the
Cost of Services of the P.C. for the past full fiscal year and have projected
the Costs of Services for the full calendar year of this agreement. The bases of
the negotiated, fixed Management Fee, which the parties agree to represent the
fair market value of services, supplies and facilities, include, but are not
limited to, a combined figure of (1) reasonable market value of the equipment,
contract analysis and support, support services, purchasing, personnel,
Facilities, management, administration, other services and capital provided by
Management Company; (2) value to be received monthly by PC as the result of
Management Company's purchase of accounts receivable pursuant to 6.2 hereof; (3)
The value of Management Company's Construction Investment; (4) the value of
insurance coverages made available to PC through group rates available to
Management Company; (5) the increased value to PC as the result of Management
Company's access to better rates for supplies through bulk purchase; and (6) the
ability of Management Company to manage the practice with greater profitability
to PC. The negotiated compensation is intended to account for the nature,
quantity and quality of services required, and financial risks assumed by
Management Company under this Management Agreement. Management Company shall be
paid the following amounts (collectively "Service Fees"):
6.1.1 An amount reflecting all Cost of Services (whether
incurred by Management Company or PC) paid or recorded by Management
Company from Management Company's own funds, pursuant to the terms of
this Agreement; and
6.1.2 Repayment of any Advances or Discretionary Advances; and
6.1.3 Management Fee of $45,000 (Forty-Five Thousand Dollars)
per month ("Monthly Management Fee").
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6.2 COLLECTIONS AND MANAGEMENT COMPANY PURCHASE OF ACCOUNTS RECEIVABLE.
On or before the 20th business day of each month, Management Company shall
reconcile the accounts receivable of the PC arising during the previous calendar
month. Accounts receivable shall be defined as all receivable recorded each
month (net of Adjustments) on the books of the PC ["Accounts Receivable"]. The
adjustments made shall only reflect actual collection history of the PC and
Management Company shall pay dollar-for-dollar on such Adjusted Accounts
Receivable. Management Company shall transfer or pay such amount of funds to PC
equal to the Accounts Receivable less Cost of Services and Basic Management Fee,
the latter payment subject to Sections 3.1.12 and 3.1.13. Management Company
shall, in addition, transfer such portion of the Service Fees necessary to pay
such portion of the Cost of Services which are costs and expenses of the PC, as
described in Section 2.1 hereof. PC shall cooperate with Management Company and
execute all necessary document necessary to effect an assignment of such
Accounts Receivable to Management Company or, at Management Company's option, to
its lenders. All collections in respect of such Accounts Receivable shall be the
property of Management Company and deposited in a bank account at a bank
designated by Management Company. To the extent that the PC comes into
possession of any payments which are in satisfaction or all, or any part, of
such Accounts Receivable, the PC shall direct such payments to Management
Company for deposit in bank accounts designated by Management Company.
6.3 ADVANCES. Management Company agrees to advance funds to PC to meet
Cost of Services, or provide working capital ["Advances"], although the purchase
of Accounts Receivable and the Management Company Construction Investment shall
not be constitute Advances. Management Company may, in its sole discretion, at
the request of the PC, advance funds to fund mergers with other physicians or
physician groups into PC ["Discretionary Advance(s)"]. All Advances and
Discretionary Advances shall be made only with the mutual agreement of PC and
Management Company.
6.3.1 Any Advances or Discretionary Advances made pursuant to
this Management Agreement shall be a debt owed to Management Company by
PC and shall have payment priority over any distribution to PC's
Physician-Shareholder(s). Any Advance shall be repaid from any
distribution to Physician-Shareholder(s) of PC either as a lump sum
payment, within 60 days after the advance, or in installments as agreed
to by Management Company.
6.3.2 Interest expense will be charged for Advances and
Discretionary Advances and will be computed at the Prime Rate used by
Management Company's primary bank, from time to time (the "Prime
Rate"). Advances shall be evidenced by a security agreement, in the
form of Exhibit 6.3.2, giving Management Company a collateral interest
in all accounts receivable and distributions to PC's Shareholder(s).
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6.4 The Monthly Management Fee provided for in Section 6.1.3 shall be
adjusted on the dates indicated below, and as adjusted, shall become the Monthly
Management Fee for the applicable period:
6.4.1 For the Fiscal Year commencing January 1, 2000 the
Monthly Management Fee shall be the greater of (i) $45,000 multipied by
a fraction, the numerator of which shall be the Consumer Price Index[
(the "CPI" as hereinafter defined) for "All Items" shown on the "New
York Metropolitan Area" (unadjusted for seasonal variation) as
promulgated by the Bureau of Labor Statistics of the United States
Department of Labor ("Department of Labor") for the month of September
1999 and the denominator of which shall be the CPI for the month of
September 1998. In the event that a substantial change is made by the
Department of Labor in the method by which the CPI is established
during the term of this Agreement, then the CPI shall be adjusted to
the figure that would have resulted had no change occured in the manner
of computing the CPI. If the CPI as defined herein is no longer
published by the Department of Labor, a reliable governmental or
nonpartisan publication evaluating the information theretofore used in
detemining the CPI shall be used in lieu thereof], or (ii) $47,500.00
per month.
6.4.2 For the Fiscal Year commencing January 1, 2001, the
Monthly Management Fee shall be the greater of (i) $45,000 multipied by
a fraction, the numerator of which shall be the Consumer Price Index[
(the "CPI" as hereinafter defined) for "All Items" shown on the "New
York Metropolitan Area" (unadjusted for seasonal variation) as
promulgated by the Bureau of Labor Statistics of the United States
Department of Labor ("Department of Labor") for the month of September
2000 and the denominator of which shall be the CPI for the month of
September 1998 or (ii) $50,000 per month.
6.4.3 For the Fiscal Year commencing January 1, 2002, the
Monthly Management Fee shall be the greater of (i) $45,000 multipied by
a fraction, the numerator of which shall be the Consumer Price Index[
(the "CPI" as hereinafter defined) for "All Items" shown on the "New
York Metropolitan Area" (unadjusted for seasonal variation) as
promulgated by the Bureau of Labor Statistics of the United States
Department of Labor ("Department of Labor") for the month of September
2001 and the denominator of which shall be the CPI for the month of
September 1998 or (ii) $52,000 per month.
6.4.4 For the Fiscal Year commencing January 1, 2003, the
Monthly Management Fee shall be the greater of (i) $45,000 multipied by
a fraction, the numerator of which shall be the Consumer Price Index[
(the "CPI" as hereinafter defined) for "All Items" shown on the "New
York Metropolitan Area" (unadjusted for seasonal variation) as
promulgated by the Bureau of Labor Statistics of the United States
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Department of Labor ("Department of Labor") for the month of September
2002 and the denominator of which shall be the CPI for the month of
September 1998 or (ii) $55,000 per month.
6.4.5 For the Fiscal Year commencing January 1, 2004, the
Monthly Management Fee shall be the greater of (i) $45,000 multipied by
a fraction, the numerator of which shall be the Consumer Price Index[
(the "CPI" as hereinafter defined) for "All Items" shown on the "New
York Metropolitan Area" (unadjusted for seasonal variation) as
promulgated by the Bureau of Labor Statistics of the United States
Department of Labor ("Department of Labor") for the month of September
2003 and the denominator of which shall be the CPI for the month of
September 1998 or (ii) $57,500 per month.
6.4.6 For the Fiscal Year commencing January 1, 2005, the
Monthly Management Fee shall be an amount that Management Company and
PC shall have negotiated in advance of January 1, 2005. In the event
Management Company and PC shall not have prior to January 1, 2005
agreed upon a Monthly Management Fee for the Fiscal Year commencing
January 1, 2005, then the 2004 Monthly Management Fee in effect prior
to January 1, 2005 shall continue in effect until such time as
Management Company and PC shall agree upon a Monthly Management Fee for
the Fiscal Year commencing January 1, 2005. For each Fiscal Year
subsequent to January 1, 2005, Management Company and PC shall likewise
negotiate a Monthly Management Fee. In the event Management Company and
PC are unable to negotiate successfully a Monthly Management Fee for
such subsequent Fiscal Years, then the Monthly Management Fee in effect
prior to the commencement of any such Fiscal Year shall pertain until
such time as Management Company and PC are able to negotiate
successfully a Monthly Management Fee for the applicable Fiscal Year,
which agreed upon Monthly Management Fee shall be retroactive to the
commencement of such Fiscal Year.
ARTICLE 7
EXCLUSIVE MANAGEMENT RIGHT, TERM AND RENEWAL
7.1 PC grants to Management Company the exclusive right to manage PC
during the term of this Agreement (the "Exclusive Management Right"). In
consideration of the Exclusive Management Right, Management Company agrees as
follows:
7.1.1 Management Company shall pay Dr. San Roman $100,000.00
(One Hundred Thousand Dollars) in cash within 30 days after Dr. San
Roman and PC cause another physician to become a senior equity owner of
PC on or before December 31, 1999 and completes three (3) months of
practice at the PC ("Second Shareholder"). For purposes of this
Agreement "senior equity owner" shall mean a physician owning not less
than a twenty-six per cent (26%) interest in PC.
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7.1.2 Management Company shall pay Dr. San Roman $100,000.00
(One Hundred Thousand Dollars) in cash within 30 days after PC, Dr. San
Roman and the Second Shareholder cause a third Physician-Shareholder to
become a equity owner of PC with not less than a ten percent (10%)
equity interest which 10% interest shall become not less than twenty
(20%) within 36 months thereafter. In the event such
Physician-Shareholder does not become at least a twenty percent (20%)
equity owner within the 36 months, Dr. San Roman shall remit to
Management Company, the amount paid pursuant to this Section, within 30
days after demand by Management Company.
7.2 The term of this Agreement shall begin on July 1, 1999 and shall
expire ten (10) years after such date unless earlier terminated pursuant to
Article 8 below. This Agreement may be renewed by either party, if within the
period of 180 days prior to the date of expiration, one party gives notice to
the other of its intention to continue this Agreement under the same terms and
conditions as set forth herein or under such different terms and conditions as
particularly set forth in the written notice and further providing that the
other party has 30 days from the date of notice to accept, reject or modify the
offer. If within 30 days the other party does not respond or by written notice
accepts, this Agreement shall continue for an additional 10 years under the
terms and conditions as provided in the notice. In the event the offer is not
accepted, the parties agree to negotiate, in good faith, a renewal of this
Agreement.
ARTICLE 8
TERMINATION OF THE AGREEMENT
8.1 TERMINATION. This Agreement may be terminated by either party in
the event of the following:
8.1.1 INSOLVENCY. If a receiver, liquidator or trustee of any
party shall be appointed by court order, or a petition to reorganize
shall be filed against any party under any bankruptcy, reorganization
or insolvency law, and shall not be dismissed within 90 days, or any
party shall file a voluntary petition in bankruptcy or make assignment
for the benefit of creditors, then either of the other parties may
terminate this Agreement upon 10 days prior written notice to the other
parties.
8.1.2 MATERIAL BREACH. If either party shall materially breach
its obligations hereunder, then either of the other parties may
terminate this Agreement by providing 30 days prior written notice to
the breaching party detailing the nature of the breach, provided that
the breaching party shall not have cured the breach within such 30 day
period, or, with respect to breaches that are not curable within such
30 day period, shall not have commenced to cure such breach within such
30 day
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period and thereafter shall not have cured the breach with the exercise
of due diligence.
8.1.3 ILLEGALITY. Either party may terminate this Agreement
immediately upon receipt of notification by any local, state or federal
agency or court of competent jurisdiction that the conduct contemplated
by this Agreement is forbidden by law; except that this Agreement shall
not terminate during such period of time as to any party which contests
such notification in good faith and the conduct contemplated by this
Agreement is allowed to continue during such contest. If any governing
regulatory agency asserts that (i) the services provided by Management
Company under this Agreement are unlawful, (ii) the practice of
medicine by PC as contemplated by this Agreement is unlawful, or (ii)
the services provided by Management Company requires a certificate of
need; and any such assertion is not contested (or if contested, the
agency's assertion is found to be correct by a court of competent
jurisdiction and no appeal is taken, or if any appeals are taken and
the same are unsuccessful), this Agreement shall thereupon terminate
with the same force as if such termination date was the date originally
specified in this Agreement as the date of final expiration of the
terms of this Agreement. Notwithstanding this paragraph, the parties
acknowledge that this Agreement serves the interests of both PC and
Management Company and, specifically, affords PC the opportunity for
growth, and self-direction, and provides access to essential capital
and cash flow. For these reasons, PC agrees to make such amendments to
this Agreement as are necessary to conform to the opinions, reviews
and/or orders of regulatory and/or administrative agencies of the State
of New York, such as to preserve the legality of this Agreement
provided that such are not to the financial detriment of the PC.
8.1.4 TERMINATION UPON TWELVE MONTHS WRITTEN NOTICE. Either
party may terminate this Agreement upon twelve (12) months prior
written notice.
8.2 TERMINATION BY MANAGEMENT COMPANY FOR PROFESSIONAL DISCIPLINARY
ACTIONS. Management Company may terminate this Agreement upon 10 days prior
written notice to PC if any PC shareholder's, having an equity ownership of 25%
or more ("25% Shareholder"), authorization to practice medicine is suspended,
revoked or not renewed, or if any other formal disciplinary action is taken
against any 25% Shareholder which could reasonably lead to a suspension,
revocation or non-renewal of a 25% Shareholder's license.
8.3 TERMINATION BY MANAGEMENT COMPANY FOR FAILURE OF PC TO ADD
ADDITIONAL PHYSICIANS. Management Company may terminate this Agreement upon 30
days prior written notice to PC if PC fails to increase the number of
shareholders, pursuant to Section 7.1.2 by July 1, 2002.
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ARTICLE 9
RIGHTS UPON TERMINATION
9.1 If this Agreement is terminated for any reason, other than
illegality, or the insolvency or material breach by Management Company, then
Management Company and the PC agree as follows:
9.1.1 PC shall purchase, and Management Company shall sell,
any Assets at the net book value determined in accordance with
generally accepted accounting principles consistently applied as to the
date of termination. Should this Agreement terminate prior to October
1, 2002, then the PC shall pay to Management Company not only the
unamortized portion of Management Company's Construction Investment,
but interest on such amount, to be computed at the Prime Rate and
retroactive to the date or dates of such Construction Investment.
9.1.2 PC shall assume all leases for offices and equipment
used directly for the management and operation of the PC's business,
both at the Mineola and Suffolk sites and any other sites existing as
of the date of termination, or if assumption is not permitted, make all
payments called for by such leases, to Management Company.
9.1.3 PC shall notify, within 30 days of the date of
termination, all patients with Biological Materials in storage at the
Facility, that Management Company will no longer provide management
services and that the care and custody of such Biological Materials
rests solely with the PC. The form of such notification shall be with
the consent of Management Company (such consent not to be unreasonably
withheld).
9.1.4 PC shall repay any indebtedness, owned to Management
Company as the result of Advances, Discretionary Advances or Service
Fees. In addition, any unamortized portions of the payments made to Dr.
San Roman pursuant to Sections 7.1.1 and 7.1.2 shall be repaid by Dr.
San Roman within 30 days of the date of termination. For purposes of an
amortization of the payments pursuant to Sections 7.1.1 and 7.1.2,
Management Company will amortize such payments over a three-year
period.
9.1.5 The sale and purchase, assumptions and/or assignments
contemplated by sections 9.1.1 and 9.1.2 shall be accomplished at a
closing to be held within 60 days of the effective date of termination
(or sooner shall the parties mutually agree) and any and all payments
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to IntegraMed shall be made, in equal monthly installments, over
thirty-six months, payment to commence on the first day of the first
full month following the termination date.
9.2 If this Agreement terminates as the result of illegality, or the
insolvency or material breach by Management Company, then PC and Management
Company agree as follows:
9.2.1 PC shall have the option, but not the obligation, to
purchase, and Management Company shall, upon the exercise of such
option sell, any Assets at the net book value determined in accordance
with generally accepted accounting principles consistently applied as
to the date of termination.
9.2.2 PC shall have the option, but not the obligation, to
assume all leases for offices and equipment used directly for the
management and operation of the PC's business, both at the Mineola and
Suffolk sites and any other sites existing as of the date of
termination, or if assumption is not permitted, make all payments
called for by such leases, to Management Company. Management Company
agrees to assign its rights to such facilities should the PC exercise
its option, or accept payments in lieu of assumption.
9.2.3 Management Company will notify, within 30 days of the
date of termination, all patients with Biological Materials in storage
at the Facility, that Management Company will no longer provide
management services and that the care and custody of such Biological
Materials rests solely with the PC. The form of such notification shall
be with the consent of Management Company (such consent not to be
unreasonably withheld).
9.2.4 The PC shall repay any indebtedness, owed to Management
Company as the result of Advances, Discretionary Advances or Service
Fees.
9.2.5 PC shall exercise its the options provided in 9.2.1 and
9.2.2, by written notice to Management Company within thirty (30) days
of the effective date of termination. The sale and purchase,
assumptions and/or assignments contemplated by sections 9.1.1 and 9.1.2
shall be accomplished at a closing to be held within 75 days of the
effective date of termination (or sooner shall the parties mutually
agree) and any and all payments to IntegraMed shall be made, in equal
monthly installments, over twenty-four months, payment to commence on
the first day of the first full month following the termination date.
9.3 In the event of termination for any reason, the continuing
obligations delineated in Article 11, and Sections 12.14, and 12.15 (and any
subparts thereof) shall continue pursuant to their terms.
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ARTICLE 10
INSURANCE
10.1 Management Company shall use its best efforts to cause PC to be
made an additional insured under Management Company's professional liability
coverage; provided, however, conditions for being made an additional insured
shall be (i) PC utilizing patient informed consent forms supplied by Management
Company, provided such forms are consistent with law and any guidelines issued
by the American Society of Reproductive Medicine and (ii) PC complying with
requirements of Management Company's insurance company. Management Company shall
also carry a policy of public liability and property damage insurance with
respect to the Facilities under which the insurer agrees to indemnify Management
Company and PC against all cost, expense and/or liability arising out of or
based upon any and all claims, accidents, injuries and damages customarily
included within the coverage of such policies of insurance available for
Management Company. The minimum limits of liability of such insurance shall be
$1 million combined single limit covering bodily injury and property damage.
Certificates of Insurance evidencing such policies and additional insured status
shall be presented to PC within thirty (30) days after such coverage is
effected. In the event Management Company is unable to cause PC to be made an
additional insured under Management Company's professional liability coverage,
PC shall carry professional liability insurance covering itself and its
employees providing Infertility Services under this Agreement. Such coverage
shall be in the minimum amount of $1 million per incident, $3 million in the
aggregate.
10.2 PC and Management Company shall provide written notice to the
other at least thirty (30) days in advance of the effective date of any
reduction, cancellation or termination of the insurance required to be carried
by each hereunder.
10.3 As part of PC's participation, in any manner, in an Management
Company insurance program, and in an effort to assist Management Company in the
maintenance of its owns insurance, PC agrees to the following obligations, which
represent an effort to reduce risk and maintain a cost effective insurance
program:
10.3.1 PC shall provide medical treatment, including
Infertility Services in compliance at all times with ethical standards,
laws and regulations applying to the practice of medicine in the State
of New York. PC shall ensure that each Physician Employee, Other
Professional Employee and any other professional provider associated
with PC is duly licensed to provide the services being rendered within
the scope of such provider's practice. In addition, PC shall require
each Physician Employee during the term of this Agreement (1) to
maintain a DEA number; (2) to maintain appropriate medical staff
privileges as determined by PC and (3) to obtain board certification in
Reproductive Endocrinology within five (5) years of a Physician
Employee's completion of an accredited training program or, to have the
equivalent training and experience at a foreign university and/or
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medical center. In the event that any disciplinary actions or medical
malpractice actions are initiated against any such physician or other
professional provider, PC shall immediately inform the Executive
Director and provide the underlying facts and circumstances of such
action.
10.3.2 PC shall retain that number of Physician Employees as
are reasonably necessary and appropriate for the provision of
Infertility Services. However, PC shall hire Physicians ["Incoming
Physician"] only (1) with the consent, not to be unreasonably withheld,
of Management Company, and upon notice and investigation of the
insurer.
10.3.3 Each Physician Employee shall hold and maintain a valid
and unrestricted license to practice medicine in New York, and shall be
competent in the practice of obstetrics and gynecology, including the
subspecialty of infertility and assisted reproductive medicine.
10.3.4 PC shall insure that Physician Employees and
Professional Employees provide patient care and clinical backup as
required to insure the proper provision of services to patients of the
PC at the Mineola and Suffolk Facilities, and/or such other locations
as shall be mutually agreed to by PC and Management Company. PC shall
insure that its Physician Employees and Professional Employees devote
substantially all of their professional time, effort and ability to
PC's practice, including the provision of Infertility Services and the
development of such practice.
10.3.5 In the Event of any Relocation Program, as described in
section 4.3.4, such shall be conducted by the PC in accordance with
patient consent and the ethical guidelines of the American Society of
Reproductive Medicine.
10.3.6 PC shall undertake and use its best efforts to locate
physicians who, in PC's judgment, possess the credentials and expertise
necessary to enable such physician candidates to become affiliated with
PC for the purpose of providing Infertility Services.
10.3.7 PC covenants for itself and will use diligent efforts
to cause its Physician Employees and Professional Employees to comply
with reasonable personnel policies and guidelines developed for the
practice of the PC by Management Company, which shall include
administrative protocols and policies designed to insure that the work
sites complies with all applicable laws and regulations, federal and
state.
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10.3.8 PC shall require its Physician Employees and
Professional Employees to participate in such continuing medical
education as PC deems to be reasonably necessary for such physicians or
Professional Employees to remain current in the provision of
Infertility Services.
10.3.9 PC shall cooperate in the obtaining and retaining of
professional liability insurance by assuring that its Physician
Employees and Other Professional Employees are insurable and
participating in an on-going risk management program. PC shall cause
its Physician Employees and Professional Employees to cooperate in any
risk management program created and/or operated by Management Company.
ARTICLE 11
NON-SOLICITATION AND NON-COMPETITION
11.1 The PC recognizes and acknowledges that Management Company will
incur substantial costs in providing the equipment, support services, personnel,
management, administration and other services that are the subject of this
Agreement. The parties also recognize that the services to be provided by
Management Company will be feasible only if the PC operates an active practice
to which the Employee-Physicians devote their full professional time and
attention. PC agrees that the non-competition and non-solicitation covenants
described hereunder are necessary for the protection of Management Company, and
that Management Company would not enter this Agreement without the following
covenants:
11.1.1 During the term of this Agreement, PC shall not
establish, operate or provide Infertility Services at a medical office,
clinic or other health care facility other than as provided for in this
Agreement.
11.1.2 During the Term of this Agreement, and for a period of
two years from the date it is terminated, PC shall not directly or
indirectly own, manage, operate, control, contract with, be associated
with or lend its or its shareholders' names to, or maintain any
interest whatsoever in any enterprise (i) which provides, distributes,
promotes or advertises any type of management or administrative
services in competition with Management Company; or (ii) which offers
any type of service or product to third parties substantially similar
to those offered by Management Company.
11.1.3 During the term of this Agreement, and for two years
from the date of termination, PC shall not hire, attempt to hire,
contract or solicit for hiring or consultancy, any employee of
Management Company, or form a corporation, partnership or joint venture
or other entity with any such employee, who is currently employed by
Management Company or had been employed by Management Company within
one (1) year prior to the termination of this Agreement.
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Notwithstanding anything to the contrary contained herein, the PC may
(1) continue the employment of any Professional Employees employed by
the PC as of the date of notice of termination of this Agreement, or
effective date of termination of this Agreement (whichever is earlier);
and (ii) hire, attempt to hire, contract or solicit for hiring or
consultancy Sue McGreevy.
ARTICLE 12
MISCELLANEOUS
12.1 INDEPENDENT CONTRACTOR. Management Company and PC are independent
contracting parties. In this regard, the parties agree that:
12.1.1 The relationship between Management Company and PC is
that of an independent supplier of non-medical services and a medical
practice, respectively, and, unless otherwise provided herein, nothing
in this Agreement shall be construed to create a principal-agent,
employer-employee, or master-servant relationship between Management
Company and PC;
12.1.2 Neither PC nor Management Company (on behalf of PC)
shall seek or accept payment from Medicare or Medicaid for services
provided by PC;
12.1.3 Notwithstanding the authority granted to Management
Company herein, Management Company and PC agree that PC shall retain
the full authority to direct all of the medical, professional, and
ethical aspects of its medical practices;
12.1.4 Any powers of PC not specifically vested in Management
Company by the terms of this Agreement shall remain with PC;
12.1.5 PC shall, at all times, be the sole employer of the
Physician Employees, the Other Professional Employees and all other
professional personnel engaged by PC in connection with the operation
of its medical practice at the Facilities, and shall be solely
responsible for the payment of all applicable federal, state or local
withholding or similar taxes and provision of workers' compensation and
disability insurance for such professional personnel;
12.1.6 No party shall have the right to participate in any
benefits, employment programs or plans sponsored by the other parties
on behalf of the other parties' employees, including, but not limited
to, workers' compensation, unemployment insurance, tax withholding,
health insurance, life insurance, pension plans or any profit sharing
arrangement;
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12.1.7 In no event shall any party be liable for the debts or
obligations of any other party except as otherwise specifically
provided in this Agreement; and
12.1.8 Matters involving the internal agreements and finances
of PC, including but not limited to the distribution of professional
fee income among Physician Employees and Other Professional Employees
who are providing professional services to patients of PC, and other
employees of PC, disposition of PC property and stock, accounting, tax
preparation, tax planning, and pension and investment planning (and
expenses relating solely to these internal business matters), hiring
and firing of physicians, decisions and contents of reports to
regulatory authorities governing PC and licensing, shall remain the
sole responsibility of PC.
12.2 FORCE MAJEURE. No party shall be liable to the other for failure
to perform any of the services required under this Agreement in the event of a
strike, lockout, calamity, act of God, unavailability of supplies, or other
event over which such party has not control, for so long as such event continues
and for a reasonable period of time thereafter, and in no event shall such party
be liable for consequential, indirect, incidental or like damages caused
thereby.
12.3 USE OF NAME OF PC. The name or any statement that may implicitly
refer directly or indirectly to PC or impute any affiliation directly or
indirectly between Management Company and PC shall not be used in any manner or
on behalf of Management Company in any advertising or promotional materials or
otherwise without PC's prior written consent. However, Management Company may
use P.C's name or address in advertising to the public solely for the purpose of
providing directions to the office(s) of PC.
12.4 EQUITABLE RELIEF. Without limiting other possible remedies
available to a non-breaching party for the breach of the covenants contained
herein, injunctive or other equitable relief shall be available to enforce those
covenants, such relief to be without the necessity of posting bond, cash or
otherwise. If any restriction contained in said covenants is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and remaining restrictions therein shall be enforced independently of
each other.
12.5 PRIOR AGREEMENTS; AMENDMENTS. This Agreement supersedes all prior
agreements and understandings between the parties as to the subject matter
covered hereunder, and this Agreement may not be amended, altered, changed or
terminated orally. No amendment, alteration, change or attempted waiver of any
of the provisions hereof shall be binding without the written consent of all
parties, and such amendment, alteration, change, termination or waiver shall in
no way affect the other terms and conditions of this Agreement, which in all
other respects shall remain in full force.
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12.6 ASSIGNMENT; BINDING EFFECT. This Agreement and the rights and
obligations hereunder may not be assigned without the prior written consent of
all of the parties, and any attempted assignment without such consent shall be
void and of no force and effect, except that Management Company may assign this
Agreement to any subsidiary or affiliate of Management Company without the
consent of the other parties. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties' respective heirs, legal
representatives, successors and permitted assigns.
12.7 WAIVER OF BREACH. The failure to insist upon strict compliance
with any of the terms, covenants or conditions herein shall not be deemed a
waiver of such terms, covenants or conditions, nor shall any waiver or
relinquishment of any right at any one or more times be deemed a waiver or
relinquishment of such right at any other time or times.
12.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Any and all claims,
disputes, or controversies arising under, out of, or in connection with this
Agreement or any breach thereof, except for equitable relief sought pursuant to
Section 11.4 hereof, shall be determined by binding arbitration in the State of
New York, County of New York (hereinafter "Arbitration"). The party seeking
determination shall subject any such dispute, claim or controversy to the
American Arbitration Association, New York County, and the rules of commercial
arbitration of the selected entity shall govern. The Arbitration shall be
conducted and decided by three (3) arbitrators, unless the parties mutually
agree, in writing at the time of the Arbitration, to fewer arbitrators. In
reaching a decision, the arbitrators shall have no authority to change or modify
any provision of this Agreement, including any liquidated damages provision.
Each party shall bear its own expenses and one-half the expenses and costs of
the arbitrators. Any application to compel Arbitration, confirm or vacate an
arbitral award or otherwise enforce this Section shall be brought in the Courts
of the State of New York or the United States District Court for the Southern
District of New York, to whose jurisdiction for such purposes PC and Management
Company hereby irrevocably consent and submit.
12.9 SEPARABILITY. If any portion of the provisions hereof shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such portion or provisions in circumstances other than those in
which it is held invalid or unenforceable, shall not be affected thereby, and
each portion or provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law, but only to the extent the same continues to
reflect fairly the intent and understanding of the parties expressed by this
Agreement take as a whole.
12.10 HEADINGS. Section and paragraph headings are not part of this
Agreement and are included solely for convenience and are not intended to be
full or accurate descriptions of the contents thereof.
25
<PAGE>
12.11 NOTICES. Any notice hereunder shall have been deemed to have been
given only if in writing and either delivered in hand or sent by registered or
certified mail, return receipt requested, postage prepaid, or by United States
Express Mail or other commercial expedited delivery service, with all postage
and delivery charges prepaid, to the addresses set forth below:
If to Management Company:
Gerardo Canet, President
IntegraMed America, Inc.
One Manhattanville Road
Purchase, New York 10577-2100
With a copy to:
Claude E. White, Esq.
General Counsel
IntegraMed America, Inc.
One Manhattanville Road
Purchase, New York 10577-2100
If to PC:
Gabriel San Roman, MD, President
MPD Medical Associates, P.C.
200 Old Country Road
Mineola, New York 11501
With a copy to:
Charles A. Bilich, Esq.
Meltzer, Lippe, Goldstein & Schlissel, P.C.
190 Willis Avenue
Mineola, New York 11501
Any party hereto, by like notice to the other parties, may designate such other
address or addresses to which notice must be sent.
12.12 ENTIRE AGREEMENT. This Agreement and all attachments hereto
represent the entire understanding of the parties hereto with respect to the
subject matter hereof and thereof, and cancel and supersede all prior agreements
and understandings among the parties hereto, whether oral or written, with
respect to such subject matter.
26
<PAGE>
12.13 NO MEDICAL PRACTICE BY MANAGEMENT COMPANY. Management Company
will not engage in any activity that constitutes the practice of medicine, and
nothing contained in this Agreement is intended to authorize Management Company
to engage in the practice of medicine or any other licensed profession.
12.14 CONFIDENTIAL INFORMATION.
12.14.1 During the initial term and any renewal term(s) of
this Agreement, the parties may have access to or become acquainted
with each others' trade secrets and other confidential or proprietary
knowledge or information concerning the conduct and details of each
party's business ("Confidential Information"). At all times during and
after the termination of this Agreement, no party shall directly or
indirectly, communicate, disclose, divulge, publish or otherwise
express to any individual or governmental or non-governmental entity or
authority (individually and collectively referred to as "Person") or
use for its own benefit or the benefit of any Person any Confidential
Information, no matter how or when acquired, of another party. Each
party shall cause each of its employees to be advised of the
Confidential nature of such Confidential Information and to agree to
abide by the confidentiality terms of this Agreement. No party shall
photocopy or otherwise duplicate any Confidential Information of
another party without the prior express written consent of the such
other party except as is required to perform services under this
Agreement. All such Confidential Information shall remain the exclusive
property of the proprietor and shall be returned to the proprietor
immediately upon any termination of this Agreement.
12.14.2 Confidential Information shall not include information
which (i) is or becomes known through no fault of a party hereto; (ii)
is learned by a party from a third-party legally entitled to disclose
such information; or (iii) was already known to a party at the time of
disclosure by the disclosing party.
12.14.3 In order to minimize any misunderstanding regarding
what information is considered to be Confidential Information,
Management Company or PC will designate at each others request the
specific information which Management Company or PC considers to be
Confidential Information.
12.15 INDEMNIFICATION.
12.15.1 Management Company agrees to indemnify and hold
harmless PC, its directors, officers, employees and servants from any
suits, claims, actions, losses, liabilities or expenses (including
reasonable attorney's fees and costs) arising out of or in connection
with any act or failure to act by Management Company related to the
performance of its duties and responsibilities under this Agreement.
The obligations contained in this Section 12.15.1 shall survive
termination of this Agreement.
27
<PAGE>
12.15.2 PC agrees to indemnify and hold harmless Management
Company, its shareholders, directors, officers, employees and servants
from any suits, claims, actions, losses, liabilities or expenses
(including reasonable attorney's fees and costs) arising out of or in
connection with any act or failure to act by PC's related to the
performance of its duties and responsibilities under this Agreement.
The obligations contained in this Section 12.15.2 shall survive
termination of this Agreement.
12.15.3 In the event of any claims or suits in which
Management Company and/or PC and/or their directors, officers,
employees and servants are named, each of Management Company and PC for
their respective directors, officers, employees agree to cooperate in
the defense of such suit or claim; such cooperation shall include, by
way of example but not limitation, meeting with defense counsel (to be
selected by the respective party hereto), the production of any
documents in his/her possession for review, response to subpoenas and
the coordination of any individual defense with counsel for the
respective parties hereto. The respective party shall, as soon as
practicable, deliver to the other copies of any summonses, complaints,
suit letters, subpoenas or legal papers of any kind, served upon such
party, for which such party seeks indemnification hereunder. This
obligation to cooperate in the defense of any such claims or suits
shall survive the termination, for whatever reason, of this Agreement.
12.15.4 Management Company will defend, indemnify and hold
harmless the PC against and in respect of (i) any and all debts,
liabilities and obligations of the PC accruing prior to the Effective
Financial Date ["Prior PC Liabilities"] and (ii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and
expenses (including fees and expenses of counsel) arising out of such
Prior PC Liabilities.
12.15.5 Promptly after the receipt by the PC of notice of any
claim or commencement of any action or proceeding subject to
indemnification delineated in Section 12.15.4 ("asserted liability"),
the PC will, demand such indemnification from Management Company and
proffer the defense to Management Company. Management Company may
thereafter, at its option, assume such defense at its own expense and
by its own counsel. Management Company shall provide written notice to
the PC, within twenty days, of its assumption or declination of such
defense. If Management Company shall undertake to compromise any
asserted liability, it shall promptly notify the PC of its intention to
do so and the PC agrees to cooperate fully and promptly with Management
Company and its counsel in the compromise and defense of any asserted
liability. Management Company shall not enter into any non-monetary
settlement hereunder without the prior written consent of the PC.
Notwithstanding the foregoing, PC shall have the right to participate
in the compromise or defense of any asserted liability with its own
counsel and at its own expense.
28
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
INTEGRAMED AMERICA, INC.
By:/s/Gerardo Canet
------------------------------
Gerardo Canet, President & CEO
MPD MEDICAL ASSOCIATES, P.C.
By:/s/Gabriel San Roman
------------------------------------
Gabriel San Roman, M.D., Shareholder
By:/s/Kristen Cain
-----------------------------
Kristen Cain, MD, Shareholder
29
<PAGE>
EXHIBIT 3.2
OFFICE AND FACILITIES
TO BE PROVIDED BY MANAGEMENT COMPANY TO PC
200 Old Country Road, Mineola, New York 11501
2500 Nesconset Highway, Building #19, Stony Brook, New York 11790
30
<PAGE>
EXHIBIT 6.3.2
SECURITY AGREEMENT
[See Attached]
31
AMENDMENT NO. 3 TO MANAGEMENT AGREEMENT
BETWEEN
INTEGRAMED AMERICA, INC.
AND
SHADY GROVE REPRODUCTIVE SCIENCE CENTER, P.C.
THIS AMENDMENT NO. 3 TO MANAGEMENT AGREEMENT ("Amendment No. 3") is
dated September 1, 1999 by and between IntegraMed America, Inc., a Delaware
corporation, with its principal place of business at One Manhattanville Road,
Purchase, New York 10577("IntegraMed") and Shady Grove Reproductive Science
Center, P.C., a Maryland professional corporation, having a place of business at
15001 Shady Grove Road, Suite 400, Rockville, Maryland 20850 ("Shady Grove").
RECITALS:
WHEREAS, Shady Grove (formerly known as Levy, Sagoskin & Stillman,
M.D., P.C.) and Shady Grove Fertility Centers, P.C. ("PC") entered into a
management agreement dated March 11, 1998 pursuant to which PC agreed to provide
certain management and administrative services to Shady Grove (the "Management
Agreement"); and
WHEREAS, PC changed its name to "Shady Grove Fertility Centers, Inc."
("New Shady Grove") on March 12, 1998 and IntegraMed acquired the majority of
the stock of New Shady Grove on March 12, 1998 and the remaining stock of New
Shady Grove on January 5, 1999; and
WHEREAS, New Shady Grove and IntegraMed, entered into a submanagement
agreement ("Submanagement Agreement"), with PC's consent, dated March 12, 1998
pursuant to which IntegraMed agreed to perform certain duties and
responsibilities of New Shady Grove under the Management Agreement; and
WHEREAS, the Management Agreement was amended by amendments dated April
16, 1998 and May 6, 1998; and
WHEREAS, New Shady Grove, a wholly-owned subsidiary of IntegraMed, was
merged into IntegraMed on March 29, 1999; and
WHEREAS, IntegraMed and Shady Grove desire to clarify certain terms and
conditions of the Management Agreement, as amended.
<PAGE>
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, and as contained in the Management Agreement, IntegraMed and
Shady Grove agree as follows:
1. As a result of the merger of New Shady Grove, a wholly-owned
subsidiary of IntegraMed, into IntegraMed effective March 29, 1999, all the
rights and obligations of New Shady Grove under the Management Agreement inured
to the benefit of IntegraMed, as successor-in-interest, and the Submanagement
Agreement terminated by operation of law.
2. Sections 3.1.2 (iii) and (iv) of The Management Agreement are hereby
deleted and the following are hereby substituted therefor, retroactive to March
12, 1998:
"(iii) to receive payments from insurance companies,
prepayments received from health care plans and all other
third-party payors, and patient deposits (for purposes of this
Agreement patient deposits shall mean any payment in the form
of cash, note, check, money order or other instrument received
from a patient in advance of services being rendered to the
patient which collectively shall be hereinafter referred to as
"Patient Deposits"); (iv) to take possession of and endorse in
the name of PC (and/or in the name of any Physician Employee
or Other Professional Employee rendering Infertility Services
to patients of PC) any Patient Deposits and notes, checks,
money orders, and other instruments received in payment of
Receivables;"
3. The Management Agreement is hereby amended to add the following
new Section 7.2.3 to Article 7, retroactive to March 12, 1998:
"7.2.3 On or before the 15th business day of each month,
Management Company shall reconcile all shared risk receipts
and Patient Deposits, as herein defined, of PC arising during
the previous calendar month and PC hereby pays, transfers and
assigns to Management Company, and Management Company hereby
accepts from PC, all Patient Deposits hereafter owned by or
arising in favor of PC during each such previous month. All
Patient Deposits shall be paid to Management Company, in
consideration of management services in accordance with this
Article 7, subject to refund to PC in the event the applicable
Infertility Services for which the Patient Deposit was paid
are not performed by PC.
4. All other provisions of the Management Agreement, as amended,
not in conflict with this Amendment No. 3 remain in full force and effect.
5. This Amendment No. 3 may be executed in any number of separate
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Amendment No. 3
the date first above written.
INTEGRAMED AMERICA, INC.
By:/s/Gerardo Canet
------------------------------
Gerardo Canet, President & CEO
SHADY GROVE REPRODUCTIVE SCIENCE CENTER, P.C.
By:/s/Michael J. Levy
--------------------------------
Michael J. Levy, M.D., President
FLEET
CAPITAL LEASING
MASTER EQUIPMENT LEASE AGREEMENT NO. 32793
LESSOR: FLEET CAPITAL CORPORATION LESSEE: INTEGRAMED AMERICA, INC.
A Rhode Island Corporation a Delaware Corporation
Address: 50 Kenndey Plaza Address: One Manhattanville Rd.
Providence, Rhode Island 02903-2305 Purchase, NY 10577-2100
1. LEASE OF EQUIPMENT
Subject to the terms and conditions set forth herein (the "Master Lease")
and in any Lease Schedule incorporating the terms of this Master Lease {each, a
"Lease Schedule"), Lessor agrees to lease to Lessee, and Lessee agrees to lease
from Lessor, the items and units of personal property described in each such
Lease Schedule, together with all replacements, parts, additions, accessories
and substitutions therefor {collectively, the "Equipment"). As used in this
Lease, the term "Item of Equipment" shall mean each functionally integrated and
separately marketable group or unit of Equipment subject to this Lease. Each
Lease Schedule shall constitute a separate, distinct and independent lease of
Equipment and contractual obligation of Lessee. References to "the Lease," "this
Lease" or "any Lease" shall mean and refer to any Lease Schedule which
incorporates the terms of this Master Lease, together with all exhibits,
addenda, schedules, certificates, riders and other documents and instruments
executed and delivered in connection with such Lease Schedule or this Master
Lease, all as the same may be amended or modified from time to time. The
Equipment is to be delivered and installed at the location specified or referred
to in the applicable Lease Schedule. The Equipment shall be deemed to have been
accepted by Lessee for all purposes under this Lease upon Lessor's receipt of an
Acceptance Certificate with respect to such Equipment, executed by Lessee after
receipt of all other documentation required by Lessor with respect to such
Equipment. Lessor shall not be liable or responsible for any failure or delay in
the delivery of the Equipment to Lessee for whatever reason. As used in this
Lease, " Acquisition Cost" shall mean (a) with respect to all Equipment subject
to a Lease Schedule, the amount set forth as the Acquisition Cost in the Lease
Schedule and the Acceptance Certificate applicable to such Equipment; and {b)
with respect to any item of Equipment, the total amount of all vendor or seller
invoices (including Lessee invoices, if any) for such item of Equipment,
together with all acquisition fees and costs of delivery, installation, testing
and related services, accessories, supplies or attachments procured or financed
by Lessor from vendors or suppliers thereof (including items provided by Lessee}
relating or allocable to such item of Equipment ("Related Expenses"). As used in
this Lease with respect to any Equipment, the terms" Acceptance Date," "Rental
Payment(s)," "Rental Payment Date(s)," "Rental Payment Numbers," "Rental Payment
Commencement Date," "Lease Term" and "Lease Term Commencement Date" shall have
the meanings and values assigned to them in the Lease Schedule and the
Acceptance Certificate applicable to such Equipment.
2. TERM AND RENT
The Lease Term for any Equipment shall be as specified in the applicable
Lease Schedule. Rental Payments shall be in the amounts and shall be due and
payable as set forth in the applicable Lease Schedule. Lessee shall, in
addition, pay interim rent to Lessor on a pro-rata, per-diem basis from the
Acceptance Date to the Lease Term Commencement Date set forth in the applicable
Acceptance Certificate, payable on such Lease Term Commencement Date. If any
rent or other amount payable hereunder shall not be paid within 10 days of the
date when due, Lessee shall pay as an administrative and late charge an amount
equal to1.5% of the amount of any such overdue payment. In addition, Lessee
shall pay overdue interest on any delinquent payment or other amounts due under
the Lease (by reason of acceleration or otherwise) from 30 days after the due
date until paid at the rate of 1 1/2% per month or the maximum amount permitted
by applicable law, whichever is lower. All payments to be made to Lessor shall
be made to Lessor in immediately available funds at the address shown above, or
at such other place as Lessor shall specify to Lessee in writing. THIS IS A
NON-CANCELABLE, NON- TERMINABLE LEASE OF EQUIPMENT FOR THE ENTIRE LEASE TERM
PROVIDED IN EACH LEASE SCHEDULE HERETO.
3. POSSESSION; PERSONAL PROPERTY
No right, title or interest in the Equipment shall pass to Lessee other
than the right to maintain possession and use of the Equipment for the Lease
Term (provided no Event of Default has occurred) free from interference by any
person claiming by, through, or under Lessor. The Equipment shall always remain
personal property even though the Equipment may hereafter become attached or
affixed to real property. Lessee agrees to give and record such notices and to
take such other action at its own expense as may be necessary to prevent any
third party (other than an assignee of Lessor) from acquiring or having the
right under any circumstances to acquire any interest in the Equipment or this
Lease.
<PAGE>
4. DISCLAIMER OF WARRANTIES
LESSOR IS NOT THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT, NOR THE AGEENT
THEREOF; AND MAKES NO EXPHESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO ANY
MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OF THE
EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS DESIGN OR CONDITION, ITS
CAPACITY OR DURABILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN THE
MANUFACTURE OR ASSEMBLY OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO
THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING THERETO, OR
PATENT INFRINGEMENTS, AND LESSOR HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSOR IS
NOT RESPONSIBLE FOR ANY REPAIRS OR SERVICE TO THE EQUIPMENT, DEFECTS THEREIN OR
FAILURES IN THE OPERATION THEREOF. Lessee has made the selection of each item of
Equipment and the manufacturer and/or supplier thereof based on its own judgment
and expressly disclaims any reliance upon any statements or representations made
by Lessor. For so long as no Event of Default (or event or condition which, with
the passage of time or giving of notice, or both, would become such an Event of
Default) has occurred and is continuing, Lessee shall be the beneficiary of, and
shall be entitled to, all rights under any applicable manufacturer's or vendor's
warranties with respect to the Equipment, to the extent permitted by law.
If the Equipment is not delivered, is not properly installed, does not
operate as warranted, becomes obsolete, or is unsatisfactory for any reason
whatsoever, Lessee shall make all claims on account thereof solely against the
manufacturer or supplier and not against Lessor, and Lessee shall nevertheless
pay all rentals and other sums payable hereunder. Lessee acknowledges that
neither the manufacturer or supplier of the Equipment, nor any sales
representative or agent thereof, is an agent of Lessor, and no agreement or
representation as to the Equipment or any other matter by any such sales
representative or agent of the manufacturer or supplier shall in any way affect
Lessee's obligations hereunder.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS
Lessee represents and warrants to and covenants with Lessor that:
(a) Lessee has the form of business organization indicated above and is
duly organized and existing in good standing under the laws of the state listed
in the caption of this Master Lease and is duly qualified to do business
wherever necessary to carryon its present business and operations and to own its
property; (b) this Lease has been duly authorized by all necessary action on the
part of Lessee consistent with its form of organization, does not require any
further shareholder or partner approval, does not require the approval of, or
the giving notice to, any federal, state, local or foreign governmental
authority and does not contravene any law binding on Lessee or contravene any
certificate or articles of incorporation or by-laws or partnership certificate
or agreement, or any agreement, indenture, or other instrument to which Lessee
is a party or by which it may be bound; (c} this Lease has been duly executed
and delivered by authorized officers or partners of Lessee and constitutes a
legal, valid and binding obligation of Lessee enforceable in accordance with its
terms; (d) Lessee has not and will not, directly or indirectly, create, incur or
permit to exist any lien, encumbrance, mortgage, pledge, attachment or security
interest on or with respect to the Equipment or this Lease (except those of
persons claiming by, through or under Lessor); (e) the Equipment will be used
solely in the conduct of Lessee's business and will remain in the location shown
on the applicable Lease Schedule unless Lessor otherwise agrees in writing and
Lessee has completed all notifications, filings, recordings and other actions in
such new location as Lessor may reasonably request to protect Lessor's interest
in the Equipment; (f) there are no pending or threatened actions or proceedings
before any court or administrative agency which materially adversely affect
Lessee's financial condition or operations, and all credit, financial and other
information provided by Lessee or at Lessee's direction is, and all such
information hereafter furnished will be accurate and complete in ~ material
respects; and (g) Lessor has not selected, manufactured or supplied the
Equipment to Lessee and has acquired any Equipment subject hereto solely in
connection with this Lease and Lessee has received and approved the terms of any
purchase order or agreement with respect to the Equipment.
<PAGE>
6. INDEMNITY
Lessee assumes the risk of liability for, and hereby agrees ~O indemnify
and hold safe and harmless, and covenants to defend, Lessor, its employees,
servants and agents from and against: (a) any and all liabilities, losses,
damages, claims and expenses (including legal expenses of every kind and nature)
arising out of the manufacture, purchase, shipment and delivery of the Equipment
to Lessee, acceptance or rejection, ownership, titling, registration, leasing,
possession, operation, use, return or other disposition of the Equipment,
including, without limitation, any liabilities that may arise from patent or
latent defects in the Equipment (whether or not discoverable by Lessee), any
claims based on absolute tort liability or warranty and any claims based on
patent, trademark or copyright infringement; (b) any and all loss or damage of
or to the Equipment; and (c) any obligation or liability to the manufacturer or
any supplier of the Equipment arising under any purchase orders issued by or
assigned to Lessor .
7. TAXES AND OTHER CHARGES
Lessee agrees to comply with all laws, regulations and governmental orders
related to this Lease and to the Equipment and its use or possession, and to pay
when due, and to defend and indemnify Lessor against liability for all license
fees, assessments, and sales, use, property, excise, privilege and other taxes
(including any related interest or penalties} or other charges or fees now or
hereafter imposed by any governmental body or agency upon any Equipment, or with
respect to the manufacturing, ordering, shipment, purchase, ownership, delivery,
installation, leasing, Operation, possession, use, return, or other disposition
thereof or the rentals hereunder (other than taxes on or measured solely by the
net income of Lessor). Any fees, taxes or other lawful charges paid by Lessor
upon failure of Lessee to make such payments shall at Lessor's option become
immediately due from Lessee to Lessor .
If any Lease Schedule is denominated as a "True Lease Schedule," then, with
respect to the Equipment set forth on such True Lease Schedule. Lessee hereby
covenants and agrees that Lessor shall be entitled to the following tax benefits
(the "Tax Benefits"), Lessor will be entitled to cost recovery deductions under
Section 168 of the Internal Revenue Code of 1986, as amended (the "Code"), using
a 200% declining balance method of depreciation switching to the straight line
method for the first taxable year for which such method will yield larger
depreciation deductions, and assuming a half-year convention and zero salvage
value, for the applicable recovery period for such Equipment as set forth in the
True Lease Schedule with respect to such Equipment. Lessee further acknowledges
and agrees that Lessor has entered into such True Lease Schedule on the
assumption that Lessor will be taxed throughout the Lease Term of the True Lease
Schedule at Lessor's federal corporate income tax rate existing on the date of
such Lease. Schedule (the" Assumed, Tax Rate"). If, for any reason whatsoever,
there shall be a loss, disallowance, recapture or delay in claiming all or any
portion of the Tax Benefits with respect to the Equipment, or there shall be
included in Lessor's gross income for Federal, state or local income tax
purposes any amount on account of any addition, modification or improvement to
or in respect of any of the Equipment made or paid for by Lessee, or if there
shall be a change in the Assumed Tax Rate (any loss, disallowance, recapture,
delay, inclusion or change being herein called a "Tax Loss"), then thirty (30)
days after written notice to Lessee by Lessor that a Tax Loss has occurred,
Lessee shall pay Lessor a lump sum amount which, after deduction of all taxes
required to be paid by Lessor with respect to the receipt of such amount, will
provide Lessor with an amount necessary to maintain Lessor's after-tax economic
yield and overall net after-tax cash flows at least at the same level that would
have been available if such Tax Loss had not occurred, plus any interest,
penalties or additions to tax which may be imposed in connection with such Tax
Loss, In lieu of paying such Tax Loss in a lump sum, Lessor may require, or upon
Lessee's request, may agree, in Lessor's sole discretion, that such Tax Loss
shall be paid in equal periodic payments over the applicable remaining Lease
Term with respect to such Equipment with each Rental Payment due and payable
with respect to such Equipment. A Tax Loss shall conclusively be deemed to have
occurred if either (a) a deficiency shall have been proposed by the Internal
Revenue Service or other taxing authority having jurisdiction, or (b) tax
counsel for Lessor has rendered an opinion to Lessor that such Tax Loss has so
occurred. The foregoing indemnities and covenants set forth in Sections 6 and 7
of this Master Lease shall continue in full force and effect and shall survive
the expiration or earlier termination of the Lease.
<PAGE>
8. DEFAULT
Lessee shall be in default of this Lease upon the occurrence of anyone or
more of the following events (each an "Event of Default"):
(a) Lessee shall fail to make any payment, of rent or otherwise, under any
Lease within 200 days of the date when due; or (b) Lessee shall fail to obtain
or maintain any of the insurance required under any Lease; or (c) Lessee shall
fail to perform or observe any covenant, condition or agreement under any Lease,
and such failure continues for 10 days after notice thereof to Lessee; or (d)
Lessee shall default in the payment or perform3nce of any indebtedness or
obligation to Lessor or any affiliated person, firm or entity controlling,
controlled by or under Common control with Lessor, under any loan, note,
security agreement, lease, guaranty, title retention or conditional sales
agreement or any other instrument or agreement evidencing such indebtedness with
Lessor or such other affiliated person, firm or entity affiliated with Lessor
and any applicable grace or cure period with respect thereto has expired; or (e)
any representation or warranty made by Lessee herein or in any certificate,
agreement, statement or document now or hereafter furnished to Lessor in
connection herewith, including without limitation, any financial information
disclosed to Lessor by Lessee, shall prove to be false or incorrect in any
material respect; or (f) death or judicial declaration of incompetence of
Lessee, it an individual; the commencement of any bankruptcy, insolvency,
arrangement, reorganization, receivership, liquidation or other similar
proceeding by or against Lessee or any of its properties or businesses, or the
appointment of a trustee, receiver, liquidator or custodian for Lessee or any of
its properties of business, or if Lessee suffers the entry of an order for
relief under Title 11 of the United States Code; or the making by Lessee of a
general assignment or deed of trust for the benefit of creditors, or (g) Lessee
shall default in any payment or other obligation equal to or in excess of
$100,000.00 to any third party and any applicable grace or cure period with
respect thereto has expired; or (h) Lessee shall terminate its existence by
merger, consolidation, sale of substantially all of its assets or otherwise; or
(i) if Lessee is a privately held corporation, and more than 50% of Lessee's
voting capital stock, or effective control of Lessee's voting capital stock,
issued and outstanding from time to time, is not retained by the holders of such
stock on the date of this Lease; or (j) if Lessee is a publicly held
corporation, there shall be a change in the ownership of Lessee's stock. such
that Lessee is no longer subject to the reporting requirements of the Securities
Exchange Act of 1934, or no longer has a class of equity securities registered
under Section 12 of the Securities Act of 1933; or (k) any event or condition
set forth in subsections (b) through (j) of this Section 8 shall occur with
respect to any guarantor or other person responsible, in whole or in part, for
payment or performance of this Lease; or (I) any event or condition set f<?rth
in subsections (d) through (j) sha~1 occur with respect to any affiliated
person, firm or entity controlling, controlled by or under common control with
Lessee. Lessee shall promptly notify Lessor of the occurrence of any Event of
Default or the occurrence or existence of any event or condition which, upon the
giving of notice of lapse of time, or both, may become an Event of Default.
9. REMEDIES: MANDATORY PREPAYMENT.
Upon the occurrence of any Event of Default, Lessor may, at its sole option
and discretion, exercise one or more of the following remedies with respect to
any or all of the Equipment: (a) cause Lessee to promptly return, at Lessee's
expense, any or all Equipment to such location as Lessor may designate in
accordance with the terms of Section 18 of this Master Lease, or Lessor, at its
option, may enter upon the premises where the Equipment is located and take
immediate possession of and remove the same by summary proceedings or otherwise,
all without liability to Lessor for or by reason of damage to property or such
entry or taking possession except for Lessor's gross negligence or willful
misconduct; (b) sell any or all Equipment at public or private sale or otherwise
dispose of, hold, use, operate, lease to others or keep idle the Equipment, all
as Lessor in its sole discretion may determine and all free and clear of any
rights of Lessee; (c) remedy such default, including making repairs or
modifications to the Equipment, for the account and expense of Lessee, and
Lessee agrees to reimburse Lessor for all of Lessor's costs and expenses; (d) by
written notice to Lessee, terminate the Lease with respect to any or all Lease
Schedules and the Equipment subject thereto, as such notice shall specify, and,
with respect to such terminated Lease Schedules and Equipment, declare
immediately due and payable and recover from Lessee, as liquidated damages for
loss of Lessor's bargain and not as a penalty, an amount equal to the Stipulated
Loss Value, calculated as of the next following Rental Payment Date; (e) apply
any deposit or other cash collateral or sale or remarketing proceeds of the
Equipment at any time to reduce any amounts due to Lessor, and (f) exercise any
other right or remedy which may be available to Lessor under applicable law, or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof, including reasonable attorneys' fees and court
costs. Notice of Lessor's intention to accelerate, notice of acceleration,
notice of nonpayment, presentment, protest, notice of dishonor, or any other
notice whatsoever are hereby waived by Lessee and any endorser, guarantor,
surety or other party liable in any capacity for any of the Lessee's obligations
under or in respect of the Lease. No remedy referred to in this Section 9 shall
be exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity.
<PAGE>
The exercise or pursuit by Lessor of anyone or more of such remedies shall
not preclude the simultaneous or later exercise or pursuit by Lessor of any or
all such other remedies, and all remedies hereunder shall survive termination of
this Lease. At any sale of the Equipment pursuant to this Section 9, Lessor may,
to the extent permitted by law, bid for the Equipment. Notice required, if any,
of any sale or other disposition hereunder by Lessor shall be satisfied by the
mailing of such notice to Lessee at least seven (7) days prior to such sale or
other disposition. In the event Lessor takes possession and disposes of the
Equipment, the proceeds of any such disposition shall be applied in the
following order: (1} to all of Lessor's costs, charges and expenses incurred in
taking, removing, holding, repairing and selling or leasing the Equipment; (2)
to the extent not previously paid by Lessee, to pay Lessor for any damages then
remaining unpaid hereunder; (3) to reimburse Lessee for any sums previously paid
by Lessee as damages hereunder; and (4) the balance, if any, shall be retained
by Lessor. A termination shall occur only upon written notice by Lessor and only
with respect to such Equipment as Lessor shall specify in such notice.
Termination under this Section 9 shall not affect Lessee's duty to perform
Lessee's obligations hereunder to Lessor in full. Lessee agrees to reimburse
Lessor on demand for any and all costs and expenses incurred by Lessor in
enforcing its rights and remedies hereunder following the occurrence of an Event
of Default, including, without limitation, reasonable attorney's fees, and the
costs of repossession, storage, insuring, reletting, selling and disposing of
any and all Equipment.
The term "Stipulated Loss Value" with respect to any item of Equipment
shall mean the Stipulated Loss Value as set forth in any Schedule of Stipulated
Loss Values attached to and made a part of the applicable Lease Schedule. If
there is no such Schedule of Stipulated Loss Values, then the Stipulated Loss
Value with respect to any item of Equipment on any Rental Payment Date during
the Lease Term shall be an amount equal to the sum of: (a) all Rental Payments
and other amounts then due and owing to Lessor under the Lease, together with
all accrued interest and late charges thereon calculated through and including
the date of payment; ~ (b} the net present value of: (i} all Rental Payments
then remaining unpaid for the Lease Term, ~ (ii) the amount of any purchase
obligation with respect to such item of Equipment or, if there is no such
obligation, then the fair market value of such item of Equipment at the end of
the Lease Term, as estimated by Lessor in its sole discretion (accounting for
the amount of any unpaid Related Expenses for such item of Equipment and, with
respect to any such item of Equipment that has been attached to or installed on
or in any other property leased or owned by Lessee, such value shall be
determined on an installed basis, in place and in use), all discounted to net
present value at a discount rate equal to the 1-year Treasury Constant Maturity
rate as published in the Selected Interest Rates table of the Federal Reserve
statistical release H. 15(519) for the week ending immediately prior to the
original Acceptance Date for such Equipment.
10. ADDITIONAL SECURITY
For so long as any obligations of Lessee shall remain outstanding under any
Lease, Lessee hereby grants to Lessor a security interest in all of Lessee's
rights in and to Equipment subject to such Lease from time to time, to secure
the prompt payment and performance when due (by reason of acceleration or
otherwise) of each and every indebtedness, obligation or liability of Lessee, or
any affiliated person, firm, or entity controlling, controlled by, or under
common control with Lessee, owing to Lessor, whether now existing or hereafter
arising, including but not limited to all of such obligations under or in
respect of any Lease. The extent to which Lessor shall have a purchase money
security interest in any item of Equipment under a Lease which is deemed to
create a security interest under Section 1-201 (37) of the Uniform Commercial
Code shall be determined by reference to the Acquisition Cost of such item
financed by Lessor. In order more fully to secure its rental payments and all
other obligations to Lessor hereunder, Lessee hereby grants to Lessor a security
interest in any deposit of Lessee to Lessor under Section 3(d) of any Lease
Schedule hereto. Such security deposit shall not bear interest, may be
commingled with other funds of Lessor and shall be immediately restored by
Lessee if applied under Section 9. Upon expiration of the term of this Lease and
satisfaction of all of Lessee's obligations, the security deposit shall be
returned to Lessee. The term "Lessor" as used in this Section 10 shall include
any affiliated person, firm or entity controlling, controlled by or under common
control with Lessor .
11. NOTICES
Any notices or demands required or permitted to be given under this Lease
shall be given in writing and by regular mail and shall become effective when
deposited in the United States mail with postage prepaid to Lessor to the
attention of Customer Accounts, and to Lessee at the address set forth above, or
to such other address as the party to receive notice hereafter designates by
such written notice.
<PAGE>
12. USE; MAINTENANCE; INSPECTION; LOSS AND DAMAGE
During the Lease Term for each item of Equipment, Lessee shall, unless
Lessor shall otherwise consent in writing. (a) permit each item of Equipment to
be used only within the continental United States by qualified personnel solely
for business purposes and the purpose for which it was designed and shall, at
its sole expense, service, repair, overhaul and maintain each item of Equipment
in the same condition as when received, ordinary wear and tear excepted, in good
operating order, consistent with prudent industry practice (but, in no event
less than the same extent to which Lessee maintains other similar equipment in
the prudent management of its assets and properties) and in compliance with all
applicable laws, ordinances, regulations, and conditions of all insurance
policies required to be maintained by Lessee under the Lease and all manuals,
orders, recommendations, instructions and other written requirements as to the
repair and maintenance of such item of Equipment issued at any time by the
vendor and/or manufacturer thereof; (b) maintain conspicuously on any Equipment
such labels, plates, decals or other markings as Lessor may reasonably require,
stating that Lessor is owner of such Equipment; (c) furnish to Lessor such
information concerning the condition, location, use and operation of the
Equipment as Lessor may request; (d) permit any person designated by Lessor to
visit and inspect any Equipment and any records maintained in connection
therewith, during normal business hours and upon prior notice from Lessor ,
provided, however, that the failure of Lessor to inspect the Equipment or to
inform Lessee of any noncompliance shall not relieve Lessee of any of its
obligations hereunder; (e) if any Equipment does not comply with the
requirements of this Lease, Lessee shall, within 30 days of written notice from
Lessor, bring such Equipment into compliance; (f) not use any Equipment, nor
allow the same to be used, for any unlawful purpose, nor in connection with any
property or material that would subject the Lessor to any liability under any
state or federal statute or regulation pertaining to the production, transport,
storage, disposal or discharge of hazardous or toxic waste or materials; and (g)
make no additions, alterations, modifications or improvements (collectively,
"Improvements") to any item of Equipment that are not readily removable without
causing material damage to such item of Equipment or which will cause the value,
utility or useful life of such item of Equipment to materially decline. If any
such Improvement is made and cannot be removed without causing material damage
or decline in value, utility or useful life (a "Non-Severable Improvement"),
then Lessee warrants that such Non- Severable Improvement shall immediately
become Lessor's property upon being installed and shall be free and clear of all
liens and encumbrances and shall become Equipment subject to all of the terms
and conditions of the Lease. All such Improvements that are not Non-Severable
Improvements shall be removed by Lessee prior to the return of the item of
Equipment hereunder or such Improvements shall also become the sole and absolute
property of Lessor without any further payment by Lessor to Lessee and shall be
free and clear of all liens and encumbrances whatsoever. Lessee shall repair all
damage to any item of Equipment caused by the removal of any Improvement so as
to restore such item of Equipment to the same condition which existed prior to
its installation and as required by this Lease.
Lessee hereby assumes all risk of loss, damage or destruction for whatever
reason to the Equipment from and after the earlier of the date (i) on which the
Equipment is ordered or (ii) Lessor pays the purchase price of the Equipment,
and continuing until the Equipment has been returned to, and accepted by, Lessor
in the condition required by Section 18 hereof upon the expiration of the Lease
Term. If during the Lease Term all or any portion of an item of Equipment shall
become lost, stolen, destroyed, damaged beyond repair or rendered permanently
unfit for use for any reason, or in the event of any condemnation, confiscation,
theft or seizure or requisition of title to or use of such item, Lessee shall
immediately pay to Lessor an amount equal to the Stipulated Loss Value of such
item of Equipment, as of the next following Rental Payment Date.
<PAGE>
13. INSURANCE
Lessee shall procure and maintain insurance in such amounts and upon such
terms and with such companies as Lessor may approve, during the entire Lease
Term and until the Equipment has been returned to, and accepted by, Lessor in
the condition required by Section 18 hereof, at Lessee's expense, provided that
in no event shall such insurance be less than the following coverages and
amounts: (a) Worker's Compensation and Employer's Liability Insurance, in the
full statutory amounts provided by law; {b) Comprehensive General Liability
Insurance including product/completed operations and contractual liability
coverage, with minimum limits of $1 ,000,000 each occurrence, and Combined
Single Limit Body Injury and Property Damage, $1 ,000,000 aggregate, where
applicable; and (c) All Risk Physical Damage Insurance, including earthquake and
flood, on each item of Equipment, in an amount not less than the greater of the
Stipulated Loss Value of the Equipment or (if available) its full replacement
value. Lessor will be included as an additional insured and loss payee as its
interest may appear. Such policies shall be endorsed to provide that the
coverage afforded to Lessor shall not be rescinded, impaired or invalidated by
any act or neglect of Lessee. Lessee agrees to waive Lessee's right and its
insurance carrier's rights of subrogation against Lessor for any and all loss or
damage.
All policies shall be endorsed or contain a clause requiring the insurer to
furnish Lessor with at least 30 days' prior written notice of any material
change, cancellation or non-renewal of coverage. Upon execution of this Lease,
Lessee shall furnish Lessor with a certificate of insurance or other evidence
satisfactory to Lessor that such insurance coverage is in effect. In case of
failure of Lessee to procure or maintain insurance, Lessor may at its option
obtain such insurance, the cost of which will be paid by the Lessee as
additional rentals. Lessee hereby irrevocably appoints Lessor as Lessee's
attorney-in-fact to file, settle or adjust, and receive payment of claims under
any such insurance policy and to endorse Lessee's name on any checks, drafts or
other instruments on payment of such claims. Lessee further agrees to give
Lessor prompt notice of any damage to or loss of the Equipment, or any part
thereof.
14. LIMITATION OF LIABILITY
Lessor shall have no liability in connection with or arising out of the
ownership, leasing, furnishing, performance or use of the Equipment or any
special, indirect, incidental or consequential damages of any character,
including, without limitation, loss of use of production facilities or
equipment, loss of profits, property damage or lost production, whether suffered
by Lessee or any third party.
15. FURTHER ASSURANCES
Lessee shall promptly execute and deliver to Lessor such further documents
and take such further action as Lessor may require in order to more effectively
carry out the intent and purpose of this Lease. Lessee shall provide to Lessor,
within 120 days after the close of each of Lessee's fiscal years, and, upon
Lessor's request, within 45 days of the end of ec.ch quarter of Lessee's fiscal
year, a copy of its financial statements prepared in accordance with generally
accepted accounting principles and, in, the case of annual financial statements,
audited by independent certified public accountants, and in the case of
quarterly financial statements certified by Lessee's chief financial officer.
Lessee shall execute and deliver to Lessor upon Lessor's request any and all
schedules, forms and other reports and information as Lessor may deem necessary
or appropriate to respond to requirements or regulations imposed by any
governmental authorities. Lessee shall execute and deliver to Lessor upon
Lessor's request such further and additional documents, instruments and
assurances as Lessor deems necessary (a) to acknowledge and confirm, for the
benefit of Lessor or any assignee or transferee of any of Lessor's rights, title
and interests hereunder {an "Assignee"), all of the terms and conditions of all
or any part of this Lease and Lessor's or Assignee's rights with respect
thereto, and Lessee's compliance with all of the terms and provisions hereof and
(b) to preserve, protect and perfect Lessor's or Assignee's right, title or
interest hereunder and in any Equipment, including, without limitation, such UCC
financing statements or amendments, corporate resolutions, certificates of
compliance, notices of assignment or transfers of interests, and restatements
and reaffirmations of Lessee's obligations and its representations and
warranties with respect thereto as of the dates requested by Lessor from time to
time. In furtherance thereof, Lessor may file or record this Lease or a
memorandum or a photocopy hereof (which for the purposes hereof shall be
effective as a financing statement) so as to give notice to third parties, and
Lessee hereby appoints Lessor as its attorney-in-fact to execute, sign, file and
record UCC financing statements and other lien recordation documents with
respect to the Equipment where Lessee fails or refuses to do so after Lessor's
written request, and Lessee agrees to payor reimburse Lessor for any filing,
recording or stamp fees or taxes arising from any such filings.
<PAGE>
16. ASSIGNMENT
This Lease and all rights of Lessor hereunder shall be assignable by Lessor
absolutely or as security, without notice to Lessee, subject to the rights of
Lessee hereunder for the use and possession of the Equipment for so long as no
Event of Default has occurred and is continuing hereunder . Any such assignment
shall not relieve Lessor of its obligations hereunder unless specifically
assumed by the assignee, and Lessee agrees it shall not assert any defense,
rights of set-off or counterclaim against any assignee to which Lessor shall
have assigned its rights and interests hereunder, nor hold or attempt to hold
such assignee liable for any of Lessor's obligations hereunder. No such
assignment shall materially increase Lessee's obligations hereunder. LESSEE
SHALL NOT ASSIGN OR DISPOSE OF ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE
OR ENTER INTO ANY SUBLEASE WITH RESPECT TO ANY OF THE EQUIPMENT WITHOUT THE
EXPRESS PRIOR WRITTEN CONSENT OF LESSOR.
17. LESSEE'S OBLIGATION UNCONDITIONAL
This Lease is a net lease and Lessee hereby agrees that it shall not be
entitled to any abatement of rents or of any other amounts payable hereunder by
Lessee, and that its obligation to pay all rent and any other amounts owing
hereunder shall be absolute and unconditional under all circumstances,
including, without limitation, the following circumstances: (i) any claim by
Lessee to any right of set-off, counterclaim, recoupment, defense or other right
which Lessee may have against Lessor, any seller or manufacturer of any
Equipment or anyone else for any reason whatsoever; (ii) the existence of any
liens, encumbrances or rights of others whatsoever with respect to any
Equipment, whether or not resulting from claims against Lessor not related to
the ownership of such Equipment; or (iii) any other event or circumstances
whatsoever. Each Rent Payment or other amount paid by Lessee hereunder shall be
final and Lessee will not seek to recover all or any part of such payment from
Lessor for any reason whatsoever.
18. RETURN OF EQUIPMENT
Upon the expiration or earlier termination of the Lease Term with respect
to any Equipment, and provided that Lessee has not validly exercised any
purchase option with respect thereto, Lessee shall: (a) return the Equipment to
a location and in the manner designated by the Lessor within the continental
United States, including, as reasonably required by Lessor, securing
arrangements for the disassembly and packing for shipment by an authorized
representative of the manufacturer of the Equipment, shipment with all parts and
pieces on a carrier designated or approved by Lessor, and then reassembly
(including, if necessary, repair and overhaul) by such representative at the
return location in the condition the Equipment is required to be maintained by
the Lease and in such condition as will make the Equipment immediately able to
perform all functions for which the Equipment was originally designed (or as
upgraded during the Lease Term), and immediately qualified for the
manufacturer's (or other authorized servicing representative's) then-available
service contract or warranty; (b) cause the Equipment to qualify for all
applicable licenses or permits necessary for its operation for its intended
purpose and to comply with all specifications and requirements of applicable
federal, state and local laws, regulations and ordinances; (c) upon Lessor's
request, provide suitable storage, acceptable to Lessor, for the Equipment for a
period not to exceed 1 80 days from the date of return; (d) cooperate with
Lessor in attempting to remarket the Equipment, including display and
demonstration of the Equipment to prospective purchasers or lessees, and
allowing Lessor to conduct any private or public sale or auction of the
Equipment on Lessee's premises. All costs incurred in connection with any of the
foregoing shall be the sole responsibility of the Lessee. During any period of
time from the expiration or earlier termination of the Lease until the Equipment
is returned or put into storage in accordance with the provisions hereof or
until Lessor has been paid the applicable purchase option price if any
applicable purchase option is exercised, Lessee agrees to pay to Lessor
additional per diem rent ("Holdover Rent"), payable promptly on demand in an
amount equal to 125% of the highest monthly Rental Payment payable during the
Lease Term divided by 30, provided, however, that nothing contained herein and
no payment of Holdover Rent hereunder shall relieve Lessee of its obligation to
return the Equipment upon the expiration or earlier termination of the Lease.
19. RELATED LEASE SCHEDULES
In the event that any Equipment subject to a Lease shall become attached
to, affixed to, or used in connection with Equipment subject to any other Lease
hereunder (each a "Related Lease Schedule"), Lessee agrees that: (a) if Lessee
elects to exercise any purchase option, early termination option, renewal
option, purchase obligation or early purchase option under any Lease; or (b) if
Lessee elects to return the Equipment under any Lease in accordance therewith,
then, in either case, Lessor shall have the right, in its discretion, to require
the same disposition for all Equipment subject to a Related Lease Schedule.
<PAGE>
20. MISCELLANEOUS; ENFORCEABILITY AND GOVERNING LAW.
The term "Lessee" as used in the Lease shall mean and include any and all
Lessees who sign below, each of whom shall be jointly and severally liable under
the Lease. This Master Lease will not be binding on Lessor until accepted and
executed by Lessor, notice of which is hereby waived by Lessee. Any waiver of
the terms hereof shall be effective only in the specific instance and for the
specific purpose given. Time is of the essence in the payment and performance of
all of Lessee's obligations under the Lease. The captions in this Lease are for
convenience only and shall not define or limit any of the terms hereof .
Any provisions of this Lease which are unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
unenforceability without invalidating the remaining provisions hereof, and any
such unenforceability in any jurisdiction shall not render unenforceable such
provisions in any other jurisdiction. To the extent permitted by applicable law,
Lessee hereby waives; (a) any provisions of law which render any provision
hereof unenforceable in any respect; (b) all rights and remedies under Rhode
Island General Laws Sections 6A-2. 1-508 through 522 or corresponding provisions
of the Uniform Commercial Code article or division pertaining to personal
property leasing in any jurisdiction in which enforcement of this Lease is
sought.
THIS LEASE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW.
LESSEE HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE ST A
TE OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF RHODE
ISLAND FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE
TO THE VENUE OF SUCH COURTS. LESSEE HEREBY EXPRESSL Y W AIVES ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS LEASE. Any action by
Lessee against Lessor for any cause of action relating to this Lease shall be
brought within one year after any such cause of action first arises.
THIS LEASE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES CONCERNING
THE LEASE OF THE EQUIPMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. LESSEE
ACKNOWLEDGES AND CERTIFIES THAT NO SUCH ORAL AGREEMENTS EXIST. THIS LEASE MAY
NOT BE AMENDED, NOR MAY ANY RIGHTS UNDER THE LEASE BE WAIVED, EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTY CHARGED WITH SUCH AMENDMENT OR
WAIVER.
Executed and delivered by duly authorized representatives of the parties hereto
as of the date set forth below.
DA TED AS OF: NOVEMBER 30, 1998
FLEET CAPITAL CORPORATION INTEGRAMED AMERICA, INC.
By: /s/J. Scott Sibley By: /s/Gerardo Canet
------------------ ----------------
Name: J. Scott Sibley Name: Gerardo Canet
Title: Vice President Title: President & CEO
<PAGE>
FLEET
Capital Leasing
LEASE SCHEDULE NO. 32793-00001
50 Kennedy Plaza
Providence, Rhode Island 02903-2305
Lessee: INTEGRAMED AMERICA, INC.
Address: One Manhattanville Road
Purchase, NY 10577-2100
1. This Lease schedule No. 32793-00001 dated as of March 26, 1999 is
entered into pursuant to and incorporates by this reference, all of the terms
and provisions of that certain Master Equipment Lease Agreement No. 32793 dated
as of November 30, 1998 (the "Master Lease"), for the lease of the Equipment
described in schedule A attached hereto. This Lease Schedule shall constitute a
separate, distinct and independent lease of the Equipment and the contractual
obligation of Lessee. References to the "the Lease" or "this Lease" shall mean
and refer to this Lease Schedule, together with the Master Lease and all
exhibits, addenda, schedules, certificates, riders and other documents and
instruments executed and delivered in connection with this Lease Schedule, all
as the same may be amended or modified from time to time. All capitalized terms
used herein and not defined herein shall have the meanings set forth or referred
to in the Master Lease. By it execution and delivery of this Lease Schedule,
Lessee hereby reaffirms all of the representations, warranties and covenants
contained in the Master Lease, as of the date hereof, and further represents and
warrants to Lessor that no event of Default, and no event or condition which
with notice or the passage of time or both would constitute an Event of Default,
has occurred and is continuing as of the date hereof.
2. Acquisition Cost. The Acquisition Cost of the Equipment is $531,773.48.
3. (a) LEASE TERM. The Lease Term shall commence on the date hereof and
shall continue for a period of 48 months after the Lease Term Commencement set
forth in the Acceptance Certificate to his Lease Schedule, plus any renewal or
extended term applicable in accordance with the terms of the Lease.
(b) RENTAL PAYMENTS. In addition to interim rent payable pursuant to
Section 2 of the Master Lease, Lessee shall pay Lessor 48 consecutive Rental
Payments in the amounts set forth in the schedule below, plus any applicable
sales/use taxes, commencing on the Rental Payment Commencement Date set forth in
the Acceptance Certificate and MONTHLY thereafter for the remaining Lease Term.
Each Rental Payment shall be payable on the same day of the month as the Rental
Payment Date in each succeeding rental period during the remaining Lease Term
(each, a "Rental Payment Date"):
Amount of Each
Number of Rental Payments Rental Payment
48 $12,896.15
(c) ADVANCE RENTAL PAYMENT. Lessee agrees to pay Lessor the first 01 and
last 0 rental Payments, due and payable on the Acceptance Date.
(d) SECURITY DEPOSIT. Lessee agrees to make a payment in an amount equal
to 0% of the Acquisition Cost of the Equipment, due and payable on the
Acceptance Date, to be held by Lessor as a non-interest bearing deposit to
secure Lessee's performance under the Lease.
4. EQUIPMENT LOCATION(S). The Equipment will be located at the location(s)
specified in Schedule A.
5. Taxes. Lessor will invoice Lessee for all sales, use and/or personal
property taxes as and when due and payable in accordance with applicable law,
unless Lessee delivers to Lessor a valid exemption certificate with respect to
such taxes. Delivery of such certificate shall constitute Lessee's
representation and warranty that no such taxes shall become due and payable with
respect to the Equipment, and Lessee shall indemnify and held harmless Lessor
from and against any and all liability or damages, including late charges and
interest which lessor may incur by reason of the assessment of such taxes.
6. The Rental Payments may change for Equipment accepted after APRIL 05,
1999.
<PAGE>
7. EARLY TERMINATION. Upon at least 90 days prior written notice to Lessor,
Lessee shall have the right to terminate the Lease Term for all but not less
than all of the Equipment subject to this Lease on any Rental Payment Date
designated in such notice (the "Termination Date") by payment of the Stipulated
Loss Value determined in accordance with Schedule of Stipulated Loss Values
attached hereto and made a part hereof. Provided that Lessor shall have received
all amounts payable hereunder on the Termination Date, and that no Event of
Default then exists and is continuing under the Lease, Lessee shall have no
further obligation to make Rent payments hereunder and this Lease shall
terminate in accordance with the provisions hereof, whereupon Lessor shall
convey all of its right, title and interest in and to the Equipment to lessee as
of the Termination Date, on as "AS-IS," "WHERE-IS" BASIS WITHOUT REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, and without recourse to Lessor, except that the
Equipment shall be free and clear of all liens created by Lessor.
8. For the purposes of the Lease only, the fourth sentence of the second
paragraph of Section 9 to the Master Lease is hereby deleted and replaced with
the following:
"In the event Lessor takes possession and disposes of the Equipment, the
proceeds of any such disposition shall be applied in the following order:
(1) to all of Lessor's costs, charges and expenses incurred in taking,
removing, holding, repairing and selling or leasing the Equipment; (2) to
the extent not previously paid by Lessee, to pay lessor for any damages
then remaining unpaid hereunder and to pay any other Obligations (defined
below) then due and owing to lessor; (3) to reimburse lessee for any sums
previously paid by lessee as damages hereunder; and (4) the balance, if
any, shall be distributed to lessee."
As used in this Lease, the term "Obligations" means all indebtedness or
liabilities of Lessee under or in respect of one or more leases, leans, notes,
credit agreements, reimbursement agreements, security agreements, title
retention or conditional sales agreements, or other documents, instruments or
agreements, whether now existing or hereafter arising, evidencing Lessee's
obligations for the payment of rents, borrowed money or other financial
accommodations owing to Lessor.
Lessor acknowledges and agrees that this Lease is intended to be capitalized
lease of the Equipment and that Lessee intends to capitalize the rental and
other payment obligations of Lessee hereunder in accordance with generally
accepted accounting principles and to claim all tax benefits associated with
ownership of the Equipment.
Dated as of: MARCH 26, 1999
FLEET CAPITAL CORPORATION INTEGRAMED AMERICA, INC.
By: /s/John Scott Sibley By: /s/Gerardo Canet
-------------------- -----------------
Name: John Scott Sibley Name: Gerardo Canet
Title: Vice President Title: President and CEO
<PAGE>
FLEET ACCEPTANCE CERTIFICATE
Capital Leasing
50 Kennedy Plaza
Providence, Rhode Island 02903-2305
This Acceptance Certificate (this "Acceptance Certificate") is attached to
and made a part of that certain Lease Schedule No. 32793-00001, dated as of
March 26, 1999 (the "Lease Schedule"), by and between the undersigned parties.
All capitalized terms used herein and not defined herein shall have the meanings
set forth or referred to in the Lease Schedule. To the extent the terms set
forth in this Acceptance Certificate differ or conflict with any of the terms
set forth in the Lease, the terms set forth in this Acceptance Certificate shall
control.
1. Lessee acknowledges and agrees that each item of Equipment set forth on
Schedule A hereto (collectively, the "Equipment") is hereby unconditionally
accepted by Lessee for all purposes under the Lease at the locations specified
in Schedule A-1 hereto, and hereby agrees to faithfully perform all of its
obligations under the Lease as of the date hereof (the "Acceptance Date").
Lessee hereby authorizes and directs Lessor to make payment to each vendor of
the Equipment pursuant to such vendor's invoice or any purchase order, purchase
agreement or supply contract with such vendor, receipt and approval of which are
hereby reaffirmed by Lessee.
2. By its execution and delivery of this Acceptance Certificate, Lessee
hereby reaffirms all of the representations, warranties and covenants contained
in the Lease as of the date hereof, and further represents and warrants to
Lessor that no Event of Default, and no event or condition which with notice or
the passage of time or both would constitute an Event of Default, has occurred
and is continuing as of the date hereof. Lessee further certifies to Lessor that
Lessee has selected the Equipment and has received and approved the purchase
order, purchase agreement or supply contract under which the Equipment will be
acquired for all purposes of the Lease.
3. Lessee hereby represents and warrants that: (a) the Equipment has been
delivered and is in an operating condition and performing the operation for
which it is intended to the satisfaction of the Lessee; and (b) if requested by
lessor, the Equipment has been marked or labeled evidencing the Lessor's
interest therein.
4. The LEASE TERM COMMENCEMENT DATE is the 1st day of April, 1999.
5. The RENTAL PAYMENT COMMENCEMENT DATE is the 1st day of April, 1999.
6. All terms and provisions of the Lease Schedule shall remain in full
force and effect, except as otherwise provided below:
- ACQUISITION COST: $531,723.48
- LEASE TERM: forty-eight months
- RENTAL PAYMENTS: Number of Rental payments Rental Payment Amount
------------------------- ---------------------
48 $12,894.93
- Advance Rental payment(s): First 01 and last 00.
- Security Deposit: N/A%.
Dated: April 1, 1999
Agreed and Accepted:
FLEET CAPITAL CORPORATION INTEGRAMED AMERICA, INC.
By: /s/J. Scott Sibley By: /s/Gerardo Canet
------------------ ----------------
Name: J. Scott Sibley Name: Gerardo Canet
Title: Vice President Title: President and CEO
<PAGE>
SCHEDULE A
EQUIPMENT
Attached hereto and made part of the following documents:
Lease Schedule No. 32793-00001,
Acceptance Certificate and UCC-1 Financing Statement
With: IntegraMed America, Inc.
Quantity Model Description Serial #
-------- ----- ----------- --------
Location No. 01
Vendor No. 01
IBM hardware and software
01 AIX version 4.3 1-2User server license
78 XIX version 4.3 additional user license
01 Media processing Charge (CD-ROM)
01 MEDIC Integration (large)
02 SSA 4-Port multi-initiator controller
01 IBM Model H50 PowerPC server
03 4.5GB Hot swap disk drive
01 Memory expansion card
01 Upgrade 128MB RAM to 256MB RAM Card
07 256MB Ram card
01 Upgrade Single 332 MHz. CPU to Dual 332 MHz. CPU
01 Additional Dual 332 MHz. CPU
01 12/24GB Internal 4mm Tape Drive
12 8mm Tape Cartridge
01 SCSI Disk hot swap 6-pack
01 S00 Rack unit
01 Single phase PDU for rack
01 128-Port async PCI adapter
02 10/100 mbps PCI ethernet card
01 IBM 3153 terminal
01 7133-020 SSA disk subsystem (rack amount)
08 4.5GB SSA disk drive
08 5.0M SSA copper cable
01 8mm cleaning cartridge
01 16-port async concentrator for 128-port adapter
01 +MEDIC Vision/PM software
150 +MEDIC Vision/PM concurrent Text User
01 MultiTech 28.8 Modem
01 MultiTech 28.8 Modem
01 A/B/C/D Phone Switch
01 APC Matrix 5KVA UPS Unit
150 Informix RDBMS, 4GL Per User License
01 Informix SGL Single User License
01 PowerChute Plus for AIX Shutdown Software
02 Cognos Impromptu Administrator (single user)
04 Cognos PowerPlay Administrator (single user)
WITH ALL STANDARD AND ACCESSORY EQUIPMENT
FLEET CAPITAL CORPORATION INTEGRAMED AMERICA, INC.
By: /s/J. Scott Sibley By: /s/Gerardo Canet
------------------ -----------------
Name: J. Scott Sibley Name: Gerardo Canet
Title: Vice President Title: President and CEO
<PAGE>
SCHEDULE A-1
EQUIPMENT LOCATION
Attached hereto and made part of the following documents:
Lease schedule No. 32793-0001 and
Acceptance Certificate
With: IntegraMed America, Inc.
Location # Equipment Location
---------- ------------------
01 One Manhattanville Road
Purchase, NY 10577
FLEET CAPITAL CORPORATION INTEGRAMED AMERICA, INC.
By: /s/J. Scott Sibley By: /s/Gerardo Canet
------------------ -----------------
Name: J. Scott Sibley Name: Gerardo Canet
Title: Vice President Title: President and CEO
<PAGE>
FLEET PURCHASE OBLIGATION RIDER
Capital Leasing
50 Kennedy Plaza
Providence, Rhode Island 02903-2305
This Purchase Obligation Rider (this "Rider") is attached to and made a
part of that certain Lease Schedule No. 32793-0001, dated as of March 26, 1999
(the "Lease Schedule"), by and between the undersigned parties.
Upon the expiration of the Lease Term, Lessor shall sell to Lessee and Lessee
shall purchase from Lessor all, but not less than all, of the Equipment for an
amount, payable in immediately available funds on the last day of the Lease
Term, equal to: (a) all Rental Payments, late charges and other amounts due and
owing under the Lease; plus (b) all taxes, assessments and other charges due or
payble in connection with the sale of the Equipment to Lessee; plus (c) $1.00.
Upon receipt by Lessor of all amounts payable hereunder, Lessor shall convey all
of its right, title and interest in and to the Equipment to Lessee on an
"AS-IS," "WHERE-IS" BASIS, WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, and without recourse to Lessor, except that the Equipment shall be free
and clear of all liens created by Lessor.
All capitalized terms used herein and not defined herein shall have the
meanings set forth or referred to in the Lease Schedule. Except as specifically
set forth herein, all of the terms and conditions of the Lease shall remain in
full force and effect and are hereby ratified and affirmed. To the extent that
the provisions of this Rider conflict with any provisions contained in the
Lease, the provisions of this Rider shall control.
Dated as of: MARCH 26, 1999
FLEET CAPITAL CORPORATION INTEGRAMED AMERICA, INC.
By: /s/J. Scott Sibley By: /s/Gerardo Canet
------------------ ----------------
Name: J. Scott Sibley Name: Gerardo Canet
Title: Vice President Title: President and CEO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<CASH> 3,882
<SECURITIES> 0
<RECEIVABLES> 12,196
<ALLOWANCES> 731
<INVENTORY> 0
<CURRENT-ASSETS> 16,516
<PP&E> 6,388 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,826
<CURRENT-LIABILITIES> 9,774
<BONDS> 0
0
166
<COMMON> 55
<OTHER-SE> 28,322
<TOTAL-LIABILITY-AND-EQUITY> 42,826
<SALES> 33,255
<TOTAL-REVENUES> 33,255
<CGS> 26,032
<TOTAL-COSTS> 26,032
<OTHER-EXPENSES> 5,283
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 294 <F2>
<INCOME-PRETAX> 1,646
<INCOME-TAX> 217
<INCOME-CONTINUING> 1,429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,429
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.27
<FN>
<F1>
PP&E is net of accumulated depreciation.
<F2>
Interest is net of interest income of 88.
</FN>
</TABLE>
