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FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal year ended August 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20554
DYNACQ INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
NEVADA 76-0375477
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
10304 INTERSTATE 10 EAST, SUITE 369 77029
HOUSTON, TEXAS (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code (713) 673-6432
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $.001 Par Value
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 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 ____.
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no such disclosure will
be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. _X_
The issuer's gross revenues for the most recent fiscal year:
$7,418,710.
As of November 29, 1996, there were 14,235,136 shares of the
registrant's common stock, $.001 par value, issued and outstanding, 2,669,384 of
which having an aggregate market value of approximately $ 2,669,384 (based on
the closing bid price of $ 1.00 as of such date) were held by non-affiliates of
the registrant. In determining the number of shares held by non-affiliates,
shares held by officers, directors and persons holding more than 5% of the
registrant's common stock were excluded.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format. Yes ___. No _X_.
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FORM 10-KSB
DYNACQ INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I.................................................................... 1
ITEM 1. DESCRIPTION OF BUSINESS...................................... 1
ITEM 2. DESCRIPTION OF PROPERTY...................................... 8
ITEM 3. LEGAL PROCEEDINGS............................................ 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 9
PART II................................................................... 9
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..... 9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.... 10
ITEM 7. FINANCIAL STATEMENTS......................................... 12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE....................... 12
PART III.................................................................. 13
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT............ 13
ITEM 10. EXECUTIVE COMPENSATION....................................... 14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................... 15
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 15
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............................. 15
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Company was incorporated under the laws of the State of Utah in
September 1983, as Rujo, Inc., to seek mining and oil and gas opportunities for
investment and completed a public offering of its securities on that basis in
1984. Recognizing that such opportunities were limited because of the general
decline in those industries, the Company expanded its search by exploring
business opportunities outside the mining and oil and gas industries. In January
1987, the shareholders of the Company approved the change of the name of the
Company to Jackson Brother Industries, Inc. The Company merged into a Nevada
corporation of the same name in June 1989, pursuant to a share-for-share
exchange of stock. In January 1992, the shareholders of the Company again
approved a change of corporate name to Dynacq International, Inc., elected
directors of the Company and approved a plan of recapitalization whereby
authorized capital was increased to an aggregate of 55,000,000 shares of stock,
comprised of 50,000,000 common shares and 5,000,000 preferred shares.
In July, 1992, the Company increased the number of its authorized
shares of common stock, $.001 par value (the "Common Stock") to 300,000,000
shares and sold 90,000,000 shares of common stock in a private placement to
several investors, including the Company's current chief executive officer, for
a total purchase price of $2,000,000. As a result of the change in control of
the Company, previous management, which separately sold a majority of their
shares of Common Stock of the Company as part of the transaction, resigned and
the current management team was installed.
Effective August 1, 1992, the Company commenced operations as a
provider of health care services and supplies to patients in their homes
specializing in home infusion therapy. Home infusion therapy is the
administration to a patient of nutrients, antibiotics or other medications
whether intravenously or through a feeding tube, usually as a continuation of
treatment initiated in a hospital. The Company's services include training
patients and their care givers, compounding prescriptions and conducting other
pharmacy operations, delivering supplies, providing certain nursing services,
monitoring patient compliance with the prescribed plan of care, monitoring
patient outcome, maintaining patient records, consulting with attending
physicians, maintaining equipment and processing reimbursement claims. While the
Company's core business is infusion therapy, the Company has taken several steps
during the past three fiscal years to diversify its operations and use of
assets, including the acquisition of Vista Healthcare, Inc. described below in
August 1994.
Effective March 8, 1993, the Company's shareholders approved a reverse
split of the outstanding shares of the Company's Common Stock on the basis of
one share for every eight shares outstanding, with the par value of each share
remaining at $.001. Prior to the reverse split, there were 108,150,000 shares
outstanding. Following the reverse split the number of outstanding shares was
reduced to 13,518,766. The reverse split was recommended by the Board of
Directors because of its belief that the pre-split per share price level
adversely affected the marketability of the Company's Common Stock and that an
increase in the per share price was important to qualify for a listing on the
National Association of Securities Dealers, Inc. Automated Quotation System
(NASDAQ). In September 1993, the Company's Common Stock received its listing and
began trading on the NASDAQ Small Cap system under the symbol DYII.
On August 25, 1994, the Company completed the acquisition of
approximately 65% of the outstanding common stock of Vista Healthcare, Inc., a
Texas corporation ("Vista"), in exchange for newly issued shares of the
Company's Common Stock. The Company issued a total of 716,370 shares of its
Common Stock (or approximately 5% of the shares then outstanding) to 30
shareholders of Vista (the "Vista Shareholders") in exchange for an aggregate of
128,947 shares of Vista common stock held by the Vista Shareholders. The Common
Stock was issued pursuant to an Exchange Agreement, dated July 15, 1994 (the
"Exchange Agreement"), entered into by and among the Company, Vista and the
Vista Shareholders. The terms of the Exchange Agreement were the result of
negotiations between the management of the Company and Vista and certain of the
Vista Shareholders.
Vista owns and operates a medical clinic and outpatient surgical center
in Pasadena, Texas (the "Vista Facility"). Vista provides a variety of
surgeries, medical treatments and laboratory services on an outpatient basis.
Under the Company's control, Vista continues to utilize its facilities and
equipment in the same manner, however, the Company expanded the services offered
and purchased new equipment.
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In a separate but related transaction to the Vista acquisition
described above, fifteen of the Vista Shareholders who were issued shares of the
Company's Common Stock pledged their shares to Capital Bank, located in Houston,
Texas, as collateral for loans made to each of the Vista Shareholders. Pursuant
to this arrangement, a total of 415,279 shares of the Company's Common Stock
were pledged to collateralize loans to the Vista Shareholders totaling $730,000.
All but one of the transactions involved a loan of $50,000. All of the loan
proceeds were contributed to Vista as capital by the Vista Shareholders.
In connection with the loans to the Vista Shareholders, the Company
entered into a Pledge-Security Agreement (the "Security Agreement") with Capital
Bank on August 25, 1994, wherein the Company granted a security interest in and
pledged certain funds contained in a Company account at Capital Bank to
collateralize the repayment of the loans. The Company's liability to Capital
Bank for repayment of each of the loans is limited to the shortfall, if any,
calculated by taking the difference between (i) 130% of the dollar amount of the
outstanding loan balance (including principal and interest) attributed to a
Vista shareholder, and (ii) the value of the Company shares pledged by the Vista
shareholder, which is based on the quoted value of shares of the Company's
Common Stock as published by NASDAQ. The amount of Capital Bank's security
interest in the Company's funds is adjusted upward or downward every 90 days.
As of November 15, 1996, the value of the Company's stock subject to
the pledge discussed above was approximately $113,120 less than 130% of the
aggregate loans to the Vista Shareholders. To the best of management's knowledge
all of the individual loans are current and the bank has not advised the Company
that any of the loans are in default. In the event of payment default by one of
the Vista Shareholders, Capital Bank has the option to exercise a right of
offset with respect to the funds on deposit, but only to the extent, if any, of
a shortfall as described above. In connection with the Vista acquisition, the
Company entered into a Guaranty Agreement with the lienholder on the Vista
Facility whereby the Company guaranteed 65% of the outstanding balance of the
mortgage loan collateralized by the Vista Facility. The outstanding loan balance
on the Vista Facility was approximately $ 1,075,366 as of August 31, 1996.
In September, 1994, the Company commenced construction of a new medical
office building, adjacent to the Vista Facility, which was completed in 1995 at
a total cost of approximately $1,925,000 (the "Office Building"). Most of the
offices in the Office Building are currently utilized by physicians with whom
the Company has management contracts through its wholly-owned subsidiary Doctors
Practice Management, Inc., a Texas corporation ("DPMI"). In March, 1994, the
Company formed DPMI for the purpose of providing (i) fee based management
services to physicians' groups, and (ii) assistance in consolidating medical
providers into integrated delivery systems. These systems are intended to build
a concentrated critical mass of primary care physicians, specialty physicians,
clinics and outpatient surgical centers. DPMI plans to offer participating
medical providers health care contracts, management systems that include
standards to better manage costs, shared administrative and clinical services
and individual or shared office facilities.
Since most physicians' current revenue streams of fee-for-service will
be replaced by managed care and capitated forms of revenue in the next few
years, controlling expenditures will become more crucial than ever to improve
the bottom line for physicians running their practices in a highly managed care
setting of reduced revenues. An obvious solution to produce efficiencies and
savings is for physicians to integrate and consolidate in order to share
administrative and clinical services. Much of the integration and increased
efficiencies in health care delivery are being spurred by the economic climate.
DPMI should fit well in this integrated environment, where it can provide
coordinated business management practices, which are needed by many physicians'
groups, in return for management fees and incentive performance bonuses. During
the next few years, management believes there will be a reallocation of health
care profit margins in favor of professionally managed integrated delivery
systems. DPMI's goal is to obtain a competitive advantage in competing for
managed health care contracts with insurance companies or in direct contracting
with major employers or consortiums of employers.
DPMI commenced providing management services for the Premier Health
Care Group, P.L.L.C. ("Premier"), of which the majority of physician members are
also shareholders of Vista. In May 1995, DPMI ceased providing management
services to Premier because of the difficulty of resolving administrative and
management issues with some Premier members. Since May 1995, DPMI has been
aggressively seeking new management opportunities with other physicians. This
effort is showing steady results as DPMI began managing Vista in January of
1996, the practices of three physicians in March of 1996, two physicians in
April of 1996 and one physician in July of 1996.
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THE IN-HOME INFUSION HEALTH CARE MARKET
In-home infusion health care principally involves the administration of
physician-prescribed nutrients, antibiotics or other medications to patients in
their homes, usually as a continuation of a treatment program initiated in a
hospital. The market for in-home infusion health care has grown rapidly since
its initial development in the late 1970's. Management believes that the growth
of this market is primarily attributable to (i) increased cost containment
efforts that have encouraged home health care, (ii) medical advances that enable
doctors to treat more illnesses through home health care, and (iii) the desire
of hospitalized patients to be treated in their homes. The growth of the
industry is also the result of improved delivery technology that permits the
treatment of more diseases at home and the growing awareness and acceptance
among physicians and third-party payers of home health care as an alternative to
in-hospital treatment.
Home health care is favorable for insurance companies because it is
much cheaper to pay for similar patient services performed by home health care
companies than by hospitals. The trend for insurance companies to pressure
hospitals and physicians to release patients to their homes to recover at the
earliest possible time to save cost is substantial. This enhances favorable
market growth for the home health care industry. The Company selects only
referral patients with proper adequate private insurance, with confirmation from
the insurance company of ability to pay, to ensure both profitability and
collectability of performed services and concentrates on two patient service
areas, Total Parenteral Nutrition Therapy and Antibiotic Therapy. Home health
care is not a capital intensive business and does not require high inventory
levels. It is a skilled labor intensive business that provides professional
medical services to patients with personal care.
PARENTERAL NUTRITION THERAPY - Parenteral nutrition therapy is prescribed for
individuals unable to eat or digest food due to a failure of their
gastrointestinal tracts. Parenteral nutrition is typically administered through
central vein catheters that are surgically implanted during hospitalization. The
Company formulates, compounds and dispenses solutions pursuant to a physician's
order. Solutions used in this therapy typically contain amino acids (protein),
dextrose (carbohydrate), lipids (fat), electrolytes, vitamins and trace
minerals. Some patients requiring this type of therapy periodically require
routine re-hospitalization throughout their treatment. Some patients may require
therapy for the remainder of their life.
ANTIBIOTIC THERAPY - Antibiotic and anti-infection therapies are used to treat a
variety of infections, including osteomyelitis (bone infections), bacterial
endocarditis (heart valve infections), septicemia (blood infections), wound
infections, bone and joint infections and infections associated with cystic
fibrosis and diabetes. By intravenously administering antibiotics into the
bloodstream (as opposed to ingesting them orally), the efficacy of the
medication is generally increased. Antibiotic therapy is also becoming a
significant therapy for treating individuals suffering from Acquired Immune
Deficiency Syndrome ("AIDS"). Because of the gradual destruction of the immune
system by the AIDS virus, orally administered drugs typically become less
effective against opportunistic infections, and consequently antibiotics must be
introduced intravenously.
PHYSICIAN PRACTICE MANAGEMENT
During fiscal 1996, DPMI entered into agreements to manage the medical
practices of six physicians and is currently negotiating additional contracts.
Each "Full Service Facility and Management Agreement" (the "Management
Agreement") typically delegates to and requires DPMI, at its expense, to: (i)
act as the sole and exclusive agent of the physician or physician group for the
management and administration of business functions and services related to the
physicians' medical practice; (ii) undertake marketing, billing, record keeping,
collection, clerical staffing and support services; (iii) provide physical
office space, facilities and equipment necessary for the physician's practice,
including the repair and maintenance thereof and all utilities and supplies
related thereto including licenses and permits; (iv) undertake the hiring,
firing, selection, training and supervision all non-medical personnel; (v)
prepare and maintain accounting and financial records and patient files; and
(vi) undertake other management and administrative functions related to the
foregoing. In consideration of its services, DPMI receives a management fee
typically ranging from 20% to 65% of revenues generated by the physicians. DPMI
attempts to negotiate long-term (5 years or longer) noncancellable Management
Agreements due to its large initial costs in setting up and equipping fully
staffed and functional facilities for physicians. The Management Agreements may
be terminated by the nondefaulting party in the event of a breach by the
defaulting party. DPMI and the physicians each agree to indemnify the other for
claims which may arise in connection with the performance of their respective
obligations under the Management Agreements. To facilitate the expansion and
integration of physician practices under DPMI management including the physical
relocation thereof to facilities owned by the Company, DPMI has agreed to make
loans to several of the contracting physicians. The loans (the "Physician
Loans") are usually documented by a credit agreement, a promissory note and a
security agreement which provides DPMI a security interest in certain assets of
the physicians practices including inventory, accounts, equipment and general
intangibles. As of August 31, 1996, DPMI had made three (3) Physician Loans
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in the aggregate principal amount of $ 836,000. Although the Physician Loans
have facilitated the expansion of the physician management business of DPMI, the
Company, as a lender, incurs a risk that the Physician Loans will not be paid or
paid in a timely manner. If the Company or DPMI is forced to foreclose on the
security collateralizing any Physician Loan, there can be no assurance that the
collateral will be sufficient to cover the obligation. All of the Physician
Loans are current as of August 31, 1996. If all or part of the Physician Loans
prove to be uncollectible, there would be a material adverse effect on the
earnings of the Company. Under the Management Agreements, DPMI is entitled to a
fixed percentage of collections from the physicians' practice and DPMI has
agreed to pay certain fixed categories of expenses which obligation is not
limited in amount. To the extent DPMI's share of collections is not sufficient
to cover its expense obligations under the Management Agreements, DPMI will
remain obligated to pay the excess expenses and is subject to losses under the
Management Agreements. To date, DPMI's Management Agreements have been
profitable with one exception.
OUTPATIENT SURGICAL FACILITY
The Company's Vista Facility provides outpatient surgical facilities,
x-ray diagnostic services and full service laboratory testing to physicians and
their patients. The Vista Facility and the Office Building are located adjacent
to each other. In January 1, 1996, DPMI entered into a five year Management
Agreement for the Vista Facility which entitles DPMI to 28% of the revenues
generated by the facility in exchange for comprehensive management services
provided by DPMI. The Management Agreement for the Vista Facility is similar in
scope to the ones entered into by DPMI to manage physician practices.
BUSINESS GROWTH STRATEGY
Beginning in late fiscal 1994 and during fiscal 1995, the Company
commenced implementation of a new business strategy of diversifying from an
almost exclusively in-home infusion service provider into an integrated
medical/health services Company. The foundation of this strategy was the
acquisition of a majority interest in the Vista outpatient surgical center
located in Pasadena, Texas in August 1994 and the completion of the Office
Building adjacent to the Vista Facility in April 1995. The Company also formed
DPMI to provide management services to medical practices. DPMI provides office
space and fee-based management services to client physicians located in the
Office Building. Vista provides outpatient surgical facilities, x-ray diagnostic
services and full service laboratory testing to physicians and their patients in
the Vista Facility.
The Company intends to grow as a provider of health care services by
(i) expanding the business of its existing operations locally, (ii) acquiring
established health care providers, and (iii) opening new branch facilities in
selected markets. The Company is continually evaluating potential acquisition
candidates and suitable locations for new facilities. However, the Company does
not presently have any agreements, arrangements or understandings regarding any
acquisitions or the opening of additional facilities. The Company's growth
strategy is dependent in a large part on the ability of the Company to attract
and retain key management, marketing and operating personnel at the local
facility level. Such persons are in high demand and are often subject to
competing offers from other health care service companies and related
businesses.
The Company's acquisition strategy includes (i) identifying businesses
with stable referral sources that it can acquire at attractive purchase prices,
(ii) minimizing its initial cash investment by employing deferred payment
mechanisms and financing a significant portion of the purchase price with Common
Stock and/or long-term loans, (iii) retaining management and using "earn-outs"
based on revenues and/or profits to provide incentives to such management, and
(iv) using its management expertise and corporate information and control
systems to enhance the growth and profitability of acquired operations.
The Company's target markets are areas with major industrial companies
and middle class blue-collar workers, generally with strong union ties and with
superior insurance coverage. This population group has proven to be very open to
the type of health care center concept offered by the Company. The Company's
operations are in Pasadena, Texas, a petrochemical industry hub which provides a
stable patient base of insured patients. The Company anticipates growth within a
hub area by expanding its core of outlying doctor practices and clinics under
management contracts; broadening the initial lines of specialized practices;
and, in selected new industrial markets, opening additional outpatient surgical
facilities. It is anticipated that each hub area will consist of a central core
of outpatient surgical, diagnostic and laboratory centers, infusion therapy
facilities and specialized practices serving outlying clusters of general
practitioners. Subsequent alliances of physicians, specialists and clinics are
feasible in other areas around Houston, such as Clear Lake, La Porte, Baytown,
Deer Park, and other industrial/petrochemical centers.
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COMPETITION
The Company is one of many in the greater Houston metropolitan area
that provide medical practice management. Several major hospital organizations
with greater financial resources are planning to or have entered the Pasadena
area (the Company's principal market) which will or directly compete with the
Company's operations. Such competition could be particularly acute with respect
to the Company's outpatient surgical facility and have an adverse effect on the
ability of the Company to attract and retain physician practices in the Office
Building.
The in-home infusion health care therapy market is highly competitive
and management anticipates that competition, particularly for patient referrals,
will intensify in all metropolitan areas. The industry has been subject to
market consolidation in recent years and the Company believes that this trend
will continue. The Company currently competes with other in-home infusion
therapy companies, hospitals, physician groups and other health care
organizations, many of which operate on a regional or national basis and are
larger and have significantly greater resources than the Company. In the past
year, the Company has experienced substantial pressure from insurance companies
with respect to the need for and the cost of in-home infusion therapy
treatments. This pressure has resulted in declining charges per patient and
profit margins for the Company in that area.
Presently, the Company operates only in the greater Houston
metropolitan area. However, the Company would expand its operations into other
markets through acquisitions if suitable acquisition candidates are identified
and the acquisition terms are acceptable to the Company.
With respect to the Company's health care operations, the primary
competitive factors are (i) quality of care, including responsiveness of service
and quality of professional personnel, (ii) the ability to establish and
maintain relationships with referring physicians, hospitals, health maintenance
organizations, clinics and nursing agencies, (iii) price, (iv) breadth of
services offered, and (v) general reputation with physicians, other referral
sources and potential patients. Management believes that the Company competes
successfully in all of these areas.
MARKETING AND SALES
With respect to the Company's in-home infusion business and its
outpatient surgical facility, the Company relies primarily on patient referrals
from physicians. With respect to in-home infusion therapy, these referral
sources tend to be concentrated among a limited number of physician specialists,
allowing the Company to conduct a directed selling effort. Primarily due to
escalating pressures to contain health care costs, insurance companies and other
third-party payers are participating to a greater extent in decisions regarding
health care alternatives. Consequently, management believes that such
third-party payers will be increasingly important in marketing the Company's
services in the future.
The Company's marketing strategy for DPMI is to offer to certain
oncologists, specialists and general practitioners centralized office management
services in exchange for a percentage of the doctor's revenues. The Company will
provide office personnel to perform administrative tasks, and technicians to
perform certain technical functions at the practitioners office. While the
Company expects this aspect of its business to be independently profitable, the
primary reason for pursuing this new strategy is to create a natural source of
referrals of patients needing parenteral nutrition and other therapies.
Management also believes that as oncologists, in particular, become more aware
of the benefits of nutritional therapy to their patients in terms of bettering
their quality of life while cancer treatments are being pursued, many of those
practitioners will be more likely to refer their patients to the Company at a
much earlier stage for the parenteral nutrition treatment.
DELIVERY OF IN-HOME INFUSION PATIENT SERVICES
The decision to proceed with in-home infusion therapy is made jointly
by the patient, the attending physician and the Company. This decision involves
obtaining and evaluating information about the patient's medical history, home
environment and insurance, as well as discussing the patient's willingness and
ability to participate in the self-administration of home health care. After a
patient is referred to the Company, a pharmacist takes the prescription order
from the attending physician and the Company personnel coordinate the delivery
of patient care tailored to the individual's specific needs.
Throughout the course of treatment, a company licensed pharmacist
compounds or supervises the preparation of all prescribed drugs, solutions and
related supplies and answers questions concerning the prescribed therapy and the
Company's services. In certain cases where the patient is incapable of
self-administering the therapy, a nurse is also present at each
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administration of the therapy. Company nurses visit patients periodically to
review training, catheter placement and compliance with the patient care plan.
The Company's personnel are available to respond to patient needs 24 hours a
day, seven days a week.
HEALTH CARE REGULATION
The federal government and the state of Texas regulate various aspects
of the Company's business. The Company's Vista Facility is licensed as a
pharmacy and is subject to federal and state laws and regulations governing
pharmacies. Federal laws require, among other things, that the Company's
facilities comply with rules relating to controlled substances. These rules
include an obligation to register with the Drug Enforcement Administration of
the United States Department of Justice and to meet certain requirements
concerning security, record keeping, inventory controls, prescription forms,
order forms and labeling. The Company's pharmacists and nurses also are subject
to state licensing requirements and laws regarding standards of professional
conduct. Each nurse and pharmacist used by the Company must have a valid
license. Management believes that the Company's operations comply in all
material respects with applicable pharmacy licensing requirements.
The health care industry is highly regulated at the federal and state
levels. The Company believes its business is in material compliance with
applicable law. The relationships between the Company and its affiliated
physician groups, however, are unique, and many aspects of these relationships
have not been the subject of judicial or regulatory interpretation. There can be
no assurance that a review of the Company's business by courts or by health
care, tax, labor or other regulatory authorities would not result in
determinations that could adversely affect the Company's operations or that the
health care regulatory environment will not change so as to restrict the
Company's existing operations or potential for expansion.
A federal statute (the "federal anti-kickback statute") prohibits the
offer or payment of remuneration, or the solicitation or receipt of
remuneration, to induce either (i) the purchase of any item or service
reimbursable in whole or in party by Medicare or certain state health care
programs (including Medicaid); or (ii) the referral of an individual for the
furnishing of any item or service reimbursable in whole or in part by Medicare
or certain state health care programs. Both criminal and civil penalties can be
imposed for violations of the federal-kickback statute, including exclusion from
participation in the Medicare and Medicaid programs. The Department of Health
and Human Services and law enforcement authorities are increasingly scrutinizing
arrangements between health care providers and referring physicians to ensure
that those arrangements do not constitute mechanisms for paying for referrals.
In addition, a number of states have adopted similar legislation that applies to
patients not covered by Medicare or Medicaid programs. The Company does not
believe that its business constitutes a violation of federal or state
anti-kickback statutes. Medicare and state health care programs do not reimburse
medical practices for management fees paid to the Company, and the Company does
not refer patients to the medical practices. Nevertheless, because of the
breadth of federal and state anti-kickback statutes and the absence of court
decisions interpreting their application to arrangements such as those entered
into by the Company, there can be no assurance that the Company's activities
will not be challenged by regulatory authorities or that the Company's position
will prevail if challenged.
Numerous legislative proposals have been introduced or proposed in the
U.S. Congress and in some state legislatures that would effect major changes in
the U.S. health care system nationally or at the state level. It is not clear at
this time what proposals, if any, will be adopted or, if adopted, what effect,
if any, such proposals would have on the Company's business. Certain proposals,
such as reducing Medicare and Medicaid, could adversely affect the Company.
There can be no assurance that currently proposed or future health care
legislation or other changes in the administration or interpretation of
governmental health care programs will not have a material adverse effect on the
Company.
General business corporations (as opposed to professional corporations
which are wholly-owned by physicians) are generally not allowed to render
medical care. While the Company structures its operations to comply with
applicable laws concerning the corporate practice of medicine, there can be no
assurance that, given varying and uncertain interpretations of such laws, the
Company would be found to be in compliance with such laws. A determination that
the Company is in violation of applicable restrictions on the practice of
medicine could have a material adverse effect on the Company if the Company were
unable to restructure its operations to comply with applicable state
requirements.
RISKS INHERENT IN PROVISION OF MEDICAL SERVICES
The Company's affiliated physician groups and the Vista Facility are
involved in the delivery of health care services to the public and are exposed
to the risk of professional liability claims. Claims of this nature, if
successful, could result in
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damage awards to the claimants in excess of the limits of any applicable
insurance coverage. Insurance against losses related to claims of this type can
be expensive and varies widely from state to state. The Company and its
affiliated physician groups maintain liability insurance in amounts and
coverages believed to be usual and customary. Nevertheless, successful
malpractice claims asserted against the physician groups or the Company could
have a material adverse effect on the Company. See "Business--Insurance."
LIMITED OPERATING HISTORY
The Company faces certain general business risks with respect to all of
its operations. In addition to regulatory concerns and increasing competition
with respect to all of its operations, the Company's in-home infusion therapy
operations are subject to substantial risks because the Company serves a
relatively small number of patients. The Company's in-home infusion health care
revenues have decreased from $2,730,753 in fiscal 1995 to $1,767,751 in fiscal
1996. The Company intends to more aggressively market its in-home infusion
therapy services with the goal of increasing its patient base in fiscal 1997,
however, the Company's revenues and profits will remain relatively vulnerable
unless and until the patient base increases significantly. In the past year, the
Company has faced increasing pressure from insurance companies to justify the
continuation of and need for in-home infusion therapy for patients and the
Company's charges therefor. The Company expects these pressures to continue. In
addition, the Company has not yet established a proven operating history with
respect to its physician practice management. The Company's revenues and profits
from this area will remain vulnerable until the Company has more management
contracts for physician practices and more experience in managing such
contracts. As of August 31, 1996, DPMI had management agreements for six
physician practices. The loss of one or more of these contracts could have a
material adverse effect on the profits and revenues of DPMI. In addition,
Vista's revenues decreased 1% during the last fiscal year due to fewer patient
referrals and increased competition. See "Item 6. - Management's Discussion and
Analysis and Plan of Operation".
REDUCTIONS IN THIRD PARTY REIMBURSEMENT
Health care providers typically bill various third party payors, such
as governmental programs (e.g., Medicare and Medicaid), private insurance plans
and managed care plans, for the health care services provided to their patients.
These third party payors are increasingly negotiating the prices charged for
medical services, pharmaceuticals and other supplies, with the goal of lowering
reimbursement and utilization rates. Third party payors can also deny
reimbursement for medical services, pharmaceuticals and other supplies if they
determine that a treatment was not performed in accordance with treatment
protocols established by such payors or for other reasons. Loss of revenues to
the Company caused by cost containment efforts could have a material adverse
effect on the Company. Although the Company does not have any contracts to
provide health care services on a capitated or other risk sharing basis, the
Company anticipates that it will eventually offer its services to payors in the
future on a capitated or other risk sharing basis. To the extent that patients
or enrollees covered by a contract require more frequent or extensive care than
is anticipated by the Company, the revenue to the Company derived from such
contracts may be insufficient to cover the costs of the services provided.
Insufficient revenue under capitated or other risk sharing contracts could have
a material adverse effect on the Company.
INSURANCE
In recent years, physicians, hospitals and other participants in the
health care market have become subject to an increasing number of lawsuits
alleging malpractice, product liability or related legal theories, many of which
involve large claims and significant defense costs. With respect to its in-home
infusion health care business, the Company does not carry liability insurance
for any employee or contract representative. The Company requires that all
health care professionals, including registered nurses with whom the Company
contracts, carry personal professional liability insurance. However, the Company
does not require continuing proof of insurance, mandate policy limits or
deductibles or require that the Company be named as an additional insured.
Should one of the Company's agents or contracting health care professionals
commit a negligent or other liability producing act or omission in the Company's
in-home infusion operations, the patient could have a direct claim against the
Company which would be uninsured. Mr. Chiu Chan has in force personal
professional liability insurance with coverage limits of $1 million per incident
and he has not experienced difficulty in obtaining insurance in the past and
believes the current insurance coverage is adequate to provide for any claims
that may arise and related settlements, if any, involving him personally.
Management believes the Company has reasonable and customary insurance coverage
with respect to the remainder of its business operations although the Company
cannot provide any assurance that its insurance would cover all losses to which
the Company may be subject to.
7
<PAGE> 10
EMPLOYEES
The Company and its subsidiaries employ approximately 42 full-time
employees and 2 part-time employees. A number of other individuals are utilized
on an as needed contractual basis, with the number being dependent on the
patient load.
EMPLOYEE BENEFIT PLANS
Effective August 1, 1995, the Board of Directors approved a 1995
Non-Qualified Stock Option Plan for consultants and non-employee directors. The
Board believes that the Plan will advance the long term interests of the Company
(i) by providing consultants and non-employee directors with the opportunity to
obtain an equity interest in the Company, (ii) by furthering the identity of
interests of participants in the plan with those of the shareholders of the
Company through the ownership and performance of the common stock of the
Company, and (iii) by permitting the Company to attract and retain qualified
consultants and non-employee directors. Under the terms of the Plan, the Company
may grant stock options in the Company's Common Stock to consultants and
non-employee directors of the Company and its subsidiaries. The options granted
under the Plan are not intended to qualify as "incentive stock options" as that
term is defined under Section 422A of the Internal Revenue Code and, as such,
the nonstatutory options granted under the Plan are not entitled to special
treatment under Section 422 of the Code.
Effective August 31, 1995, the Company's shareholders approved a 1995
Incentive Stock Option Plan. The 1995 Incentive Stock Option Plan was
recommended by the Board of Directors because of its belief that the Plan will
advance the interests of the Company by providing key employees, who have
substantial responsibility for the direction and management of the Company, with
additional incentive for them to promote the success of the Company by
increasing their proprietary interest in the success of the Company. It is
intended that options issued under the Plan will qualify as Incentive Stock
Options under Section 422A of the Internal Revenue Code.
ITEM 2. DESCRIPTION OF PROPERTY
The Company commenced its health care operations in August 1992 and
leased 1,000 square feet of office space in East Houston for $600 per month. As
of March 1, 1993, the office space was expanded to a total of 1,915 square feet
and, accordingly, the monthly lease rate increased to $1,286. This lease expired
March 1, 1995 and is currently on a month-to-month basis. The lessor of the
office space is Capital Bank, of Houston, Texas. One of the Company's directors
is a director of Capital Bank. Management believes that the lease rate being
paid is consistent with other commercial rates available in the East Houston
area.
In August 1994, the Company consummated the acquisition of 65% of the
outstanding common stock of Vista, which owns and operates the Vista Facility,
an outpatient surgical center in Pasadena, Texas consisting of a one story
building containing approximately 15,000 square feet. The land and building
owned by Vista is subject to and collateralized by a note payable and deed of
trust to Met Life Capital. The note bears a fixed interest rate of 9.65% with a
monthly installment of $19,533, a maturity date of September 1, 2002, and the
balance of which as of August 31, 1996, was $1,075,366. The Company entered
into a Guaranty Agreement with Met Life Capital whereby the Company guaranteed
65% of the outstanding balance of the mortgage loan. Management believes the
facility is adequately covered by insurance. The depreciation on the facility is
computed using the straight line method over thirty-nine years, furniture and
fixtures are depreciated over seven years, and equipment is depreciated over
five years. The property tax rate is about 3% of appraisal value and the annual
real and personal property taxes are about $77,000. The Vista Facility is 100%
utilized by Vista as an outpatient surgical center and to provide laboratory and
diagnostic testing services.
In September 1994, the Company commenced construction of the Office
Building (adjacent to the existing Vista Facility described above) which was
completed in 1995. The total cost of the office building was approximately
$1,925,000, and was financed from working capital. The new facility was
constructed as a professional office building for physician practices. There is
competition from several professional buildings in the surrounding area.
Management believes the Office Building is adequately covered by insurance. The
Office Building is comprised of two stories and contains approximately 35,900
square feet of space of which approximately 70% is utilized by physician
practices under the management of DPMI. The remaining space will be utilized for
additional physician practices, when contracted for, and is currently vacant. A
total of $707,000 has been spent for new equipment and furnishings for the
Office Building. All depreciation is calculated on
8
<PAGE> 11
the straight line method, with the building being depreciated over thirty-nine
years, furniture and fixtures over seven years, and equipment over five years.
The property tax rate is approximately 3% of appraisal value and the annual real
and personal property taxes are about $80,000. Currently, there are six
physician practices under management with DPMI which are located in the Office
Building. Each physician practice utilizes more than 10% of the space in the
building and comprises more than 10% of the management fees payable to DPMI
pursuant to the Management Agreements described below. Revenues and income from
the property are derived from the management fees received by DPMI under the
Management Agreements. The Company does not directly lease office space in the
building. Pursuant to the Management Agreements which provide DPMI with a
percentage of revenues from each physician's practice, DPMI agrees to provide
fully-equipped office space and other services. Given the limited number of
Management Agreements which provide revenue to DPMI and the Company from the
Office Building, the loss or cancellation of any agreement would be material.
ITEM 3. LEGAL PROCEEDINGS
Vista is named as a defendant in a lawsuit with a former employee of
Vista. The lawsuit was filed in 1993 in the 80th Judicial District Court of
Harris County, Texas, CA No. 93-57254. The plaintiff is seeking unspecified
damages against Vista and other named defendants for alleged injuries incurred
in connection with a series of anti-hepatitis vaccinations. An interlocutory
order granting Vista's Motion for Summary Judgment was granted on May 5, 1995,
disposing of all of the plaintiff's claims against Vista. The plaintiff has the
right to appeal the order prior to final disposition of the case against the
remaining defendants. Vista intends to vigorously defend the action and contends
that no amounts are due to the plaintiff from the Company. Management believes
any liability resulting from this matter will be covered by Workers Compensation
insurance maintained by Vista. Based upon management's assessment of the
potential for loss and recommendations from the Company's counsel, no amounts
have been accrued in the accompanying financial statements with respect to this
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In September 1993, the Company's Common Stock began trading on NASDAQ's
Small Capitalization Market under the symbol DYII. Prior to obtaining the NASDAQ
listing, the Company's Common Stock had traded in the over-the-counter market on
the pink sheets and on the NASD Electronic Bulletin Board.
The following table sets forth the high and low closing bid prices for
the Company's Common Stock, as adjusted for the 1 for 8 reverse stock split,
during each of the last eight fiscal quarters as reported by the National
Quotation Bureau, Inc.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995 Fiscal Year - Quarter Ended:
November 30, 1994 $2.25 $2.13
February 28, 1995 2.00 1.88
May 31, 1995 1.88 0.88
August 31, 1995 1.63 1.00
1996 Fiscal Year - Quarter Ended:
November 30, 1995 1.3125 1.00
February 29, 1996 1.375 0.9375
May 31, 1996 1.125 0.6875
August 31, 1996 1.25 1.00
</TABLE>
9
<PAGE> 12
These quotations reflect inter-dealer prices, without retail markup,
mark-down or commission and may not represent actual transactions.
As of August 31, 1996, the Company had approximately 94 shareholders of
record. This number does not include shareholders who hold the Company's
securities in nominee accounts with broker-dealer firms or depository
institutions. Management believes the number of beneficial owners of its Common
Stock to be in excess of 242.
The Company has not paid any cash dividends on its Common Stock and
intends to retain all earnings for the operation and expansion of its business.
The Company does not anticipate paying cash dividends in the foreseeable future.
Any future determination as to the payment of cash dividends will depend upon
the Company's results of operations, financial condition and capital
requirements, as well as such other factors as the Company's Board of Directors
may consider. There are no contractual or other restrictions which limit the
Company's right to declare and pay dividends should the Board of Directors elect
to do so.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company did not generate any revenues from inception in 1983
through July 1992. New management and other individuals/entities invested
$2,000,000 and the Company began to generate revenues from home health care
therapy in August 1992, the first month of operations.
ANALYSIS OF OPERATIONS
The following discussion provides an analysis of the Company's results
of operations and reasons for material changes therein for the three years ended
August 31, 1996.
The Company recorded consolidated net income of $559,473 for the year
ended August 31, 1996, as compared to consolidated net income of $936,019 in
1995 and $470,094 in 1994. The Company's net income in 1994 included a $38,000
one-time charge resulting from the change in method of accounting for income
taxes by the adoption of the provisions of Statement of Financial Accounting
Standards No. 109. There were no other significant, unusual or non-recurring
items of income or expense during the three years ended August 31, 1996. As a
result of the expansion of the Company's business operations including the
operations of DPMI in fiscal 1996, and the acquisition of Vista in the last
month of fiscal 1994, as noted below, it is difficult to meaningfully compare
revenues and expenses of the Company for the last three fiscal years.
AUGUST 31, 1996 VS. AUGUST 31, 1995
For the fiscal year ended August 31, 1996, consolidated total revenues
were $7,418,710 compared to $6,904,586 for the prior year. Notwithstanding this
moderate increase of $514,124 or 7% in consolidated gross revenues, there were a
number of significant increases and decreases in the component revenue
categories. For instance, revenue attributable to in-home infusion therapy
operations decreased $963,002 or 35% from that of the prior year due to lower
patient load as a result of fewer referrals and lower reimbursable insurance
charges per patient. Revenue attributable to Vista operations decreased $33,655
or 1% from that of the prior year due to fewer patient referrals, primarily as a
result of the relocation of a physician group which was located on the premises.
This combined revenues decrease of $996,657 was offset to a large extent by a
revenue increase of $1,512,264 or 123% attributable to DPMI as a result of
DPMI's aggressive efforts in signing up physicians for management. Rental
revenue decreased $299,928 or 71% from that prior year due to new management
agreements with physicians that incorporate rental revenue as part of the
management fee. Interest revenue increased $14,917 or 23% from that of the prior
year due to a larger cash balance being deposited into interest bearing bank
accounts. The Company achieved positive net income with respect to two of its
three areas of operation. Net income (before minority interest) from the
operations of DPMI was $420,689 and $190,202 from the operations of the Vista
Facility. The Company incurred a loss of $51,868 with respect to its in-home
infusion therapy operation.
There were significant increases in consolidated expense categories
primarily due to increases in management activities of DPMI including a $198,577
or 17.6% increase in compensation and benefits expense, a $690,810 or 73.7%
increase in contract payments to physicians and a $297,740 or 61.2% increase in
medical supplies expense. An increase of
10
<PAGE> 13
$94,349 or 21.1% increase in depreciation and amortization expense was primarily
due to the purchase of new medical equipment by Vista. Although some expense
categories such as rent and occupancy expense and other expenses showed a
significant decrease from that of the prior year, while another expense category
such as other general and administrative expenses showed significant increase
from that of the prior year, the grouping of individual expense accounts under
each of these three expense categories in the current year differed than that of
the prior year and contributed to the significant increase and decrease in each
of these three expense categories.
The Company faces certain general business risks with respect to all of
its operations. In addition to regulatory concerns and increasing competition
with respect to all of its operations, the Company's in-home infusion therapy
operations are subject to substantial risks because the Company serves a
relatively small number of patients. The Company's in-home infusion health care
revenues have decreased from $2,730,753 in fiscal 1995 to $1,767,751 in fiscal
1996. The Company intends to more aggressively market its in-home infusion
therapy services with the goal of increasing its patient base in fiscal 1997,
however, the Company's revenues and profits will remain relatively vulnerable
unless and until the patient base increases significantly. In the past year, the
Company has faced increasing pressure from insurance companies to justify the
continuation of and need for in-home infusion therapy for patients and the
Company's charges therefor. The Company expects these pressures to continue. In
addition, the Company has not yet established a proven operating history with
respect to its physician practice management. The Company's revenues and profits
from this area will remain vulnerable until the Company has more management
contracts for physician practices and more experience in managing such
contracts. As of August 31, 1996, DPMI had management agreements for six
physician practices. The loss of one or more of these contracts could have a
material adverse effect on the profits and revenues of DPMI. Vista's revenues
decreased 1% during the last fiscal year due to fewer patient referrals as
discussed above.
AUGUST 31, 1995 VS. AUGUST 31, 1994
For the fiscal year ended August 31, 1995, total revenues were
$6,904,586 compared to $2,584,235 for the prior year. This increase of 267%
resulted from the inclusion of Vista revenues for an entire year in fiscal 1995
(fiscal 1994 included only six days of revenues, as Vista was acquired on August
25, 1994), and from DPMI revenues of $1,225,731 which did not exist in 1994. The
Company's revenues from its in-home infusion therapy services were $2,730,753 in
1995, a 6.6% increase over 1994. Vista's revenues for 1995 of $2,946,619
represented a 160% increase over 1994 on a pro-forma basis. Total expenses for
1995 increased 339% over 1994 due to the exclusion of all but six days of
Vista's operations in 1994 and the inclusion of DPMI in 1995. On a pro-forma
basis, Vista's total expenses in 1995 increased 204% compared to 1994. Income
from operations in 1995 increased $703,612 (98%) over 1994. Rent and other
income increased from $23,141 in 1994 to $419,771 in 1995 due primarily to the
rentals received on the new medical facilities completed in 1995 and leased to
Premier. Interest expense increased from $51,048 in 1994 to $162,643 in 1995 due
to the financing costs attributable to the building improvements and equipment
in 1995.
Significant increases in expense categories included a $627,105 or 125%
increase in compensation and benefits expense, of which $336,540 was attributed
to the inclusion of a full year of Vista operations. The remaining increase of
$290,565 was attributed to the inclusion of DPMI in 1995. Provision for
uncollectible accounts increased $768,267, or 753%. Of this amount, $236,806, or
232%, was attributable to home infusion therapy operations primarily due to
increased third-party payer scrutiny of invoices and reductions in qualifying
payments. The remaining $531,461 increase in provision for uncollectible
accounts was the result of including a full year's operations of Vista in 1995.
Contract payments increased $771,674, or 467%, represented by a $57,566
decrease, or 35%, attributable to the home infusion therapy operations (a
significant part of which was reduction in consultant fees paid), offset by an
increase of $274,702 and $554,538 attributable to Vista and DPMI, respectively,
as a result of including a full year of Vista's operations in 1995 and the
inclusion of DPMI in 1995. Medical supplies increased 98%, or $241,254,
primarily due to the inclusion of a full year of Vista's operations in 1995.
Depreciation and amortization increased $400,689, or 79%; of this amount,
$126,409 was attributable to the home infusion therapy operations and the
completion of the new medical office building in 1995, and $274,280 was
attributable to the inclusion of Vista's operations for a full year in 1995.
Rent and occupancy increased $255,754, or 571%, attributable to an increase of
$55,379 for the home infusion operations resulting from the completion of the
new medical office building in 1995, $184,776 attributable to the inclusion of a
full year of Vista's operations in 1995, and $15,599 attributable to the
inclusion of DPMI in 1995. Other general and administrative expenses increased
489,089, or 130%. Of this, $166,405 represented Vista's operations for a full
year in 1995, and the remaining $322,684 increase was attributed to DPMI due to
its inclusion in 1995.
The Company's effective Federal income tax rate was 22.7% in 1996 and
38% in 1995.
11
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company maintained liquidity in fiscal 1995 and 1996. Working
capital of $1,826,002 as of August 31, 1996, increased $447,959 from the prior
year primarily due to an increase in cash of $665,007 from operations, an
increase in accounts receivable of $323,259 and a decrease in other current
assets of $33,717 offset by an increase in accounts payable of $53,204, an
increase in accrued liabilities of $720,386, a decrease in current income taxes
payable of $49,039, a decrease in current deferred income taxes payable of
$198,700 and a decrease in current portion of long term debt of $19,262. As of
August 31, 1996, the Company maintained a liquid position evidenced by a current
ratio of 1.93 to 1 and a total debt to equity ratio of 0.46 to 1.
The Company is actively targeting opportunities to expand in the
physician management and outpatient surgical clinic markets. Therefore,
internally generated funds may not be sufficient to finance future expansion.
The Company will assess the need and obtain, if necessary, additional equity
capital or debt financing; provided, however, there can be no assurance that the
Company will be able to obtain any necessary financing on the terms, or in the
amounts that are necessary and acceptable to the Company.
Management believes that available cash funds and funds generated from
operations will be sufficient for the Company to finance working capital
requirements for the foreseeable future and to meet its payment obligations on
its long-term indebtedness. Inflation has not significantly impacted the
Company's financial position or operations.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item is included in a separate section
of this Annual Report beginning on Page F-1 and is incorporated herein by
reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective September 27, 1996, the Company terminated the accounting
firm of Bateman, Blomstrom & Co. There were no disagreements on any matter of
accounting principles or practices, financial statement presentation or
disclosure, or auditing scope or procedures during the year ended August 31,
1995. The independent accountants' report on the Company's financial statements
for the past two years did not contain an adverse opinion, disclaimer of opinion
nor was it qualified or modified as to uncertainty, audit scope or accounting
principles. The decision to change certifying accountants was recommended and
approved by the Company's Board of Directors. During the Company's two most
recent fiscal years and the subsequent interim period through September 27,
1996, there were no disagreements or "reportable events" with the former
independent accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. Effective
September 27, 1996, the Company engaged the accounting firm of Wood, Harper &
Associates, P.C. as their new principal independent accountants.
12
<PAGE> 15
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table (and accompanying text) sets forth the names and
ages of all the directors and executive officers of the Company, all positions
and offices with the Company held by each person, each such person's term of
office as a director and business experience for the past five years.
NAME AGE POSITION
Chiu Moon Chan 44 Chairman of the Board of Directors, Chief Executive
Officer, President and Secretary (July 1992-Present)
Philip Chan 45 Vice President - Finance and Treasurer/Director
(July 1992-Present)
Stephen L. Huber 46 Director (July 1992-Present)
Earl R. Votaw 70 Director (July 1992-Present)
CHIU MOON CHAN is a registered pharmacist and since May 1978, has been
employed by health care service organizations in Houston, Texas. From March 1986
to May 1988, Mr. Chan was employed by the M.D. Anderson Cancer Center, Houston,
Texas. From June 1988 through September 1991, Mr. Chan operated his own in-home
health care business in Houston, Texas as a sole proprietorship. From October
1991 through July 1992, Mr. Chan was an executive officer and employee of
E.F.S.M., Inc. located in Houston, Texas, which is in the in-home health care
business, specializing in Medicare and Medicaid patients. Mr. Chan earned a
Bachelor of Science degree in Pharmacy from the University of Houston.
PHILIP CHAN was self-employed with his own consulting, accounting and
tax firm from September 1990 through 1992. From September 1989 to September
1991, he was the controller for a management corporation, Related Management
Corporations of Florida, located in Miami, Florida. From March 1986 to August
1989, he was in charge of the accounting department for Hamel and Associates, a
Houston, Texas accounting firm. Mr. Chan has earned advanced accounting degrees
from the University of Houston and is a CPA in the State of Texas.
Mr. Chiu Chan and Mr. Philip Chan are not related.
STEPHEN L. HUBER is a registered pharmacist and has earned a Bachelor
of Science degree in Hospital Pharmacy from the University of Houston. He served
as director of pharmacy patient care services at the University of Texas M.D.
Anderson Cancer Center from August 1986 to December 1991 when he was promoted to
his current position, Deputy Division Head for patient care services. Mr. Huber
joined M.D. Anderson in 1984 as assistant director of operations. He was a
director of pharmacy from May 1982 through August 1984 for Life Mark Pharmacy
Management.
EARL R. VOTAW earned a Bachelor of Arts degree from the University of
the Americas in Mexico City and a certificate of graduation from the Graduate
School of Mortgage Banking from Northwestern University of Chicago. Mr. Votaw
has served as a director since 1981 and as an executive officer since 1985 of
Jacinto City Bancshares, Inc. ("Jacinto"), a Houston-based bank holding company,
which is publicly held. He has also served since 1989 as an executive officer
and a director of JACI, Inc., a Delaware corporation, that is wholly-owned by
Jacinto. Capital Bank, a Texas chartered bank located in Houston, Texas of which
Mr. Votaw has served as president, chief executive officer, and a director since
1979 is wholly owned by JACI, Inc. As of December 31, 1993, Mr. Votaw resigned
all of his positions with Jacinto, JACI, Inc. and Capital Bank, except his
director position with Capital Bank, to pursue retirement plans.
Each director holds office until the earlier of the election of his
successor at the next annual meeting of stockholders or his resignation or
removal.
13
<PAGE> 16
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon the Company's review of Forms 3, 4, and 5 filed by
the Company's officers and directors and persons who beneficially own 10% or
more of the Company's Common Stock and the written representations of such
persons, the Company is not aware that any of such persons failed to timely file
the foregoing forms during the last fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
The following summary compensation table sets forth in summary form the
compensation received during each of the Company's last three completed fiscal
years by the Registrant's Chief Executive Officer.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
NAME/PRINCIPAL POSITION FISCAL LONG-TERM
YEAR SALARY BONUS OTHER COMPENSATION
<S> <C> <C> <C> <C> <C>
Chiu Chan, CEO 1996 $ 160,000 $ -0- $ 6,010 0
1995 160,000 6,667 28,194 0
1994 175,331 9,333 47,181 0
</TABLE>
No other officer, director or employee of the Company or its
subsidiaries received total compensation in excess of $100,000 during the last
three fiscal years. The Company has no employment agreements with its
executives. Mr. Chiu Chan and Philip Chan devote 100% of their time to the
Company.
Pursuant to the Company's Incentive Stock Option Plan, options to
purchase 275,527 shares were granted in May 14, 1996, which number includes
157,606 options granted to Mr. Philip Chan as described in the table below. The
remaining options were granted to approximately ten (10) nonexecutive employees
of the Company and its subsidiaries. All options are exercisable at $0.9375 per
share and expire May 14, 2001. The Board of Directors also adopted a
non-qualified stock option plan in August 1996 for non-director employees and
consultants, and a total of 175,000 options were granted to two (2) consultants
during fiscal 1996 under that plan.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Securities Percent of Total Options/
Underlying Options/SAR's SAR's Granted to
Name Granted Employees in Fiscal Year Exercise Price Expiration Date
---- ------------------------ ------------------------- -------------- ---------------
<S> <C> <C> <C> <C>
Mr. Philip Chan 157,606 100% $0.9375 May 14, 2001
</TABLE>
Directors of the Company do not receive any compensation for their
services as directors, although directors will be reimbursed for expenses
incurred in attending board meetings.
14
<PAGE> 17
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following sets forth certain information with respect to the
beneficial ownership of shares held by directors, executive officers and persons
known to management to own more than 5% of the outstanding Common Stock of the
Company as of November 29, 1996.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES AND
TITLE OF CLASS OF BENEFICIAL OWNER NATURE OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------- ------------------- ------------------------------ ----------------
<S> <C> <C> <C>
Common Stock Chiu Moon Chan 9,084,877(1) 63.82%
323 Wood Loop
Houston, Texas 77015
Common Stock Ella Chan 9,084,877(1) 63.82%
323 Wood Loop
Houston, Texas 77015
Common Stock Philip Chan 205,106(2) 1.43%
7930 Millbrook Drive
Houston, Texas 77095
Common Stock Hi Lite Development Ltd. 2,433,375 17.09%
First Floor, Wah Sing
Building
61A Java Road
North Point, Hong Kong
Common Stock Officers and Directors 9,289,983 64.55%
as a group (6)
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April, 1995, the Company entered into a note and security agreement
to borrow a total of $125,849 from Capital Bank for the purchase of an
ultrasound machine. The loan was secured by the ultrasound machine and is
payable in 36 monthly installments of $4,003, including interest at 9%, and is
scheduled to mature in April, 1998. The loan had a balance of $77,496 as of
August 31, 1996. Mr. Earl R. Votaw, a director of the Company, is a director of
Capital Bank.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits. The exhibits required by Item 601 of Regulation S-B
are included in this report commencing on page E-1 hereof
which contains a list of such exhibits. The list of exhibits
and the exhibits listed herein are incorporated into this part
by reference.
B. Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the fourth quarter of fiscal 1996.
- --------
(1) Includes (i) 6,782,188 shares held individually by Chiu Moon
Chan, (ii) 1,897,125 shares held in the name of Mr. Chan's
spouse, and (iii) 202,782 shares held in the name of two of
Mr. Chan's minor children. Mr. Chan disclaims any beneficial
ownership of the shares held by his spouse and minor children.
Mrs. Chan disclaims any beneficial ownership of the shares
held by her spouse and minor children.
(2) Includes 157,606 shares which may be acquired by Mr. Philip
Chan pursuant to options granted to him in May 1996. The
options are exercisable at $0.9375 and expire May 14, 2001.
15
<PAGE> 18
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DYNACQ INTERNATIONAL, INC.
By: /s/ Chiu Moon Chan Date: December 12, 1996
-------------------------------------------- -----------------
Chiu Moon Chan, Chairman of the Board
Chief Executive Officer, President and Secretary
In accordance with the Exchange Act, this report has been signed below
by the following persons, on behalf of the Registrant and in the capacities and
on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Chiu Moon Chan Chairman of the Board, December 12, 1996
- ----------------------- Chief Executive Officer,
Chiu Moon Chan President and Secretary
Vice President,
/s/ Philip S. Chan Chief Financial Officer, December 12, 1996
- ----------------------- Controller, and Director
Philip S. Chan
/s/ Stephen L. Huber Director December 12, 1996
- -----------------------
Stephen L. Huber
/s/ Earl R. Votaw Director December 12, 1996
- -----------------------
Earl R. Votaw
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS.
Not Applicable.
16
<PAGE> 19
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
INDEX
A. Financial Statements Page
Reports of independent public accountants F-2
Consolidated balance sheet as of August 31, 1996 F-4
Consolidated statements of income for the years ended August 31, F-5
1996 and 1995
Consolidated statements of changes in stockholders' equity for the F-6
years ended August 31, 1996 and 1995
Consolidated statements of cash flows for the years ended August F-7
31, 1996 and 1995
Notes to consolidated financial statements F-8
F-1
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Dynacq International, Inc.
Houston, Texas
We have audited the accompanying consolidated balance sheet of Dynacq
International, Inc. and its subsidiaries (the "Company") as of
August 31, 1996, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
August 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ WOOD, HARPER & ASSOCIATES, P.C.
------------------------------------
Houston, Texas WOOD, HARPER & ASSOCIATES, P.C.
December 3, 1996
F-2
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Dynacq International, Inc.
Houston, Texas
We have audited the accompanying consolidated statements of income, changes in
stockholders' equity, and cash flows of Dynacq International, Inc. and its
subsidiaries (the "Company") for the year ended August 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
August 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ BATEMAN, BLOMSTROM & CO.
------------------------------
Houston, Texas BATEMAN, BLOMSTROM & CO.
April 5, 1996
F-3
<PAGE> 22
DYNACQ INTERNATIONAL, INC.
Consolidated Balance Sheet
August 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,134,579
Restricted short-term investments 180,000
Accounts receivable, net of allowance for doubtful accounts of $1,739,221 2,413,372
Inventories 29,347
Other current assets 31,120
------------
Total current assets 3,788,418
Property and equipment, net 5,197,107
Other assets 1,333,084
------------
Total assets $ 10,318,609
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 199,452
Accrued liabilities 797,021
Income taxes payable 252,110
Deferred income taxes payable 436,000
Current maturities of long-term debt 277,833
------------
Total current liabilities 1,962,416
Noncurrent liabilities:
Long-term debt 969,392
Deferred income taxes 134,000
------------
Total noncurrent liabilities 1,103,392
Commitments and contingencies
Minority interest 856,357
Stockholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued
or outstanding --
Common stock, $.001 par value, 300,000,000 shares authorized; 14,235,136 shares
issued 14,235
Additional paid-in capital 3,452,130
Retained earnings 2,987,401
Less treasury stock; 71,335 shares at cost (57,322)
------------
Total stockholders' equity 6,396,444
------------
Total liabilities and stockholders' equity $ 10,318,609
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 23
DYNACQ INTERNATIONAL, INC.
Consolidated Statements of Income
For the Years Ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues, net $ 7,418,710 $ 6,904,586
------------ ------------
Costs and expenses:
Direct costs of infusion therapy revenues 334,522 425,679
Compensation and benefits 1,328,652 1,130,075
Contract payments to physicians 1,665,102 937,040
Provision for uncollectible accounts 781,201 870,318
Medical supplies 784,056 486,316
Depreciation and amortization 540,623 446,274
Rent and occupancy 119,568 300,530
Other general and administrative expenses 1,103,156 864,136
Other expenses 12,896 322,297
------------ ------------
Total costs and expenses 6,669,776 5,482,665
------------ ------------
Income from operations 748,934 1,421,921
------------ ------------
Other income (expense):
Rent and other income 119,843 419,771
Interest income 80,259 65,342
Interest expense (137,113) (162,643)
------------ ------------
Total other income (expense) 62,989 322,470
------------ ------------
Income before income taxes and minority interest 811,923 1,744,391
------------ ------------
Provision for income taxes 184,500 665,000
------------ ------------
Net income before minority interest 627,473 1,079,391
Minority interest in earnings (67,950) (143,372)
------------ ------------
Net income $ 559,473 $ 936,019
============ ============
Earnings per common share $ 0.04 $ 0.07
============ ============
Weighted average number of common and common equivalent
shares outstanding 14,242,658 14,235,136
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 24
DYNACQ INTERNATIONAL, INC.
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock Treasury Stock at Cost Additional
Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
---------- ------- ------ -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1994 14,235,136 $14,235 -- $ -- $3,332,026 $1,491,909 $ 4,838,170
Net Income -- -- -- -- -- 936,019 936,019
---------- ------- ------ -------- ---------- ---------- -----------
Balance, August 31, 1995 14,235,136 14,235 -- -- 3,332,026 2,427,928 5,774,189
Treasury Stock Acquired -- -- 71,335 (57,322) -- -- (57,322)
Repurchase of Subsidiary -- -- -- -- 120,104 -- 120,104
Stock
Net Income -- -- -- -- -- 559,473 559,473
---------- ------- ------ -------- ---------- ---------- -----------
Balance, August 31, 1996 14,235,136 $14,235 71,335 $(57,322) $3,452,130 $2,987,401 $ 6,396,444
========== ======= ====== ======== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 25
DYNACQ INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
For the Years Ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 559,473 $ 936,019
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 540,623 446,274
Deferred income taxes (169,100) 227,705
Minority interest (52,154) 286,160
(Increase) in accounts receivable (946,410) (838,484)
Increase in allowance for doubtful accounts 657,121 632,264
(Increase) decrease in inventories and other assets 27,949 (376,754)
(Increase) decrease in due from affiliate 480,670 (488,327)
Increase in accounts payable 53,204 35,804
Increase in accrued liabilities 720,387 19,612
Increase (decrease) in income taxes payable (49,039) 301,149
(Increase) in long-term receivable (642,928) --
----------- -----------
Net cash provided by operating activities 1,179,796 1,181,422
----------- -----------
Cash flows from investing activities:
Repurchase of subsidiary stock 120,104 --
Purchases of property and equipment (283,558) (2,662,135)
Disposition of property and equipment -- 188,724
Purchases of short-term investments (180,000) --
----------- -----------
Net cash used in investing activities (343,454) (2,473,411)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt -- 125,849
Principal payments on long-term debt (294,013) (257,359)
Acquisition of treasury stock (57,322) --
----------- -----------
Net cash used in financing activities (351,335) (131,510)
----------- -----------
Net increase (decrease) in cash and cash equivalents 485,007 (1,423,499)
Cash and cash equivalents at beginning of year 649,572 2,073,071
----------- -----------
Cash and cash equivalents at end of year $ 1,134,579 $ 649,572
=========== ===========
Supplemental cash flow disclosures:
Cash paid during year for:
Interest $ 137,113 $ 162,643
Income taxes $ 338,000 $ 10,968
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 26
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
NOTE 1. CORPORATE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A. BUSINESS AND ORGANIZATION
Dynacq International, Inc. (the "Company") is engaged in the business of
providing home infusion health care services and supplies to patients in
their homes, the operation of an outpatient surgery facility, the
operation of a medical office complex, and the management of group
physician practices.
The Company was incorporated under the laws of the State of Utah on
September 16, 1983, as Rujo, Inc. On January 14, 1987, the shareholders
of the Company approved the change of name of the Company to Jackson
Brothers Industries, Inc. The Company merged into a Nevada corporation
of the same name on June 16, 1989, pursuant to a share-for-share
exchange of stock. On January 28, 1992, the shareholders of the Company
again approved a change of corporate name to Dynacq International, Inc.,
elected directors of the Company and approved a plan of recapitalization
whereby authorized capital was increased to an aggregate of 55,000,000
shares of stock, comprised of 50,000,000 Common Shares and 5,000,000
Preferred Shares.
On July 28, 1992, the Company completed the sale of 90 million shares of
its "restricted" common stock to several investors for a total purchase
price of $2 million. As part of this recapitalization of the Company,
the authorized number of common shares was increased from 50 to 300
million and three holders of "restricted" stock returned a total of 9.9
million shares to the Company's treasury.
In February 1993, the Company became the beneficial owner of all of the
outstanding common stock of Lucky China International Limited, a Hong
Kong-chartered corporation, whose corporation name has since been
changed to Dynacq (Asia) Limited ("Asia"). There are two shares
outstanding. One share is held in the name of the Company and the other
share is held in the name of Mr. Kwong Chung Wai, as a nominee for the
Company. On April 13, 1995, Mr. Wai accepted an appointment as Director
of Asia. During 1995, Asia disposed of substantially all of its assets
and ceased its operations.
In August 1994, the Company consummated the acquisition of approximately
65% of the outstanding stock of Vista Healthcare, Inc. ("Vista"), which
operates a clinic and outpatient surgical center in Pasadena, Texas. The
Company issued 716,370 shares of its common stock in a transaction
valued at $1,289,461. This acquisition, which was accounted for as a
purchase, resulted in the recording of excess costs over net assets
acquired totaling $230,717. In 1994, the Company commenced construction
of a new medical office building (adjacent to the Vista facility) which
was completed in 1995 at a total cost of approximately $1,925,000.
Several of the existing physician-minority shareholders of Vista have
relocated their offices to the new facility.
In September 1994, the Company formed Doctors Practice Management, Inc.
("DPMI") to provide fee based practice management services to physicians
and to assist in consolidating medical providers into integrated
delivery systems.
B. CONSOLIDATED STATEMENTS
The accompanying financial statements present the consolidated accounts
of Dynacq International, Inc., a Nevada corporation, its two wholly
owned subsidiaries, Dynacq (Asia), Limited and Doctors Practice
Management, Inc., and Vista Healthcare, Inc., a Texas corporation, which
is approximately 65% owned by the Company. Accordingly, the consolidated
financial statements include all of the assets, liabilities, income,
expenses, and cash flows for these companies. All significant
intercompany transactions and balances have been eliminated.
F-8
<PAGE> 27
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
C. REVENUE RECOGNITION
The Company recognizes revenue from the performance of medical services
in the period in which such services are provided. Substantially all of
the Company's revenues are derived from claims filed under major medical
policies, workers' compensation policies, Medicare or Medicaid, or
personal injury claims. Allowances for discounts on services or
adjustments for non-covered costs and expenses are recognized in the
period in which the related revenues are earned. Allowances for doubtful
accounts are determined by management based upon historical experience
and an assessment of the circumstances applicable to individual
accounts.
D. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity of
three months or less as cash equivalents. At August 31, 1996, cash
equivalents were composed primarily of investments in money market funds
and certificates of deposits.
E. RESTRICTED SHORT-TERM INVESTMENTS
In connection with the Company's Pledge-Security Agreement with a
financial institution (Note 8), the Company has restricted and pledged
as collateral $180,000 of its highly liquid interest bearing deposits,
with a maturity of one year. The short-term investment is being held to
maturity and its carrying value approximates its current value.
F. INVENTORIES
Inventories are valued at the lower of cost or market with substantially
all stated at the first-in, first-out (FIFO) method.
G. PROPERTY AND EQUIPMENT
Land, buildings and improvements, furniture, fixtures and equipment are
stated at cost. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets ranging from 3 to 39
years. The Company provides tax depreciation using various accelerated
methods in conformity with the provisions of applicable tax law.
Ordinary maintenance and repairs are charged to income as incurred.
Expenditures which extend the physical or economic life of the assets
are capitalized and depreciated. Gains or losses on the disposition of
assets sold are recognized in income and the related asset and
accumulated depreciation accounts are adjusted accordingly.
H. OTHER NON-CURRENT ASSETS
Excess costs over net assets acquired from the Vista acquisition are
amortized on a straight-line basis over a period of 14 years.
Organization costs are amortized on a straight-line basis over the
estimated useful lives of such costs of 60 months. Loan origination fees
are amortized on a straight-line basis over the terms of the related
debt.
The Company periodically reviews the value of it excess costs over net
assets acquired to determine if an impairment has occurred. The Company
measures the potential impairment of recorded excess costs over net
assets acquired by the undiscounted value of expected future operating
cash flows in relation to its net capital investment in the subsidiary.
Based on its review, the Company does not believe that an impairment of
its excess costs over net assets acquired has occurred.
F-9
<PAGE> 28
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
I. ADVERTISING COSTS
The Company expenses advertising costs as incurred. Amounts expended
during the two years ended August 31, 1996 and 1995, were approximately
$39,500 and $16,500, respectively.
J. INCOME TAXES
The Company utilizes Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes ("FAS 109"), which requires that
deferred tax liabilities or assets be recognized for differences between
the income tax basis and the financial reporting basis of assets and
liabilities and are measured using the enacted marginal tax rates
currently in effect when the differences reverse. The Company's
principal differences giving rise to deferred income taxes are accounts
receivable, accounts payable, accrued liabilities, accumulated
depreciation and net operating loss carryovers. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes also are
recognized for operating losses that are available to offset future
taxable income.
K. EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing net income by the
weighted average number of common and common equivalent shares
outstanding during each year. Fully diluted earnings per share are not
presented because such amounts would be the same as amounts computed for
primary earnings per share.
L. ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that effect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the balance sheet. Actual results could differ from those estimates.
Accounts receivable and revenues in the health care industry are subject
to possible third party payor adjustments. Management periodically
reviews such estimates and it is reasonably possible that management's
assessment of recoverability of accounts receivable may change based on
actual results and other factors.
NOTE 2. VISTA HEALTHCARE, INC.
On August 25, 1994, the Company completed the acquisition of approximately 65%
of the common stock of Vista in a transaction accounted for as a purchase.
Accordingly, the accompanying financial statements reflect the results of
operations of Vista for the period subsequent to August 25, 1994. During 1995,
the Company sold a portion of its investment in Vista to certain affiliates for
$80,000 cash. During 1996, Vista repurchased a portion of its common stock from
certain affiliates for $135,000 cash. As of August 31, 1996, the Company owned
approximately 65% of the outstanding common stock of Vista.
F-10
<PAGE> 29
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
NOTE 3. PROPERTY AND EQUIPMENT
At August 31, 1996, property and equipment consisted of the following:
<TABLE>
<S> <C>
Land $ 252,589
Buildings and improvements 4,306,156
Furniture and fixtures 75,244
Equipment 2,142,154
24,125
---------
6,800,268
Less, accumulated depreciation 1,603,161
----------
Net property and equipment $5,197,107
==========
</TABLE>
Vista's existing physical facility is pledged as collateral on a long-term
mortgage to a financing company in the amount of $1,075,366, as of August 31,
1996. In connection with its acquisition of approximately 65% interest in Vista,
the Company has guaranteed 65% of the outstanding balance of this long-term
mortgage. In addition, certain equipment of Vista is pledged to collateralize a
long-term bank loan of $97,774, as of August 31, 1996.
For the years ended August 31, 1996 and 1995, depreciation expense was $519,568
and $419,048, respectively.
NOTE 4. OTHER NON-CURRENT ASSETS
In connection with the acquisition of Vista, excess costs over net assets
acquired totaling $230,717 was incurred. This amount is being amortized over a
period of fourteen years on a straight-line basis beginning August 25, 1994. For
the years ended August 31, 1996 and 1995, amortization expense was $16,480 for
each period.
NOTE 5. LONG-TERM DEBT
At August 31, 1996, long-term debt consisted of the following:
<TABLE>
<S> <C>
Note payable to a bank, payable in monthly installments of
$4,003, including interest at 8.25%, through April 1998,
collateralized by medical equipment $ 74,085
Note payable to a bank, payable in monthly installments of
$12,391, including interest at the bank's base rate plus 1%
(10.25% at August 31, 1996), through April 1997,
collateralized by equipment and guaranteed by certain minority
stockholders of Vista 97,774
Note payable to a financing company payable in monthly
installments of $19,533 including interest at 9.65% through
September 2002. The note is collateralized by land and is
guaranteed by certain minority stockholders of Vista 1,075,366
----------
1,247,225
Less, current maturities 277,833
----------
$ 969,392
==========
</TABLE>
F-11
<PAGE> 30
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
The aggregate principal payments on long-term debt for each of the five years
and thereafter subsequent to August 31, 1996 are as follows:
<TABLE>
<S> <C>
Year ended August 31: $ 277,833
1998 180,920
1999 165,502
2000 182,198
2001 200,579
Thereafter, 240,193
----------
$1,247,225
==========
</TABLE>
NOTE 6. INCOME TAXES
The provision for income tax expense consisted of the following at August 31:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Current tax expense:
Federal $ 325,800 $427,000
State 27,800 --
--------- --------
Total current 353,600 427,000
--------- --------
Deferred tax expense (benefit):
Federal (169,100) 238,000
--------- --------
Total deferred (169,100) 238,000
--------- --------
Total $ 184,500 $665,000
========= ========
</TABLE>
Deferred taxes arise primarily due to the Company's filing of its income tax
return on a cash basis and the use of accelerated methods of computing
depreciation for tax purposes. The components of the provision (benefit) for
deferred income taxes, at August 31, were as follows:
<TABLE>
<CAPTION>
Applicable to 1996 1995
- ------------- --------- ---------
<S> <C> <C>
Cash basis of accounting for federal income
tax purposes $ 31,400 $ 393,700
Difference in methods of computing
depreciation for tax and financial reporting
purposes and other 22,900 59,300
Use of reserve for bad debts for financial
reporting and specific charge-off method for
tax reporting (223,400) (215,000)
--------- ---------
</TABLE>
F-12
<PAGE> 31
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
<TABLE>
<S> <C> <C>
$(169,100) $ 238,000
========= =========
</TABLE>
Significant components of the Company's deferred tax liabilities and assets, at
August 31, 1996, were as follows:
<TABLE>
<CAPTION>
Current Noncurrent
----------- ----------
<S> <C> <C>
Deferred tax liabilities:
Basis in property and equipment $ -- $(134,000)
Receivables (1,365,900) --
Deferred tax assets:
Payables and other 338,800 --
Reserve for bad debts 591,100 --
----------- ---------
Net Liability $ (436,000) $(134,000)
=========== =========
</TABLE>
The following table reconciles the Federal statutory income tax rate and the
Company's effective income tax rate:
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Provision for income taxes at Federal
statutory rate 34.0% 34.0%
State tax provision, net of federal benefits 2.9% --
Effect of utilization of net operating loss carry
forward (18.5) --
Effect of other differences 4.3% 4.0%
----- ----
Effective tax rate 22.7% 38.0%
===== ====
</TABLE>
NOTE 7. RELATED PARTY TRANSACTIONS
The Company leases to its President his personal residence at a monthly rate of
$1,400. Total rent received for the years ended August 31, 1996 and 1995 was
$16,800 and $16,800, respectively.
Due to the legislative requirements concerning the practice of medicine in the
state of Texas, the Company has entered into agreements with various
Professional Associations and individual doctors (the "Physicians") for the
services of physicians.
The Physicians provide services to third parties and after covering the costs
associated with the physicians, remit proceeds to the Company for management
services. The structure of the agreements between the Company for its clinic and
the Physicians require that all income be paid to the Company for management
services or to the physicians for compensation. The accompanying financial
statements reflect transactions with the Physicians on a
F-13
<PAGE> 32
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
basis as if the Company and Physicians were "combined" or "consolidated" as
revenues reflect all clinic revenues billed to patients and expenses reflect
compensation incurred to the Physicians. For the years ended August 31, 1996 and
1995, total revenues billed to third parties and compensation paid associated
with the Physicians were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenues billed to third parties $2,737,993 $1,225,731
Compensation to Physicians $1,665,102 $ 554,538
</TABLE>
NOTE 8. COMMITMENTS AND CONTINGENCIES
In connection with the acquisition of Vista on August 25, 1994, the Company
issued 716,370 shares of its common stock in exchange for approximately 65% of
the outstanding common stock of Vista owned by approximately 30 individual
stockholders and/or related entities. Simultaneous with the closing of this
acquisition, fifteen of the Vista stockholders pledged a total of 415,279 shares
of the Company's stock to a local bank as collateral for individual loans
aggregating $730,000. The proceeds from these loans were contributed to the
capital of Vista.
The Company entered into a Pledge-Security Agreement with the lending bank
whereby the Company has granted the bank a limited security interest in, and has
pledged certain cash funds contained in the Company's account at the bank. The
Company's liability is limited to the shortfall, if any, calculated by taking
the difference between (i) 130% of the dollar amount of the outstanding loan
balance (including principal and interest) attributed to a particular Vista
shareholder and (ii) the value of the Company's shares pledged by that Vista
shareholder, such value to be based upon the quoted value of shares of the
Company's common stock as published by NASDAQ. The dollar amount of the bank's
security interest in funds on deposit will be adjusted upward or downward every
90 days.
Upon default by one of the Vista shareholders in payment on his/her loan, the
bank has the option to exercise a right of offset with respect to the funds on
deposit or proceed to foreclose upon its security interest, but only to the
extent, if any, of a shortfall as described above.
As of November 15, 1996, the value of the Company's stock, as defined above, was
approximately $113,120 less than 130% of the aggregate balance of the loans to
the Vista stockholders. To the best of management's knowledge, all of the
individual loans were current and the bank has not advised the Company that any
of the loans were in default.
Vista is contractually committed to purchase, on an annual basis, a minimum of
$50,000 of X-ray film from a supplier in exchange for the use of related medical
equipment without cost through November 1996. In the event Vista does not
achieve the minimum purchase requirement, a penalty will be assessed. Since
inception, Vista has not met the minimum purchase commitment and is potentially
liable for approximately $20,000 in penalties. Management expects the supplier
to waive these penalties based upon new business opportunities which exist
between Vista and the supplier. Accordingly, no amounts have been accrued in the
accompanying financial statements in connection with penalties which may be
assessed under the contract.
F-14
<PAGE> 33
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
The Company leases certain of its facilities and equipment under operating
leases with net aggregate future lease payments of $40,400 at August 31, 1996
payable as follows:
<TABLE>
<S> <C>
Year ending August 31,
1997 $12,800
1998 7,200
1999 7,200
2000 7,200
2001 6,000
-------
Totals $40,400
=======
</TABLE>
Rent expense related to its facilities and equipment leases, for the years ended
August 31, 1996 and 1995, was $13,584 and $12,384, respectively.
The Company also leases corporate office space under an operating lease on a
month-to-month basis. Rent expense for its corporate leases was $15,432 for each
of the years ended August 31, 1996 and 1995.
In addition, the Company pays certain operating leases on behalf of the
physicians being managed by Doctors Practice Management, Inc. For the years
ended August 31, 1996 and 1995, total physicians' operating lease expenses were
$90,586 and $58,927 respectively.
Total rent expense, including those physicians' operating leases paid by the
Company, for the years ended August 31, 1996, and 1995 was approximately
$119,600 and $109,700, respectively.
NOTE 9. SUPPLEMENTARY INFORMATION
At August 31, 1996, the detail of certain balance sheet accounts was as
follows:
<TABLE>
<S> <C>
Accounts Receivable:
Trade $4,118,624
Other 33,969
----------
4,152,593
Less, allowance for doubtful accounts 1,739,221
----------
$2,413,372
==========
Other assets:
Excess costs over net assets acquired, net of
accumulated amortization of $33,231 $ 197,486
Receivables 1,014,664
Other 120,934
----------
$1,333,084
==========
Accrued Liabilities:
Advalorem taxes 106,697
Compensation to Physicians 667,429
Other 22,895
----------
$ 797,021
==========
</TABLE>
F-15
<PAGE> 34
DYNACQ INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
NOTE 10. CAPITAL STOCK
During fiscal 1996, the Company repurchased 71,335 shares of its common stock
for approximately $57,300. Additionally, during fiscal 1996, the Company's
approximately 65% owned subsidiary, Vista, repurchased 11,807 shares of its
common stock for approximately $135,000.
STOCK OPTIONS
Effective August 1, 1995, the Board of Directors approved and issued 1,000,000
shares of its common stock for a 1995 Non-Qualified Stock Option Plan for
consultants and non-employee directors. Under the terms of the Plan, the Company
may grant stock options in the Company's common stock to consultants and
non-employee directors of the Company and its subsidiaries at no less than the
fair market value of the stock at the date of grant. Under the Plan, the options
become exercisable no earlier than six (6) months from date of grant and expire
on the date of the consultants termination or the non-employee directors'
resignation. As of August 31, 1996, the Company granted 175,000 options, all of
which are exercisable, at exercise prices per share ranging from $1.250 to
$1.625.
Effective August 31, 1995, the Company's shareholders approved a 1995 Incentive
Stock Option Plan. The 1995 Incentive Stock Option Plan reserves 1,000,000
shares of the Company's common stock for option grants to key employees at no
less than the fair market value of the stock at the date of grant. Under the
Plan, the options generally become exercisable cumulatively, beginning one year
after the date granted. As of August 31, 1996, the Company reserved 275,527
shares for option grants at an exercise price of $0.94. The share options
outstanding become exercisable in fiscal 1997 and expire through fiscal 2001.
NOTE 11. CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
The Company has financial instruments which are exposed to concentrations of
credit risk; they consist primarily of cash investments and trade accounts
receivable. The Company routinely maintains cash and temporary cash investments
at certain financial institutions in amounts substantially in excess of FDIC
insurance limits; however, management believes that these financial institutions
are of high quality and the risk of loss is minimal. As is customary in the
health care business, the Company has trade accounts receivable from various
private insurers, and the balance due from a particular insurer at any point in
time may be in excess of the allowance for doubtful accounts. The Company
continually monitors this situation and believes that its credit risk exposure
on its trade accounts receivable is limited. The trade receivables from private
insurers is normally in excess of 90% of the total trade receivables at any
point in time.
The carrying amounts of cash and cash equivalents, short-term investments,
receivables and accounts payable approximate fair value due to the short term
maturities of these instruments. The carrying amounts of the Company's long-term
borrowings, at August 31, 1996, approximates their fair value.
F-16
<PAGE> 35
INDEX TO EXHIBITS
All Exhibits listed below are included herewith unless otherwise noted by
an asterisk next to the Exhibit No.
(2.1.)* Stock Sale Agreement, dated July 21, 1992, pertaining to a change in
control of Dynacq International, Inc. (the "Company") which was
previously filed in and is incorporated herein by this reference to,
the Company's Registration Statement on Form 10, No. 0-20554.
(2.2.)* Exchange Agreement by and among the Company, Vista Healthcare, Inc.
("Vista") and certain Vista shareholders which was previously filed
in, and is incorporated by this reference to, the Company's Current
Report on Form 8-K, dated August 4, 1994.
(3.0)* Articles of Incorporation, filed June 16, 1989, which were
previously filed in, and are hereby incorporated by reference to the
Company's Registration Statement on Form 10, No. 0-20554.
(3.1.)* Amendment to Articles of Incorporation, filed February 12, 1992,
which was previously filed in, and is hereby incorporated by
reference to, the Company's Registration Statement on Form 10, No.
0-20554.
(3.2.)* Amendment to Articles of Incorporation, filed July 20, 1992, which
was previously filed in, and is hereby incorporated by reference to,
the Company's Registration Statement on Form 10, No. 0-20554.
(3.3.)* Bylaws (amended August 1, 1995) which were previously filed in and
are hereby incorporated by reference to the Company's Amended Form
10-K for fiscal 1995 dated May 1, 1996, File No. 0-20554.
(10.1.)* Pledge-Security Agreement between the Company and Capital Bank dated
July 20, 1994, which was previously filed in and incorporated by
this reference to, the Company's current Report on Form 8-K, dated
August 4, 1994, No. 0-20554.
(10.2.)* Guaranty Agreement between the Company and Metlife Capital
Corporation dated July, 1994, which was previously filed in and is
hereby incorporated by reference to, the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993.
(10.3.) Security Agreement dated July 18, 1996, between Vista and Capital
Bank.
(10.4.) 1995 Incentive Stock Option Plan for Employees and Employee
Directors
(10.5.) 1995 Non-Qualified Stock Option Plan for Consultants and
Non-Employee Directors
(10.6.) 1995 Stock Option Agreement between the Company and Philip S. Chan
E-1
<PAGE> 36
(10.7.) Full Service Management Agreement between Doctors Practice
Management, Inc. ("DPMI") and Mohammed M. Haq, M.D. dated March 1,
1996.
(10.8.) Full Service Facility and Management Agreement effective July 1,
1996, between Houston Physical Medicine Associates, M.D., P.A. and
DPMI.
(10.9.) Full Service Facility and Management Agreement between DPMI and
Medical Diagnostic Imaging Center dated May 1, 1996.
(10.10.) Full Service Facility and Management Agreement between DPMI and R.S.
Arora, M.D. dated May 1, 1996.
(10.11.) Full Service Facility and Management Agreement between DPMI and JCW
Medical Associates, P.A. dated May 1, 1996.
(10.12.) Full Service Management Agreement between DPMI and Ping S. Chu,
M.D., dated March 1, 1996.
(10.13.) Full Service Management Agreement effective May 1, 1996, between
DPMI and William E. Grose, M.D., P.A.
(10.14.) Promissory Note dated November 15, 1996, from JCW Medical
Associates, P.A. payable to the Company in the principal amount of
$666,922.22, bearing interest at 8% per annum and payable in 180
monthly installments.
(10.15.) Security Agreement dated May 1, 1996, by JCW Medical Associates,
P.A. to DPMI.
(10.16.) Credit Agreement dated May 1, 1996, between JCW Medical Associates,
P.A. and DPMI.
(10.17.) Revolving Credit Note from JCW Medical Associates, P.A. to DPMI
dated April 1, 1996 for $675,000.
(10.18.) Credit Agreement dated April 1, 1996, between R.S. Arora, M.D., as
Borrower, to DPMI as Lender, for advances up to $100,000.
(10.19.) Security Agreement dated April 1, 1996, by R.S. Arora M.D. as
Grantor to DPMI as Lender.
(10.20.) Revolving Credit Note dated April 1, 1996, in the principal amount
of $100,000 from R.S. Arora, M.D. to DPMI.
(10.21.) Promissory Note and Security Agreement from the Company to Capital
Bank dated April 4, 1995.
(10.22.) $100,000 Revolving Credit Note dated July 1, 1996, from Houston
Physical Medicine Associates, M.D., P.A. to DPMI
E-2
<PAGE> 37
(10.23.) Credit Agreement dated July 1, 1996, between Houston Physical
Medicine Associates, M.D., P.A. and DPMI
(10.24.) Full Service Management Agreement dated January 1, 1996, between
Vista and DPMI
(22.1.)* Listing of subsidiaries of the Company which was previously filed in
and is incorporated herein by this reference to the Company's
Amended Annual Report on Form 10-K for the fiscal year ended August
31, 1995, No. 0-020554.
(27) Financial Data Schedule
E-3
<PAGE> 1
EXHIBIT 10.3
PLEDGE-SECURITY AGREEMENT
July 18, 1996
1. The parties to this agreement are CAPITAL BANK (CAPITAL), who is the
secured party and VISTA HEALTHCARE, INC. (VlSTA), who is the pledgor.
2. CAPITAL, has made loans to those people identified on the attached
exhibit "A" (referred to as MAKERS). Each of these makers have granted CAPITAL a
security interest in their shares of VISTA stock.
3. CAPITAL, based on its loan policy as to these MAKERS, has deemed itself
insecure.
4. VISTA desires to further secure CAPITAL as to these loans and has
agrees to pledge funds on deposit with CAPITAL to accomplish this end.
5. VISTA acknowledges that this pledge is given to secure debts of the
third party MAKERS.
6. In consideration of the foregoing, VISTA "grants to CAPITAL a security
interest in and pledges to CAPITAL certain funds in a Capital Bank account,
account number 19139, as described below.
7. It is covenanted and agreed that CAPITAL's security interest extends to
such funds in account number 19139 necessary to secure CAPITAL in any shortfall
in the value of DYNACQ INTERNATIONAL, INC. shares of stock, securing the loans
listed on exhibit "A", to the extent that the quoted value of these shares does
not equal one hundred thirty percent (130%) of the balances, both principal and
interest, of each loan.
a. CAPITAL's security interest in these funds shall be adjusted upward or
downward every ninety (90) days beginning ninety (90) days after execution
hereof, based on the quoted value of DYNACQ shares as published by NASDAQ
or its successors
8. This is a continuing security interest and pledge which continues in
full force until all loans listed on exhibit "A" have been paid in full.
9. VISTA acknowledges that it will not have use of the funds in which it
has given a security interest but all funds in excess of the security interest
are available and accessible as in any debtor-creditor relation.
10. VISTA grants to and ratifies CAPITAL's right of offset to the funds
hereby secured. Upon default as described below, CAPITAL is authorized, without
notice, to offset funds in VISTA's account, necessary to pay CAPITAL for any
shortfall as described in paragraph 7. This right of offset may be exercised as
to each MAKER's default(s) as they occur and exercise of a right of offset does
not waive CAPITAL's right to offset in the future as to other MAKER(S)'
default(s).
11. An event of default, allowing offset includes, but is not limited to
(1) default by MAKER(S) in payment or performance of their promissory note(s)
and all documents securing them; (2) CAPITAL reasonably deems itself insecure as
to any MAKER(S); (3) dissolution of VISTA's business, cessation, of VISTA's
business or bankruptcy proceeding filed by or against VISTA; (4) substantial
change in management of VISTA; or (5) any other material default under this
agreement. CAPITAL and VISTA acknowledge and agree that in the event of a
default of a type described under subparagraphs (l ) and (2) of this paragraph
11, CAPITAL'S rights of offset and to proceed to foreclosure, as described in
paragraph 12, against VISTA is limited to the dollar amount of the shortfall as
that term is defined in paragraph 7), if any, relating to performance of the
promissory note of the specified Makers(s) in default.
12. At CAPITAL's discretion upon default, CAPITAL may exercise its right
of offset or proceed to foreclose its security interest as provided in the Texas
Business and Commerce Code as amended from time to time.
<PAGE> 2
13. This pledge and/or grant of security interest shall extend to any and
all new loans made to new MAKERS for the same business purpose as those listed
on the attached exhibit "A". If any new loan(s) are made, this pledge and
security interest shall extend to the shortfall under the same terms and
conditions hereof.
14. Any renewal modification or extension of an existing loan or new loan
is not a waiver hereof, it being expressly agreed that this pledge and security
interest survives until all loans have been paid in full.
15. This agreement is performable in Houston, Harris County, Texas and
shall be construed under the laws of the State of Texas.
SECURED PARTY PLEDGOR
CAPITAL BANK VISTA HEALTHCARE, INC.
BY: /s/ Milton R. Smith BY: /s/ Chiu Moon Chan
--------------------------------- -----------------------------------
Milton R. Smith, President Chiu Moon Chan, Administrator
<PAGE> 3
EXHIBIT "A"
CUSTOMER NAME: LOAN AMOUNT SHARES PLEDGED
Jorge L. Rodriguez $ 50,000.00 16,667
Anibal R. Hadad 50,000.00 23,917
Deepak Pattanaik 30,000.00 16,667
Amin M. Ebeid 50,000.00 23,917
David W. Gelber 50,000.00 23,917
Ping S. Chu 50,000.00 23,333
Raja M. Salameh 50,000.00 23,709
David Wayne Spinks 50,000.00 24,147
Jerry Michael McShane 50,000.00 24,147
James Carroll Boone 50,000.00 26,076
Raul R. Garcia 50,000.00 23,709
Maurice Sadik Haddad 50,000.00 43,126
Souheil Haddad 50,000.00 38,934
Hal B. Boone 50,000.00 47,599
Ravindra S. Arora 50,000.00 35,414
<PAGE> 1
EXHIBIT 10.4
DYNACQ INTERNATIONAL, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. DEFINITIONS
For purposes of this 1995 Incentive Stock Option Plan, unless otherwise
required by the context:
a. "Board" shall mean the Board of Directors of the Company.
b. "Code" shall mean the Internal Revenue Code of 1986, as amended.
c. "Company" shall mean Dynacq International, Inc., a Nevada corporation.
d. "Key Employee" shall mean officers, directors (who are also employees) and
supervisory personnel, as well as other employees of the Company or any
subsidiary corporation now existing or hereafter acquired or formed by the
Company.
e. "Option" shall mean a right to purchase Stock, granted pursuant to the
Plan.
f. "Option Price" shall mean the purchase price for Stock under an Option, as
determined in Section 6 below.
g. "Optionee" or "Participant" shall mean a Key Employee to whom an Option is
granted under the Plan.
h. "Plan" shall mean this Incentive Stock Option Plan.
i. "Stock" shall mean the Common Stock of the Company.
j. "Subsidiary" shall mean a subsidiary corporation of the Company, as
defined in Sections 425(f) and 425(g) of the Code.
2. PURPOSE OF THE PLAN.
This Plan is intended to advance the interests of the Company by providing
Key Employees, who have substantial responsibility for the direction and
management of the Company with additional incentive for them to promote the
success of the business by increasing their proprietary interest in the success
of the Company. The above aims will be effectuated through the granting of
certain stock options, It is intended that options issued under the Plan will
qualify as Incentive Stock Options (hereinafter called "ISOs" under Section 422A
of the Internal Revenue Code as enacted by the Economic Recovery Tax Act of
1981, and the terms of the Plan shall be interpreted in accordance with this
intention.
3. ADMINISTRATION OF THE PLAN.
<PAGE> 2
The Board shall administer the Plan. Subject to the provisions of the
Plan, the Board shall have plenary authority, in its discretion: a) to
determine the directors and employees of the Company to whom options shall be
granted; (b) to determine the time or times at which options shall be granted;
(c) to determine the number of shares subject to each option granted; (d) to
determine the option price of the shares subject to each option which price
shall not be less than the minimum specified in Section 6; (e) to determine
(subject to Section 8) the time or times when each option shall become
exercisable and the duration of the exercise period; and (f) to interpret the
Plan and to prescribe, amend, and rescind rules and regulations relating to it.
All action of the Board shall be taken by majority vote of its members. Any
action may be taken by a written instrument signed by all the members of the
Board, and action so taken shall be fully as effective as if it had been taken
by a unanimous vote of the members at a meeting duly called and held.
4. ELIGIBILITY AND LIMITATIONS ON OPTIONS GRANTED UNDER
THE PLAN.
(a) Options will be granted only to persons who are Key Employees of the
Company or a subsidiary corporation of the Company who agree, in writing,
to remain in the employ of, and render services to, the Company or a
subsidiary of the Company for a period of at least one (1) year from the
date of the granting of the option. No such agreement shall impose upon
the Company or any of its subsidiaries, however, any obligation to employ
the Participant for any period of time
(b) Each option granted under this Plan shall be an ISO. No option granted to
any Key Employee, who at the time of such grant, owns stock possessing
more than ten percent (10%) of the total voting power of the Common Stock
of the Company or of any of its subsidiaries may be an ISO, unless at the
time of such grant, the option price is fixed at not less than one hundred
ten percent (110%) of the fair market value of the stock subject to the
option.
(c) Exercise of each option is prohibited by its terms until after one (1)
year from the date of grant and after the expiration of five (5) years
from the date such option is granted.
(d) The aggregate fair market value (determined at the time the option is
granted) of the stock as to which as option is exercisable for the first
time by any Participant during any calendar year cannot exceed One Hundred
Thousand Dollars ($100,000).
5. SHARES OF STOCK SUBJECT TO THE PLAN.
There will be reserved for use upon the exercise of options to be granted
from time to time under the Plan (subject to the provisions of Section 13) an
aggregate of One Million (1,000,000) shares of the Common Stock of the Company,
which shares may be in whole or in part, as the Board shall from time to time
determine, authorized but unissued shares of the Common Stock or issued shares
of the Common Stock which shall have been reacquired by the Company. Any shares
subject to an option under the Plan, which option for any reason expires or is
terminated unexercised as to such shares, may again be subjected to an option
under the
<PAGE> 3
Plan.
6. OPTION PRICE.
The purchase price under each option issued shall be determined by the
Board at the time the option is granted, but in no event, except as otherwise
set forth in Section 4(b), shall such purchase price be less than one hundred
(100%) of the fair market value of the Company's Common Stock on the date of
grant.
The term "fair market value" shall be defined as the average of the
closing bid and asked market prices of said Common Stock quoted by the National
Association of Securities Dealers (or if said Common Stock is not quoted by NASD
then as quoted by the major market maker for said Common Stock) on the business
day prior to the date of the grant of the option, or, if there be no sales on
such date, on the most recent date upon which such stock was traded.
7. DILUTION OR OTHER AGREEMENT.
In the event that additional shares of Common Stock are issued pursuant to
a stock split or a stock dividend, the number of shares of Common Stock then
covered by each outstanding option granted hereunder shall be increased
proportionately with no increase in the total purchase price of the shares then
so covered, and the number of shares of Common Stock reserved for the purposes
of the Plan shall be increased by the same proportion. In the event that the
shares of Common Stock of the Company from time to time issued and outstanding
are reduced by a combination of shares, the number of shares of Common Stock
then covered by each outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the shares then so
covered, and the number of shares of Common Stock reserved for the purposes of
the Plan shall be reduced by the same proportion. In the event that the Company
should transfer assets to another corporation and distribute the stock of such
other corporation without the surrender of Common Stock, and if such
distribution is not taxable as a dividend and no gain or loss is recognized by
reason of Section 355 of the Internal Revenue Code of 1954, or some similar
section, then the total purchase price of the shares covered by each outstanding
option shall be reduced by an amount which bears the same ratio to the total
purchase price then in effect as the market value of the stock distributed in
respect of a share of the Common Stock, immediately following the distribution,
bears to the aggregate of the market value at such time of a share of the Common
Stock and the stock distributed in respect thereof. All such adjustments shall
be made by the Board, whose determination upon the same shall be final and
binding upon the Optionees. No fractional shares shall be issued, and any
fractional shares resulting from the computations pursuant to this Section 6
shall be eliminated from the respective option. No adjustment shall be made for
cash dividends or the issuance to stockholders of rights to subscribe for
additional Common Stock or other securities.
8. PERIOD OF OPTION AND CERTAIN LIMITATIONS ON RIGHT TO
EXERCISE.
(a) All Options issued under the Plan shall be for such period as the Board
shall determine, but not for more than five (5) Years from the date of
grant thereof.
<PAGE> 4
(b) The period of the option, once it is granted, may be reduced only as
provided for in Section 10.
(c) Each option granted under this Plan shall become exercisable only after
one (1) year continued employment of the Optionee with the Company or a
subsidiary corporation of the Company immediately following the date the
option is granted. Any option granted shall be exercisable only to the
extent of one-third of the total number of optioned shares after the
expiration of one (1) year following the date the option is granted, only
to the extent of two-thirds of the total number of optioned shares after
the expiration of two (2) years following the date the option is granted,
and in full only after the expiration of three (3) years following the
date the option is granted, such limitations being calculated, in the case
of any resulting fraction, to the nearest lower whole number of shares.
Except as provided in Section 10, no option may be exercised unless the
Optionee is at the time of such exercise in the employ of the Company or
of a subsidiary corporation of the Company and shall have been
continuously so employed since the grant of his option. Absence or leave
approved by the management of the Company shall not be considered an
interruption of employment for any purpose under the Plan.
(d) The exercise of any option shall be contingent upon receipt by the Company
of cash or a certified bank check to its order in an amount equal to he
full option PRICE OF THE shares being purchased. However, in order to
facilitate the accumulation of funds to enable employees to exercise their
option, they will have the right, if they so elect, to direct the Company
to withhold from their compensation regular amounts to be applied toward
the exercise of the options. Funds credited to the stock option accounts
will be under the control of the Company until applied to the payment of
the option price at the direction of the employee or returned to the
employee in the event the amount is not used for purchase of shares under
the option. And all funds received or held by the Company under the Plan
may be used for any corporate purpose, and no interest shall be payable to
a participant on account of any amounts so held. Such amounts may be
withdrawn by the employee at any time, in whole or in part, for any
reason.
(e) No Optionee or his legal representative, legatees, or distributees, as the
case may be, or will be deemed to be, a holder of any share subject to an
option unless and until certificate for such shares are issued to him or
them under the terms of the Plan. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
(f) In no event may an option be exercised after the expiration of its term.
(g) Exercise of an option shall result in a decrease in the number of shares
of Common Stock which thereafter may be available under the Plan by the
number of shares as to which the option is exercised.
9. ASSIGNABILITY.
Each option granted under this Plan shall be transferable only by will or
the laws of
<PAGE> 5
descent and distribution and shall be exercisable, during his lifetime, only by
the director or employee to whom the option is granted. Except as permitted by
the preceding sentence, no option granted under the Plan or any of the rights
and privileges thereby conferred shall be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and no such
option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt so to transfer, assign, pledge, hypothecate,
or otherwise dispose of the option, or of any right or privilege conferred
thereby, contrary to the provisions hereof, or upon the levy of any attachment
or similar process upon such option, right or privilege, the option and such
rights and privileges shall immediately become null and void.
10. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY.
(a) In the event of the termination of employment of an Optionee during the
one (1) year period after the date of issuance of an option to him either
by reason of (i) discharge for cause or (ii) voluntary separation on the
part of the Optionee and without consent of his employing company or
companies, any option or options theretofore granted to him under this
Plan to the extent not theretofore exercised by him shall forthwith
terminate
(b) In the event of the termination of employment of an Optionee (otherwise
than by reason of death or retirement of the Optionee) after expiration of
the one year period referenced in subsection (a) above, or within the one
year period if termination was by action of the Company and without cause,
any option or options granted to him under the Plan to the extent not
theretofore exercised shall be deemed canceled and terminated forthwith,
except that such Optionee may exercise any options theretofore granted to
him, which have not then expired and which are otherwise exercisable
within the provisions of Section 8(c) hereof, within three (3) months
after such termination. If the employment of an Optionee shall be
terminates by reason of the Optionee's retirement, the Optionee shall have
the right to exercise such option or options held by him to the extent
that such options have not expired, at any time within three (3) months
after such retirement.
(c) In the event that an Optionee shall die while employed by the Company or
shall die within (3) months after retirement, any option or options
granted to him under this Plan and not theretofore exercised by him or
expired shall be exercisable by the estate of the Optionee or by any
person who acquired such option by bequest or inheritance from the
Optionee in full, notwithstanding Section 8(c), at any time within one (1)
year after the death of the Optionee. References hereinabove to the
Optionee shall be deemed to include any person entitled to exercise the
option after the death of the Optionee under the terms of this Section.
(d) In the event of the termination of employment of an Optionee by reason of
the Optionee's disability, the Optionee shall have the right,
notwithstanding the provisions of Section 8(c) hereof, to exercise all
options held by him, to the extent that options have not previously
expired or been exercised, at any time within one (1) year after such
termination, The term "disability" shall, for the purposes of this Plan,
be defined in the
<PAGE> 6
same manner as such term is defined in Section 105(d)(4) of the Internal
Revenue Code of 1954.
(e) For the purposes of this Plan, an employee's retirement shall mean any
date an employee is otherwise entitles to retire under the Company's
retirement plans and shall include normal retirement at age 65, early
retirement at age 62, and retirement at age 60 after 30 years of service.
11. LISTING AND REGISTRATION OF SHARES.
Each option shall be subject to the requirement that if at any time the
Board of Directors shall determine, in its discretion, that the listing,
registration, or qualification of the shares covered thereby upon any securities
exchange or under any state or federal law or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issue or purchase of shares
thereunder, such option may not be exercised in whole or in part unless and
until such listing, registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to the Board.
12. RESTRICTIONS ON TRANSFER OF SHARES RECEIVED ON EXERCISE OF OPTIONS
In order to qualify as Incentive Stock Options under Section 422 of the
Internal Revenue Code, as amended, the shares received by an Optionee upon
exercise of an option may not be sold, transferred or otherwise disposed of
before the expiration of the two-year period immediately following the grant of
such option and the one-year period immediately following the exercise of such
option. Nothing stated herein, however, shall require the Optionee to comply
with such post-exercise holding periods.
13. EXPIRATION AND TERMINATION OF THE PLAN.
Options may be granted under the Plan at any time or from time to time as
long as the total number of shares optioned or purchased under this Plan does
not exceed One Million (1,000,000) shares of Common Stock. The Plan may be
abandoned or terminated at any time by the Board of Directors of the Company
except with respect to any options then outstanding under the Plan. No option
shall be granted pursuant to the Plan after a date ten (10) years from the
effective date of the Plan.
14. AMENDMENT OF PLAN.
The Board of Directors may at any time and from time to time modify and
amend the Plan in any respect; Provided, however, that no such amendment shall:
(a) increase (except in accordance with Section 6) the maximum number of shares
for which options may be granted under the Plan either in the aggregate or to
any Individual Participant; or (b)) reduce (except in accordance with Section 6)
the minimum option prices which may be established under the
<PAGE> 7
Plan; or (c) extend the period or periods during which options may be granted or
exercised; or (d) change the provisions relating to the determination of the Key
Employees to whom options shall be granted and the number of shares to be
covered by such options; or (e) change the provisions relating to adjustments to
be made upon changes in capitalizations. The termination or any modification or
amendment of the Plan shall not, without the consent of a Key Employee, affect
his rights under an option theretofore granted to him.
15. APPLICABILITY OF PLAN TO OUTSTANDING STOCK OPTIONS.
This Plan shall not affect the terms and conditions of any non-qualified
stock options heretofore granted to any Key Employee of the Company under any
other plan relating to non qualified stock options; nor shall it affect any of
the rights of any Key Employee to whom such a non-qualified stock option was
granted.
16. EFFECTIVE DATE OF PLAN.
This Plan shall become effective on the later of the date of its adoption
by the Board of Directors of the Company or its approval by vote of the holders
of a majority of the outstanding shares of the Company's Common Stock. This Plan
shall not become effective unless such shareholder approval shall be obtained
within twelve (12) months before or after the adoption of the Plan by the Board
of Directors.
<PAGE> 1
EXHIBIT 10.5
1995 NON-QUALIFIED STOCK OPTION PLAN
FOR
CONSULTANTS AND NON-EMPLOYEE DIRECTORS
OF
DYNACQ INTERNATIONAL, INC.
1. DEFINITIONS.
For purposes of this 1995 Non-Qualified Stock Option Plan, unless
otherwise required by the context:
a. "Board" shall mean the Board of Directors of the Company.
b. "Code" shall mean the Internal Revenue Code of 1986, as amended.
c. "Company" shall mean Dynacq International, Inc., a Nevada corporation.
d. "Consultant" shall mean any person who performs services of special
importance to the Company or a subsidiary corporation of the Company,
including any Independent contractors who are not otherwise eligible
to participate in the Company's 1995 Incentive Stock Option Plan.
e. "Non-Employee Director" shall mean any person who serves as a director
of the Company or a subsidiary corporation of the Company, but who is
not an employee of either the Company or any subsidiary corporation of
the Company or otherwise eligible to participate in the Company's 1995
Incentive Stock Option Plan.
f. "Option" shall mean a right to purchase Stock, granted pursuant to the
Plan.
g. "Option Price" shall mean the purchase price for Stock under an Option.
h. "Optionee" or "Participant" shall mean a Consultant or Non-Employee
Director of the Company, or of any subsidiary of the Company, to whom
an option is granted under the Plan.
i. "Plan" shall mean this Stock Option Plan for Consultants and
Non-Employee Directors of Dynacq International, Inc.
j. "Stock" shall mean the Common Stock of the Company.
k. "Subsidiary" shall mean a subsidiary corporation of the Company, as
defined in Sections 425(f) and 425(g) of the Code.
2. PURPOSE OF THE PLAN.
The purpose of the plan is to advance the long term interest of the
Company (i) by motivating Consultants and Non-Employee Directors with the
opportunity to obtain an equity interest in the Company, (ll) by furthering the
identity of interests of Participants in the Plan with those of the shareholders
of the Company through the ownership and performance of the Common Stock of the
Company, and (iii) by permitting the Company to attract and retain Consultants
and Non-Employee Directors upon whose judgements the success of the Company
largely depends. Under the terms of the Plan, the Company may grant stock
options in the Company's Common Stock to Consultants and Non-Employee Directors
of the Company and its subsidiaries. The options to be granted under this Plan
are not intended to qualify as "incentive stock options" as that term is defined
under Section 422A of the Code and, as such, the nonstatutory options granted
under this Plan are not entitled to special treatment under Section
<PAGE> 2
422 of the Code.
3. ADMINISTRATION OF THE PLAN.
The Board shall administer the Plan. Subject to the provisions of the
Plan, the Board shall have plenary authority, in its discretion: (a) to
determine the Consultants and Non-Employee Directors of the Company to whom
options shall be granted; (b) to determine the time or times at which options
shall be granted; (c) to determine the number of shares subject to each option
granted; (d) to determine the option price of the shares subject to each option;
(e) to determine the time or times when each option shall become exercisable and
the duration of the exercise period; and (f) to interpret the Plan and to
prescribe , amend, and rescind rules and regulations relating to it. All action
of the Board shall be taken by majority vote of its members. Any action may be
taken by a written instrument signed by all the members of the Board, and action
so taken shall be fully as effective as if it had been taken by a unanimous vote
of the members at a meeting duly called and held.
4. ELIGIBILITY AND LIMITATIONS ON OPTIONS GRANTED UNDER THE PLAN.
(a) Certain Consultants and Non-Employee Directors of the Company shall be
eligible to receive an option under this Plan. For purposes of this
Section, the Company, with respect to all options under the Plan,
includes any entity that is directly or indirectly controlled by the
Company or any entity in which the Company has a significant equity
interest.
(b) The options granted to a Consultant or a Non-Employee Director will
become exercisable on such date as the Board in its discretion decides,
however, in no event shall an option granted be exercisable prior to
six months from the date of grant. Payment of the option exercise price
will be made in cash. On the date of a Participant's death, options
which are then exercisable, may be exercised by a Participant's
personal representative for one (1) year after his or her death. To the
extent options are exercisable on the date a Consultant ceases to work
on behalf of the Company (other than by reason of death) or a
Non-Employee Director ceases to be a director (other than by reason of
death), such options will remain exercisable for thirty (30) days
thereafter. A Consultant shall "cease to work" for the Company on the
date that the Company issues a written notice of termination of the
Consultant's services. The thirty day accelerated exercise period will
begin to run for a Non-Employee Director on the earlier of the
effective date of his/her resignation or the date of the shareholder's
meeting at which the Non-Employee Director is not re-elected.
Notwithstanding the foregoing, should a director be removed for cause
by action of the directors or the shareholders, all outstanding
options, regardless of exercisability, will terminate as of the date of
the Board or shareholders, as appropriate, removes such director.
5. SHARES OF STOCK SUBJECT TO THE PLAN.
(a) The stock offered under the Plan shall be shares of Common Stock and
may be unissued shares or shares now held or subsequently acquired by
the Company as treasury shares, as the Board may from time to time
determine. Subject to adjustment as provided in
<PAGE> 3
Section 6, the aggregate number of shares to be delivered under the
Plan shall not exceed one million (1,000,000) shares.
(b) Any shares subject to an option granted under the Plan which is
forfeited, terminated, or expires unexercised shall again be available
for award under the Plan, subject to the limitations contained in
applicable laws and regulations.
6. ADJUSTMENT OF SHARES AVAILABLE.
The aggregate number of shares available for options under the plan,
the number of shares covered by each outstanding option, and the exercise price
per share thereof (but not the total price) of each such option shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from any forward or reverse split or
consolidation of shares or any like adjustment or the payment of any stock
dividend.
7. PRICE OF STOCK OPTIONS.
The purchase price of each option issued shall be determined by the
Board at the tine the option is granted, but in no event shall such purchase
price be less than 100 percent of the fair market value of the Company's Common
Stock on the date of grant.
The term "fair market value" shall be defined as the average of the
closing bid and asked market prices of said Common Stock quoted by the National
Association of Securities Dealers (or if said Common Stock is not quoted by the
NASD then as quoted by the major market maker for said Common Stock) on the
business day prior to the date of the grant of the option, or, if there be no
sales on such date, on the most recent date upon which such stock was traded.
8. OPTION EXERCISE.
(a) No shares shall be delivered pursuant to the exercise of any option, in
whole or in part, until payment in full of the option price thereof in
cash is received by the Company. No holder of an option, legal
representative, legatee, of distributee shall be or be deemed to be a
holder of any shares subject to such option unless and until such
person or entity has received a certificate of certificates therefor.
The term of each stock option shall be set by the Board, but no stock
option shall be exercisable more than ten (10) years after the date
suck stock option is granted.
(b) No option may at any time be exercised with respect to a fractional
share.
9. TRANSFERABILITY.
The right of any Participant to exercise an option granted under the
Plan shall, during the lifetime of such participant, be exercisable only by such
Participant and shall not be assignable or transferable, unless the Board, in
its discretion, specifically provides otherwise with respect to a particular
grant.
<PAGE> 4
10. WITHHOLDING TAXES.
The Company shall have the right to deduct from any settlement of an
option made under the Plan an amount sufficient to cover withholding, if
required by law for any federal, state or local taxes, or to take such other
actions as may be necessary to satisfy any such withholding obligations,
including the withholding from any other cash amounts due or to become due from
the Company to the Participant an amount equal to such taxes.
11. TERMINATION OF OPTION RIGHTS.
Any option granted hereunder, which is not yet exercisable, shall, in
the case of a Consultant, expire on the date the Consultant's services are
terminated in writing by the Company and, in the case of a Non-Employee
Director, an option shall expire on the earlier of the effective date of his/her
resignation or the date of the shareholders' meeting in which that Non-Employee
Director is not re-elected as a director
12. EXPIRATION AND TERMINATION OF THE PLAN.
Options may be granted under the Plan at any time or from time to time
as long as the total number of shares optioned or purchased under this Plan does
not exceed One Million (1,000,000) shares of Common Stock. The Plan may be
abandoned or terminated at any time by the Board of Directors of the Company
except with respect to any options then outstanding under the Plan. No option
shall be granted pursuant to the Plan after a date ten (10) years from the
effective date of the Plan.
13. PLAN AMENDMENT.
The Board may amend, suspend, or terminate the Plan at any time,
provided that no such amendment shall be made without approval of the Company's
shareholders if such approval is required to comply with Nevada law.
<PAGE> 1
EXHIBIT 10.6
STOCK OPTION AGREEMENT FOR
1995 INCENTIVE STOCK OPTION PLAN FOR
EMPLOYEES AND EMPLOYEE DIRECTORS
OF
DYNACQ INTERNATIONAL, INC.
The parties to this Agreement are DYNACQ INTERNATIONAL, INC., a Nevada
corporation (the "Company"), and PHILIP CHAN, (the "Participant").
GRANT OF OPTION
The Company hereby grants to Participant the right, privilege, and
option to purchase up to 157,606 shares of common stock of the Company at a
purchase (grant) price of $ 15/16 per share, in accordance with the terms and
conditions of the 1995 Incentive Stock Option Plan for Employees and Employee
Directors approved by the Company's Board of Directors on August 31, 1995 (the
"Plan"). The Plan, a copy of which is attached hereto, is incorporated herein by
this reference.
1. Notice of Exercise. Subject to the provisions set forth in
paragraph 8 of the Plan, any option granted under this
Agreement may be exercised at any time and from time to time
in whole or in part by written notice delivered to the
Company. Such notice shall state the number of shares being
exercised and shall specify a date, not more than (10) days
from the date of such notice, as the date on which full
payment for the option price for the number of shares
specified shall be made thereof at the principal office of the
Company. Upon receipt of payment, the Company shall instruct
its transfer agent to issue such shares, provided that if any
law or regulation requires the Company to take action with
respect to the shares specified in the notice, before the
issuance thereof, then the date of delivery of such shares
shall be extended for the period necessary to take such action
which may include registration of the stock under applicable
law.
2. No Shareholder Rights. The Participant acknowledges that he
has no rights as a shareholder with respect to shares for
which the option has not been exercised, and the Participant
shall have no rights with respect to such shares unless
otherwise conferred hereby.
3. Option Rights and Holding Period. The options granted
hereunder shall be fully vested and exercisable by the
Participant one year from the Effective Date hereof. The
option rights herein are exercisable for the full amount or
for any part hereof from time to time during the period of
five (5) years from the Effective Date hereof and only by such
participant.
4. Nontransferability. No option granted hereby shall be
transferable other than by Will or by the laws of descent and
distribution. No option or interest therein may be
transferred, assigned, pledged, or hypothecated by the
Participant
<PAGE> 2
during the lesser of (1) five years from the Effective Date
hereof, or (2) his lifetime, by operation of law or otherwise,
or be made subject to execution, attachment, or similar
process.
5. Effective Date. The Effective Date of this Agreement shall be
May 15, 1996.
6. Acknowledgment. The undersigned Participant has read and
understands this Agreement and the laws and the terms and
conditions of the Plan and hereby agrees to be bound by all of
the terms and conditions thereof.
COMPANY:
DYNACQ INTERNATIONAL, INC.
By: /s/ Chiu Chan
--------------------------
Title:
-----------------------
PARTICIPANT:
/s/ Philip Chan
-----------------------------
-----------------------------
<PAGE> 1
EXHIBIT 10.7
FULL SERVICE MANAGEMENT AGREEMENT
This FULL SERVICE MANAGEMENT AGREEMENT ("Agreement") is entered into
and effective as of the 1st day of March, 1996 (notwithstanding the date of
actual execution) by and between DOCTORS PRACTICE MANAGEMENT, INC., A Texas
business corporation ("Manager"), and Mohammed M. Haq, M.D., a Texas sole
proprietor ("Physician").
WITNESSETH:
WHEREAS, Physician is a duly and validly existing Texas sole
proprietorship that has been organized for the purpose of operating a medical
practice and providing medical and related healthcare services ("Healthcare
Services") to the general public in the Greater Houston, Texas area;
WHEREAS, Manager is experienced in providing management and related
items and services to physicians, professional associations, and other
professional healthcare entities and indiviauals;
WHEREAS, Physician desires and intends to obtain such management,
administrative, and business services necessary and appropriate for Physician's
business operations and the provision of Healthcare Services by Physician, and
Manager desires to provide, and is capable of providing, all such management,
administrative, and business services; and
WHEREAS, Physician and Manager mutually desire an arrangement that:
(1) ensures consistency of service, quality of care, and safety of
Physician's patients;
(2) facilitates effective utilization of Healthcare services;
(3) ensures consistent and customary patterns for the provision of
Healthcare Services;
(4) facilitates the management and administration of the day-to-day
business operations of the Physician; and
(5) facilitates the establishment and maintenance of a public image of
excellence and high quality for the Physician,
all for the benefit of those persons seeking Healthcare Services as patients of
the Physician.
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby forever acknowledged and confessed, the parties
hereto agree as follows:
I. Definitions
For the purposes of this Agreement, the following terms shall have the
following
<PAGE> 2
meanings described thereto, unless otherwise clearly required by the context in
which such term is used.
1.1 Agreement. The term "Agreement" shall mean this Full Service Management
Agreement between Physician and Manager and any amendments hereto as may from
time to time be adopted as hereinafter provided.
1.2 Annual Budget. The term "Annual Budget" shall mean the operational
budget of the Physician, for a given fiscal year, prepared by Manager in
consultation with Physician.
1.3 Physician. The term "Physician" shall mean Mohammed M. Haq, M.D., a
Texas sole proprietor.
1.4 Manger/Physician Account. The term "Manager/Physician Account" shall
mean the bank account of the Manager established on behalf of the Physician as
described in Section 3.9 hereof.
1.5 Physician Expense or Physician's Expense. The term "Physician Expense"
or "Physician's Expense" shall mean an expense or cost incurred by Physician or
Manager on behalf of Physician and for which Physician is financially liable,
including management fee, regardless of whether the transfer of Physician's
funds to satisfy the Physician's financial liability is performed by Physician
or by Manager on Physician's behalf.
1.6 Facility. The term "Facility" shall mean the physical premises in which
Healthcare Services are furnished to patients by the Physician and shall
include, if applicable, multiple locations.
1.7 Healthcare Services. The term "Healthcare Services" shall mean the
medical and related healthcare services provided by Physician to patients.
1.8 Management Fee. The term "Management Fee" shall mean Manager's
compensation established and described in Article V hereof.
1.9 Manager. The term "Manager" shall mean Doctors Practice Management,
Inc., a Texas business corporation.
1.10 Manager Expense or Manager's Expense. The term "Manager Expense" or
"Manager's Expense" shall mean an expense or cost incurred by Manager on behalf
of Physician and for which Manager is financially liable.
1.11 State. The term "State" shall mean the State of Texas.
1.12 Term. The term "Term" shall mean the initial and any renewal periods
of duration of this Agreement as described in Section 6.1 hereof.
II. Appointment and Authority of Manager
<PAGE> 3
2.1 Appointment. Physician hereby appoints Manager as its sole and
exclusive agent for the management and administration of the business functions
and services related to Physician's provision of Healthcare Services and Manager
hereby accepts such appointment, subject at all times to the provisions of this
Agreement.
2.2 Authority. Consistent with the provisions of this Agreement, Manager
shall have the responsibility and commensurate authority to provide business,
administrative, and full management services for Physician relating to the
provision of Healthcare Services, including, without limitation, management,
administration, billing and collection services, financial consulting, financial
record keeping and reporting, preparation of financial statements, cash
management services, contract negotiation, scheduling of nonphysican personnel,
support services, specified nonphysician personnel, marketing, and other
business office services. Manager is hereby expressly authorized to provide all
such services in whatever reasonable manner Manager deems appropriate to meet
the day-to-day requirements of the business functions of, or related to,
Physician's provision of Healthcare Services at the Facility. To the extent
practicable, Manager, at its discretion, may from time to time perform some or
all of such business office services for Physician at locations other than the
Facility. Except as otherwise provided in this Agreement, all expenses incurred
by Manager in providing management services pursuant to this Agreement shall be
Manager's Expense. The parties acknowledge and agree that Physician shall be
solely responsible for and have sole control over the provision of Healthcare
Services performed for patients at the Facility and that all diagnoses,
treatments, procedures, and other professional healthcare services shall be
provided and performed by Physician or under the supervision of Physician
personnel retained by Physician, as such physician personnel, in their sole
discretion, deem appropriate.
III. Covenants of Manager.
3.1 Facilities and Equipment. Manager shall provide to Physician the space
for the Facility, including all equipment, fixtures, furniture, and furnishings
located therein that Manager deems reasonably necessary for the provision of
Healthcare Services. Manager shall consult with and seek the advice of Physician
in connection with equipping the Facility and in connection with the purchase of
additional or replacement equipment to ensure the necessity and appropriateness
of equipment placed in service at the Facility.
3.1.2 Repair and Maintenance. Manager shall be responsible for the repair
and maintenance of all equipment loacted in the Facility.
3.1.3 Disclaimer of Warranty. MANAGER MAKES NO REPRESENTATIONS OR
WARRANTIES, EITHER EXPRESSED OR IMPLIED, WITH RESPECT TO ANY EQUIPMENT,
FIXTURES, FURNITURE, FURNISHINGS, OR SUPPLIES PROVIDED BY MANAGER PURSUANT TO
THIS AGREEMENT, AND ALL WARRANTITIES, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, WARRANTITIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ARE HEREBY EXPRESSLY DISCLAIMED.
<PAGE> 4
3.2 Utilities and Related Services. Manager shall negotiate, enter into,
and retain contracts for, and shall timely pay when due all charges relating to
electricity, gas, water, telephone, sewage, waste disposal, cleaning(interior
and exterior), pest extermination, heating and air-conditioning maintenance, and
similar services reasonably necessary and appropriate for the operation of the
facility and the provision of Healthcare Services therein.
3.3 Supplies. Manager shall obtain and provide all reasonable medical,
office, and other supplies, and shall ensure that the Facility is at all times
adequately stocked with such supplies as are reasonably necessary and
appropriate for the operation of the Facility.
3.4 Support Services. Manager shall provide all laundry, linen, uniform,
stationery, forms, postage, duplication or photocopying services, and other
support services as are reasonably necessary and appropriate for the operation
of the Facility.
3.5 Licenses and Permits. Manager shall coordinate all development and
planning processes, and apply for and use manager's best efforts to obtain and
maintain all federal, State and local licenses and regulatory permits required
for or in connection with the operation of the Facility and the equipment
(existing and future) located therein, other than those relating to the practice
of medicine by physicians retained by Physician.
3.6 Personnel
3.6.1 Management and Clerical Personnel. Manager shall employ or otherwise
retain, and shall be responsible for selecting, training, supervising,
scheduling, and terminating, all management and clerical personnel as Manager
deems reasonably necessary and appropriate for Manager's performance of its
duties and obligations under this Agreement. Manager shall have sole
responsibility for determining the salaries, wages, and fringe benefits of all
such management and clerical personnel, for paying such salaries and wages, and
for providing such fringe benefits, and for witholding, as required by law, any
sums for income tax, unemployment insurance, social security, or any other
withholding required by applicable law or governmental requirement.
3.6.2 Nonexclusivity. In recognition of the fact that the personnel retined
by Manager to prvide services pursuant to this Agreement may from time to time
perform services for others, this Agreement shll not prevent Manager from
performing such services for others or restrict Manager from using such
personnel in the performance of services for others.
3.6.3 Contract Negotiations. Upon the request of Physician, Manager shall
advise with respect to and negotiate, either directly or on Physician's behalf,
as appropriate, all contractual arrangements with third parties as are
reasonably necessary and appropriate for Physician's provision of Healthcare
Services.
3.9 Billing and Collection. On behalf of and for the account of Physician,
Manager shall establish and maintain credit and billing and collection policies
and procedures, and shall be responsible for the billing and collection of all
professional and other fees for billable Healthcare Services provided by
Physician. Manager shall advise and consult with Physician regarding the fees
for Healthcare Services provided by Physician.
<PAGE> 5
3.9.1 To bill Physician's patients, in Physician's name and on Physician's
behalf, for all billable Healthcare Services provided by Physician.
3.9.2 To bill, in Physician's name and on Physician's behalf, all claims
for reimbursement or indemnification from Blue Shield/Blue Cross, insurance
companies, Medicare, Medicaid, and all other third-party payors for all covered
billable Healthcare Services provided by Physician;
3.9.3 To collect and receive, in Physician's name and on Physician's
behalf, all accounts receivable generated by such billings and claims for
reimbursement or indemnification, and to deposit all amounts collected into the
Manager/Physician Account, which account shall be maintained at Manager's
Expense and shall be and at all times remain in Manager's name. Physician
covenants to transfer and deliver to Manager all funds received by Physician
from patients or third-party payors for Healthcare services. Upon receipt by
Manager of any funds from patients or third-party payors or from Physician
pursuant hereto for Healthcare Services, Manager shall immediately deposit same
into the Manager/Physician Account; and
3.9.4 To take possession of, endorse in the name of Physician, and deposit
into the Manager/Physician Account any notes, checks, money orders, insurance
payments, and any other instruments received in payment of accounts receivable
for Healthcare Services, and to make withdrawals from the Manager/Physician
Account for payments of those items designated as Manager or Physician Expense.
3.11 Financial Matters
3.11.1 Annual Budget. Annually and at least thirty (30) days prior to the
commencement of each fiscal year of Physician, Manager shall prepare, in
consultation with Physician, and deliver to Physician an operational budget for
such fiscal year setting forth an estimate of facility revenues and expenses
(including, without limitation, all costs associated with the services provided
by Manager hereunder). Manager shall use its best efforts to perform its duties
and obligations under this Agreement such that the actual revenues, costs, and
expenses associatd with Physician's provision of Healthcare Service in the
Facility during any applicable period shall be consistent with the Annual
Budget. Manager shall prepare and submit to Physician, and shall thereafter
adopt, an Annual Budget for the current fiscal year as soon as practicable.
3.11.2 Accounting and Financial Records. Manager shall establish and
administer accounting procedures, controls, and systems for the development
preparation, and safekeeping of records and books of accounts relating to the
business and financial affairs of Physician at the Facility all of which shall
be prepared and maintined in accordance with generally accepted accounting
principles consistently applied. Manager shall prepare and deliver to Physician,
within (90) days of the end of each fiscal year of Physician, a balance sheet, a
profit and loss statement, and a statement of cash flow reflecting the financial
status of Physician in respect of the provision of Healthcare Services at the
Facility as of the end of such prior fiscal year, all of which shall be prepared
in accordance with generally accepted accounting principles consistently
applied. Manager shall also prepare and deliver to Physician interim monthly
financial statements for management purposes only.
<PAGE> 6
3.12 Reports and Records
3.12.1 Medical Records. Manager shall establish, monitor, and maintain
procedures and policies for the timely creation, preparation, filing and
retrieval of all medical records generated by Physician in connection with
Physician's provision of Healthcare Services. All such medical records shall be
treated in accordance with all applicable State and federal laws relating to the
confidentiality thereof.
3.13 Legal Actions. As requested by Physician, Manager shall, at
Physician's Expense, advise and assist Physician in instituting or defending, in
the name of Physician, all legal actions or proceedings by or against third
parties arising out of Physician's provision of Healthcare Services at the
Facility, including, without limitation, those actions to collect fees for
billable Healthcare Services or other billable services provided to patients by
Physician, and those actions necessary for the protection and continued
operation of Physician.
3.14 Manager Insurance. Throughout the Term, Manager shall, at Manager's
Expense, obtain and maintain with commercial carriers, through captive insurance
companies, through self-insurance, or some comination thereof, professional,
casualty, and comprehensive general liability insurance covering Manager,
Manager personnel, and all of Manager's equipment in such amounts, on such
basis, and upon such terms and conditions as Manager deems appropriate.
IV. Covenants of Physician
4.1 Qualification. Physician shall at times during the Term (i) be and
remain legally qualified to provide Healthcare Services in a manner consistent
with all State and federal laws; (ii) be engaged in the full time practice of
medicine; and (iii) has general authority to act for and bind Physician in all
matters relevant to this Agreement.
4.2 Personnel
4.2.1 Physician Personnel. Physician shall retain physicians, who shall
hold and maintain valid and unlimited licenses to practice medicine in the
State, to provide Healthcare Services in the Facility. With respect to
Physician's Expense for its physician personnel, Physician shall be responsible
for paying the compensation for such physician personnel and for withholding, as
required by law, any sums for income tax, unemployment insurance, social
security, or any other withholding required by applicable law. Manager shall, on
behalf of Physician, administer the compensation and benefits and make
appropriate withholdings with respect to such physician personnel. All physician
personnel shall be under Physician's control and direction in the performance of
Healthcare Services at the Facility.
4.2.2 Nonphysician Healthcare Personnel. Manager shall employ and be
responsible for the salaries, wages, fringe benefits, and other employment
related expenses with regard to all nonphysician healthcare personnel necessary
for the provision of Healthcare Services to patients at the Facility. Manager
shall determine the salaries, wages, and fringe benefits of all such personnel.
Physician shall be responsible for selecting, scheduling, and terminating all
nurses, laboratory technicians, and other nonphysician healthcare personnel as
Physician deems
<PAGE> 7
reasonably necessary and appropriate for the operation of the Facility;
provided, however, that all such nonphysician healthcare personnel shall be
hired and/or terminated by Physician after consultation with Manager. Manager
shall be responsible for training and supervising all nonphysician healthcare
personnel, and all such personnel shall be under Manager's control, supervision
and direction when assisting Physician in the performance of Healthcare Services
in the Facility.
4.3 Standards. As a continuing condition Manager's obligations hereunder,
Physician shall provide Healthcare Services in accordance with applicable
federal, State, and municipal laws, rules, regulations, ordinances, and orders,
and the ethics and standards of care of the medical community wherein the
Facility is located.
4.4 Physician Contracting. Physician shall not, without the prior written
consent of manager, have any right or authority to enter into any agreements
with third parties relating to the Facility, its operation, or any agreements
otherwise binding upon Manager.
4.5 Physician Insurance. Throughout the Term, Physician shall, , obtain and
maintain with commercial carriers, acceptable to Manager, professional and
comprehensive general liability insurance covering Physician and those physician
and nonphysician personnel Physician retains to provide Healthcare Services in
the minimum amount __________________________________________________ Dollars
($________________________________________________) for each occurrence and
__________________________________________Dollars ($________________)in the
aggregate for Physician and each physician and nonphysician personnel Physician
retains to provide Healthcare Services. Physician shall provide to Manager a
certificate of insurance evidencing such coverage.
4.6 Indemnification by Physician. Physician shall indemnify and hold
Manager harmless from and against any and all liability losses, damages, claims,
causes of action, and expenses, including, without limitation, reasonable
attorney's fees and associated costs, associated with or resulting, directly or
indirectly, from any act or omission of Physician, its employees, agents, or
independent contractors in or about the Facility during the Term. To be entitled
to such indemnification, Manager shall give Physician prompt written notice of
the assertion by a third party of any claim with respect to which Manager might
bring a claim for indemnification hereunder, and in all events must provide such
written notice to Physician within the applicable period for defense of such
claim by Physician. Physician shall, at Physician's Expense, have the right to
defend and litigate any such third-party claim.
4.7 Similar clause for indemnification by manager for any acts by manager
or its employees, agents.
V. Management Fee and Disbursement of Funds
5.1 Amount of Management Fee. Physician agrees to pay a management Fee of
50% of collection to Manager to cover Manager's Expense. The Management Fee is
not intended and shall not be interpreted or applied as permitting Manager to
share in Physician's fees for
<PAGE> 8
Healthcare Services or any other services, but is acknowledged as the parties'
negotiated agreement as to the reasonable fair market value of the items and
services furnished by Manager pursuant to this Agreement, considering the nature
of the services required by Physician and the risks assumed by Manager. This
also covers medical practice and health insurance of physician and his family.
VI. Term and Termination
6.1 Initial and Renewal Terms. The term of this Agreement will be for a
Five(5) year period commencing as of March 1, 1996, and expiring as of February
28, 2001, unless and until terminated as provided in Section 6.2 of this
Agreement the ("Term").
6.2 Termination
6.2.1 Termination by Manager. Manager may terminate this Agreement upon the
occurence of any one of the following events:
(a) The revocation, suspension, or cancellation of the license to practice
medicine in the State of any physician retained by Physician to provide
Healthcare services in the Facility;
(b) any physician retained by Physician to provide Healthcare Services in
the Facility is convicted of a felony;
(c) the dissolution of Physician;
(e) upon the expiration of sixty (60) days after Manager has given
Physician written notice of Manager's intent to terminate this
Agreement with or without cause; or
6.2.2 Termination by Physician. Physician may terminate this Agreement upon
the occurrence of the dissolution of Manager.
6.2.3 Termination by Agreement. In the event Physician and Manager shall
mutually agree in writing, this agreement may be terminated on the date
specified in such written agreement.
(a) upon expiration of 60 day written notice to the manager with or without
cause.
6.2.4 Damage or Condemnation. In the event the Facility is totally or
substantially destroyed by fire, explosion, flood, windstrom, hail, earthquake,
hurricane, tornado, or other casualty or act of God, or in the event all or a
substantial portion of the Facility and the premises on which it is situated is
taken or to be taken by condemnation or eminent domain proceeding, then either
party may by written notice to the other immediately terminate this Agreement.
6.2.5 Bankruptcy. In the event that either party become insolvent, or if
any petition under
<PAGE> 9
federal or state law pertaining to bankruptcy or insolvency or for a
reorganization or arrangement or other relief from creditors shall be filed by
or aginst either party, or if any assignment, trust, mortgage, or other transfer
shall be made of all or a substantial part of the property of either party, or
if either party shall make or offer a composition in its debts with its
creditors, or if a receiver, trustee, or similar officer or creditor's committe
shall be appointed to take charge of any property of or to operate or wind up
the affairs of either party, then the other party may, by written notice, as
speciied in Section 7.3, immediately terminate this Agreement.
6.2.6 Action by Texas State Board of Medical Examiners. In the event the
Texas State Board of medical Examiners shall, solely by virtue of this
Agreement, initiate an acton to revoke the liense to practice medicine in the
State of any physician retained by Physician, then Physician may by written
notice to Manager immediately terminate this Agreement. In the event the Texas
State Board of Medical Examiners shall, on any other grounds, including, without
limitation, improper medical practice or improper conduct by any physician
retained by Physician, initiate an action to restrict, suspend, or revoke the
license of such physician to practice medicine in the State, then Manager may by
written notice to Physician immediately terminate this Agreement.
6.2.7 Default. In the event either party shall give written notice to the
other that such other party has substantially defaulted in the performance of
any material duty or material obligation imposed upon it by this Agreement, and
such default shall not have been cured within thirty (30) days following the
giving of such written notice, the party giving such written notice shall have
the right to immediately terminate this Agreement unless the defaulting party
shall, within said thirty (30) day period, have made a good faith effort to
initiate corrective action and it is contemplated that such corrective action
will be completed within the following thirty (30) day period.
6.3 Effects of Termination. Upon termination of this Agreement, as
hereinabove provided, neither party shall have any further obligations hereunder
except for (i) obligations accruing prior to the date of termination, and (ii)
obligations, promises, or covenants set forth herein that are expressly made to
extend beyond the Term, including, without limitation, indemnities, payment of
accrued management Fees, if any,
VII. Miscellanous
7.1 Independent Relationship. It is mutually understood and agreed that
Physician and Manager, in performing their respective duties and obligations
under this Agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended nor shall be construed to create an employer/employee relationship or a
joint venture relationship, or to allow Manager to exercise control or direction
of any nature, kind, or description over the manner or method by which Physician
performs Healthcare services.
7.2 Representatives
7.2.1 Physician Representative. Except as may be herein more specifically
provided, Physician shall act with respect to all matters hereunder through
Physician.
<PAGE> 10
7.2.2 Manager Representative. Except as may be herein more specifically
provided, Manager shall act with respect to all matters hereunder through the
President of Manager.
7.3 Notices. Any notice, demand, or communication required, permitted, or
desired to be given hereunder shall be deemed effectively given when personally
delivered or mailed by prepaid certified mail, return receipt requested,
addressed as follows:
Physician: Mohammed M. Haq, M.D.
4301 A Vista
Pasadena, Texas 77504
Manager: Doctors Practice management, Inc.
10304 I-10 East, Suite 369
Houston, Texas 77029
or to such other address, or to the attention of such other person or officer,
as either party may by written notice designate.
7.4 Governing Law. This Agreement has been executed and delivered in, and
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Texas.
7.5 Assignment. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that Physician shall not assign its rights and
obligations under this Agreement without the prior written consent of Manager.
Manager shall have the right to (i) assign its rights and obligations hereunder
to any third party, and (ii) collaterally assign its interest in this Agreement
and its right to collect Management Fees hereunder to any financial institution
or other third party without the consent of Physician.
7.6 Waiver of Breach. the waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or to be construed to
constitute, a waiver of any subsequent breach of the same or another provision
hereof.
7.7 Enforcement. In the event either party resorts to legal action to
enforce or interpret any provision of this Agreement, the prevailing party shall
be entitled to recover costs of such action so incurred, including, without
limitation, reasonable attorney's fees.
7.8 Gender and Number. Whenever the context of this Agreement requires, the
gender of all words herein shall include the masculine, feminine, and neuter,
and the number of all words herein shall include the singular and plural.
7.9 Additional Assurance. Except as may be herein specifically provided to
the contrary, the provisions of this Agreement shall be self-operative and shall
not require further agreement by
<PAGE> 11
the parties; provided, however, at the request of either party, the other party
shall execute such additional instruments and take such additional acts as are
reasonable and as the requesting party may deem necessary to effectuate this
Agreement.
7.10 Consents, Approvals, and Exercise of discretion. Except as may be
herein specifically provided to the contrary, whenever this Agreement requires
any consent or approval to be given by either party, or either party must or may
exercise discretion, the parties agree that such consent or approval shall not
be unreasonably withheld or delayed, and such discretion shall be reasonably
exercised.
7.11 Force Majeure. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party.
7.12 Severability. in the event any provision of this Agreement is held to
be invalid, illegal, or unenforceable for any reason and in any respect, such
invalidity, illegality, or unenforceability shall not affect the remainder of
this agreement, which shall be and remain in full force and effect, enforceable
in accordance with its terms.
7.13 Divisions and Headings. The division of this Agreement into articles,
sections, and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall not affect in any way the meaning
or interpretation of this Agreement.
7.14 Amendments and Agreement Execution. This Agreement and amendments
hereto shall be in writing and executed in multiple copies by the duly
authorized officers of Physician and Manager. Each multiple copy shall be deemed
an original, but all multiple copies together shall constitute one and the same
instrument.
7.16 Entire Agreement. This Agreement supersedes all previous contracts and
constitutes the entire agreement between the parties with respect to the subject
matter of this Agreement. Neither party shall be entitled to benefits other than
those specified herein. No oral statements or prior written material not
specifically incorporated herein shall be of any force and effect, and no
changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to become
effective on the date stipulated in such amendment(s). The parties specifically
acknowledged that, in entering into and executing this agreement, the parties
rely solely upon the representations and agreements contained in this Agreement
and no others.
<PAGE> 12
IN WITNESS WHEREOF, Physician and Manager have executed this Agreement in
multiple originals this 1st day of March, 1996, but effective as of the date
first above written.
Physician: Mohammed M. Haq, M.D.
By: /s/ Mohammed M. Haq
-------------------------------
Manager: Doctors Practice management, Inc.
By: /s/ Chiu Chan
-------------------------------
Chiu Chan
President
<PAGE> 1
EXHIBIT 10.8
FULL SERVICE FACILITY
AND
MANAGEMENT AGREEMENT
HOUSTON PHYSICAL MEDICINE ASSOCIATES, M.D., P.A.
JULY 1, 1996
<PAGE> 2
FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT
THIS FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT, entered into
effective as of July 1, 1996, is by and between HOUSTON PHYSICAL MEDICINE
ASSOCIATES, M.D., P.A., d/b/a TEXAS MEDICAL REHABILITATION & PAIN CENTER, P.A.,
a Texas professional association ("DOCTOR")and DOCTORS PRACTICE MANAGEMENT,
INC., a Texas corporation ("COMPANY").
WITNESSETH:
WHEREAS, DOCTOR is a duly incorporated and validly existing Texas
professional association that is engaged in the business of providing
professional services, specifically including physician services, in Texas
("Professional Services"); and
WHEREAS, COMPANY is a duly incorporated and validly existing Texas
corporation, qualified to do business in Texas, that is experienced in providing
management and related items and services including, without limitation,
capital, personnel, facilities and equipment to licensed health care personnel,
professional associations, and other professional health care entities and
individuals; and
WHEREAS, DOCTOR's physician employees practice medicine in Texas and
desire and intend to continue to operate a professional health care practice to
provide Professional Services and related health care services in facilities
designed and equipped for such services,
WHEREAS, DOCTOR further desires and intends to provide Professional
Services and related health care services at various locations in the Houston,
Texas Standard Metropolitan Statistical Area, as defined by the U.S. Department
of Commerce, Bureau of the Census, including, without limitation, the provision
of such services at 6300 Hillcroft, Suite 304, Houston, Texas 77081 and 4301
Vista, Pasadena, Texas 77504 (Used Premises");
WHEREAS, DOCTOR prefers to devote substantially all of its time to the
practice of medicine and the delivery of medical services to its patients and,
therefore, desires and intends to obtain such management, administrative, and
business services as are reasonably necessary and appropriate for DOCTOR to
efficiently provide Professional Services at the Leased Premises and other
locations and Company desires to provide and is fully capable of providing all
such management, administrative and business services; and
WHEREAS, COMPANY desires to and is capable of making Leased Premises
available to DOCTOR and COMPANY desires to and is capable of providing the
management, administrative, and business services necessary and appropriate for
DOCTOR'S provision of Professional Services at the Leased Premises and other
locations; and
WHEREAS, DOCTOR and COMPANY mutually desire an arrangement that:
<PAGE> 3
(a) facilitates consistency of service, both in the medical care provided
by DOCTOR and in the administrative and business services provided by COMPANY;
(b) facilitates effective utilization of DOCTOR'S resources;
(c) facilitates appropriate staffing and scheduling of personnel for and by
DOCTOR, as the case may be;
(d) facilitates the management and administration of the day-to-day
business operations of DOCTOR;
(e) ensures that each party will receive the total revenue attributable to
such party's services, capital investment, and business risks, and no portion of
the revenue attributable to the services, capital investment, and business risks
of the other party; and
(f) ensures that (1) DOCTOR and licensed health care personnel employed by
DOCTOR shall (a) owe their first duty to their patients; and (b) preserve the
confidential nature of the doctor-patient relationship; (2) DOCTOR controls
patient care in the medical and administrative procedures to be followed; and
(3) that COMPANY does not commit any act constituting the practice of medicine
or use any licensed health care practitioner's license to practice medicine all
for the benefit of those seeking services as patients.
NOW, THEREFORE, for and in consideration of the agreements contained
herein and other good and valuable consideration, the receipt and adequacy all
of which are forever acknowledged and confessed, the parties hereto agree as
follows:
Article I DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
following meanings ascribed thereto, unless otherwise clearly required by the
context in which such term is used.
1.1 Agreement. The term "Agreement" shall mean this FULL SERVICE
FACILITY AND MANAGEMENT AGREEMENT between DOCTOR and COMPANY and any amendments
hereto, as may from time to time be adopted, as hereinafter provided.
1.2 Professional Services. The term "Professional Services" shall
mean the professional services, specifically including physician services, and
related health care services provided by DOCTOR.
1.3 DOCTOR. The term "DOCTOR" shall mean Houston Physical Medicine
Associates, M.D., P.A., d/b/a Texas Medical Rehabilitation & Pain Center, P.A.,
a Texas professional association.
1.4 DOCTOR'S Account. The term "DOCTOR'S Account" shall mean the
bank account of COMPANY established as described in Section 3.12 hereof.
<PAGE> 4
1.5 Facility. The term "Facility" shall mean the medical offices
owned or leased by COMPANY where Professional Services are provided by DOCTOR.
1.6 COMPANY. The term "COMPANY" shall mean Doctors Practice
Management, Inc. and Management Service Organization, Inc. Texas corporations.
1.7 Management Fee. The term "Management Fee" shall mean COMPANY's
compensation as described in Article V hereof.
1.8 State. The term "State" shall mean the State of Texas.
1.9 Term. The term "Term" shall mean the initial and any renewal
periods of duration of this Agreement as described in Section 6.1 hereof.
1.10 Location. The term "Location" shall mean the Facility(s) in
the Houston, Texas, Standard Metropolitan Statistical area and such Facility(s)
as may exist in the future.
ARTICLE II APPOINTMENT AND AUTHORITY.
2.1 Appointment. DOCTOR hereby appoints COMPANY as its sole and
exclusive agent for the management and administration of the business functions
and services related to DOCTOR'S provision of Professional Services, and COMPANY
hereby accepts such appointment, subject at all times to the provisions of this
Agreement.
2.2 Authority of COMPANY. Consistent with the provisions of this
Agreement, COMPANY shall have the responsibility and commensurate authority to
provide full service management services for DOCTOR, including, without
limitation, equipment, supplies, support services, personnel (but specifically
excluding licensed medical personnel), marketing, billing and collection
services, management, administration, financial record keeping and reporting,
and other business office services as provided herein. COMPANY, subject to the
ultimate control and direction of DOCTOR, is hereby expressly authorized to
provide all such services in any reasonable manner COMPANY deems appropriate to
meet the day-to-day requirements of the business functions of DOCTOR. To the
extent practicable, COMPANY, at its discretion, shall perform some or all of the
services specified hereunder for DOCTOR.
2.3 Authority of DOCTOR. DOCTOR, through licensed health care
personnel, shall be solely responsible for and have sole and complete authority,
supervision and control over the provision of Professional Services and other
related health care services performed for patients of DOCTOR, and all
diagnoses, treatments, procedures, and other professional health care services
shall be provided and performed exclusively by or under the supervision of
licensed health care personnel retained by DOCTOR, as DOCTOR, in its sole
discretion, deems appropriate and in accordance with all laws. DOCTOR will have
the ultimate authority in the hiring and termination of all clinic staff, both
licensed and unlicensed. DOCTOR also has the right to request COMPANY to replace
any COMPANY personnel assigned to the clinic. This Agreement shall in no way be
construed to mean or suggest that COMPANY is engaged in the practice of
medicine.
<PAGE> 5
2.4 Management Committee The management committee will be
comprised of representative's of DOCTOR, DPM and MSO. The decisions of the
management committee shall be based on a 2/3 majority. The scope of the
committee will be (a) Budgets( Income, Expense, Capital (b) Contract
Negotiations with 3rd parties which may have a material effect on operations.
(c) Capital expenditures in excess of five thousand dollars ($ 5,000.00) (d)
Lines of Credit (c) Expansion funding. COMPANY must approve all fiscal matters
related to expense budget overrun's and capital expenditure.
ARTICLE III COVENANTS OF COMPANY.
3.1 Leased Premises and Equipment. COMPANY shall, at COMPANY's
expense, provide to DOCTOR the Locations and all equipment that is deemed by the
parties hereto to be reasonably necessary and appropriate for the provision of
Professional Services at the Locations.
3.1.1 Retention of Title. DOCTOR shall have access to and use of the
Locations and all equipment located therein throughout the Term, provided,
however, that title to the Locations and all equipment other than items placed
in the Locations by DOCTOR shall, at all times, be and remain in COMPANY, or if
applicable, the entity from which COMPANY leases the Locations and/or equipment.
3.1.2 Repair and Maintenance. COMPANY shall be responsible for the
repair and maintenance of the Locations, and for the repair, maintenance, and
replacement of all equipment located at the Locations, as well as other
obligations under the Lease Agreement regarding the Locations comparable to the
effective date hereof.
3.1.3 Additional Equipment. Should DOCTOR, from time to time during
the Term request COMPANY to provide additional patient care equipment, office,
or other equipment for use at the Locations or to replace used or obsolete
equipment, COMPANY and DOCTOR shall consult with each other on the matter.
Should COMPANY be unwilling or unable to provide such requested equipment,
DOCTOR may acquire and maintain such equipment and title to same shall be and
remain in DOCTOR; provided, however, that COMPANY agrees to provide and maintain
all equipment which is usual and customary in a facility similar to the
Locations, throughout the Term hereof.
3.1.4 Disclaimer of Warranty. COMPANY MAKES NO WARRANTY, EITHER
EXPRESSED OR IMPLIED, WITH RESPECT TO THE LOCATIONS, PREMISES OR ANY EQUIPMENT
PROVIDED BY COMPANY PURSUANT TO THIS AGREEMENT, AND ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY EXPRESSLY
DISCLAIMED.
3.2 Utilities and Related Services. COMPANY shall, at COMPANY's
expense arrange for and shall timely pay when due all charges relating to the
provision of necessary electricity, gas, water, telephone, sewage, cleaning and
decorating (interior and exterior), pest extermination, heating
<PAGE> 6
and air-conditioning maintenance, and similar services reasonably necessary and
appropriate for the provision of Professional Services at the Locations.
3.3 Supplies. COMPANY shall obtain and provide, in its name and
for its own account, all reasonable patient care, office, and other supplies,
and shall ensure that the Leased Premises are at all times adequately stocked
with such supplies as are reasonably necessary and appropriate for the provision
of Professional Services at the Leased Premises. Patient care supplies shall be
provided in accordance with the specifications of DOCTOR with respect to brand
names, dosages, quantities and other specifications.
3.4 Waste Disposal. COMPANY shall, at COMPANY's expense, arrange
for the proper disposal of all medical and non-medical wastes generated by
DOCTOR. Such waste disposal shall include disposal of any bio-hazardous waste
and any other medical waste that requires special disposal, provided that all
Physicians and non-physician personnel employed by DOCTOR comply with all
guidelines established by COMPANY for waste disposal. DOCTOR shall at all times
comply with guidelines set forth by COMPANY for all waste disposal, including
the disposal of sharps, bio-hazardous waste and any other waste products. DOCTOR
shall also comply with any guidelines set forth by COMPANY with respect to the
operation and maintenance of any equipment or other item that has environmental
law implications.
3.5 Support Services. COMPANY, at COMPANY's expense, shall arrange
for the provision of all laundry, linen, printing, stationery, forms, postage,
duplication or photocopying services, patient record transcribing services, and
other similar support services as are reasonably necessary and appropriate for
the provision of Professional Services.
3.6 Licenses and Permits. COMPANY shall, at COMPANY's expense and
on behalf of and in the name of DOCTOR, coordinate all development and planning
processes, and apply for and use COMPANY's best efforts to obtain and maintain
all federal, State and local licenses and regulatory permits required for or in
connection with the operation of the Facility and the equipment (existing and
future) located therein, other than those relating to the practice of medicine.
3.7 PERSONNEL.
3.7.1 Provision of Company Personnel. COMPANY shall employ or
otherwise retain, at COMPANY's expense, and shall be responsible for selecting,
training, supervising, and terminating all management, administrative, clerical,
secretarial, bookkeeping, accounting, payroll, billing and collection, and other
non-professional personnel as COMPANY deems reasonably necessary and appropriate
for COMPANY's performance of its duties and obligations under this Agreement.
COMPANY shall have the sole responsibility for determining the salaries and
fringe benefits of personnel retained by COMPANY, for paying such salaries and
providing such fringe benefits, or for withholding, as required by law, any sums
of income tax, unemployment insurance, social security, or any other withholding
pursuant to any applicable law or governmental requirement.
3.7.2 Non-Exclusivity. In recognition of the fact that the personnel
retained by COMPANY to provide services pursuant to this Agreement may from time
to time perform services for others,
<PAGE> 7
this Agreement shall not prevent COMPANY from performing such services for
others or restrict COMPANY from using its personnel to provide services to
others, provided such activity does not cause any material detriment to DOCTOR.
In recognition of the professional obligations of DOCTOR, DOCTOR shall have the
right and obligation to retain, at DOCTOR's expense, any additional
professional or other personnel as DOCTOR deems necessary or appropriate for the
provision of health care services.
3.7.3 Equal Employment Opportunity. COMPANY shall abide and provide
assistance to DOCTOR, and abide by any and all applicable federal and/or State
equal employment opportunity statutes, rules, and regulations, including,
without limitation, Title VII of the Civil Rights Act of 1964, the Equal
Employment Opportunity Act of 1972, the Age Discrimination in Employment Act of
1967, the Equal Pay Act of 1963, the National Labor Relations Act, the Fair
Labor Standards Act, the Rehabilitation Act of 1973, and the Occupational Safety
and Health Act of 1970, all as may from time to time be modified or amended.
3.7.4 Labor Reports. COMPANY shall appropriately prepare, maintain,
and file all requisite reports and statements regarding income tax withholdings,
unemployment insurance, social security, workers' compensation, equal employment
opportunity, or other reports and statements required with respect to personnel
provided by COMPANY or DOCTOR pursuant to this Agreement.
3.8 Consultants. COMPANY shall render such business and financial
management, consultation, and advice as may from time-to-time be requested by
DOCTOR in connection with the business operations of DOCTOR and DOCTOR's
provision of Professional Services. In addition, COMPANY shall make available to
DOCTOR, for consultation and advice, to the extent available and as reasonably
necessary, COMPANY's specialists in such areas as accounting, auditing,
budgeting, medical practice management, finance, law, government programs,
housekeeping, insurance, management development, patient records, nursing,
recruitment, quality assurance, systems and procedures, and third party
reimbursement.
3.9 Contract Negotiations. Upon the request of DOCTOR, COMPANY
shall advise with respect to and negotiate on DOCTOR's behalf, all contractual
arrangements with third parties as are reasonably necessary and appropriate for
DOCTOR's provision of Professional Services, including, without limitation,
negotiated price agreements with third party payors, managed care providers, or
the purchasers of group health care services.
3.10 Marketing. In accordance with applicable law and ethical
standards and restrictions, COMPANY shall establish and implement a marketing
and public relations program promoting DOCTOR'S provision of Professional
Services to the general public and to other health care professionals and
suppliers. In connection with such marketing program and in accordance with
applicable law and ethical standards and restrictions, COMPANY shall establish
signs on or about the Facility identifying the operations of the Facility and
the provision of Professional Services therein. COMPANY shall implement all
marketing programs at the direction of DOCTOR.
<PAGE> 8
3.11 License to Use Trade names and Trademarks of COMPANY. COMPANY,
at some time in the future may grant to DOCTOR, but only subject to the terms
and conditions of this Agreement, a license to use certain names in connection
with the provision of Professional Services in combination with such color
schemes, patterns, appearances, characteristics and words as are specifically
approved by COMPANY. DOCTOR'S use of any trademarks, trade names, service marks,
insignia, slogans, emblems, symbols, designs or other identifying
characteristics owned by or associated with COMPANY or any of its subsidiaries
or affiliates (collectively, "COMPANY MARKS") shall be subject to the prior
written approval of COMPANY. DOCTOR acknowledges that such names and COMPANY
Marks have acquired a secondary meaning in connection with COMPANY's operations.
DOCTOR may also apply to COMPANY for permission to use any other COMPANY Marks
which permission may or may not be granted in the absolute discretion of
COMPANY. The use of any COMPANY Marks in any signs, advertising or any
promotional material shall be subject to the prior approval of COMPANY.
The restrictions imposed hereunder shall extend to all other COMPANY
Marks licensed to DOCTOR by COMPANY. Except as specifically authorized by this
Agreement, DOCTOR will not use COMPANY Marks nor use, imitate or infringe upon
any of the foregoing in whole or in part. On the termination of this Agreement
for whatever cause, including COMPANY's breach, DOCTOR shall forthwith, at its
expense, make whatever changes may be necessary in any signs, advertising and
promotional material in order to comply with the provisions of this Section and
cease using the name and any COMPANY Marks. DOCTOR's covenants under this
Section are unconditional and in no way dependent upon the performance of
COMPANY of any of its agreements hereunder.
DOCTOR will always acknowledge and recognize both before and after the
expiration of this Agreement the exclusive right of COMPANY to use or to grant
to others the right or license to use, whether separately or as a part of or in
connection with other words, any COMPANY Mark. If DOCTOR utilizes any COMPANY
Mark, DOCTOR shall take all actions which are necessary to maintain COMPANY's
good will and reputation or cease utilizing, at COMPANY's demand, the name and
any and all COMPANY Marks.
3.12 Billing and Collection. On behalf of DOCTOR and for the
purpose depositing all receipts arising from DOCTOR's patient activities,
COMPANY shall maintain the DOCTOR'S current lockbox account at Southwest Bank of
Texas. Such account will require two (2) signatures, one (1) COMPANY and one (1)
DOCTOR for all disbursements in excess of two thousand dollars ($ 2,000) . Such
DOCTOR'S account will be under the COMPANY FEIN . COMPANY shall establish and
maintain credit and billing and collection policies and procedures, and shall
use COMPANY's best efforts to timely bill and collect all professional and other
fees for all billable Professional Services provided by DOCTOR; it being
understood, however that DOCTOR, in his sole discretion, shall establish the
fees for all billable Professional Services provided by DOCTOR. DOCTOR shall
timely advise COMPANY of any changes in DOCTOR'S fee schedule to permit COMPANY
to implement such changes. In connection with this Section 3.12 and throughout
the Term, DOCTOR hereby grants a special power of attorney to and appoints
COMPANY as DOCTOR's true and lawful agent and attorney-in-fact, and COMPANY
hereby accepts such special power of attorney and appointment, for the following
purposes:
<PAGE> 9
3.12.1 To bill DOCTOR'S patients, in DOCTOR'S name and on DOCTOR'S
behalf, for billable Professional Services provided by DOCTOR.
3.12.2 To bill, in DOCTOR'S name and on DOCTOR'S behalf, all claims
for reimbursement or indemnification from Blue Shield/Blue Cross, Medicare,
Medicaid and all other third party payors for covered billable Professional
Services provided by DOCTOR.
3.12.3 To collect and receive, in DOCTOR'S name and on DOCTOR'S
behalf, all accounts receivable generated by such billings and claims for
reimbursement or indemnification, and to deposit all amounts collected in the
DOCTOR'S Account, which account shall be and remain in COMPANY'S name. In
connection herewith, DOCTOR covenants to transfer and deliver to COMPANY all
funds received by DOCTOR from patients or third party payors for Professional
Services. Upon receipt by COMPANY of any funds from patients or third party
payors or from DOCTOR pursuant hereto for Professional Services, COMPANY shall
deposit same into the DOCTOR'S Account.
3.12.4 To take custody of, endorse in the name of DOCTOR, and deposit
into the DOCTOR'S Account any notes, checks, money orders, insurance payments,
and any other instruments received in payment of the accounts receivable for
Professional Services.
Upon request of COMPANY, DOCTOR shall execute and deliver to COMPANY or
the financial institution wherein the DOCTOR'S Account is maintained, such
additional documents or instruments as may be reasonably necessary to evidence
or effect the special power of attorney granted to COMPANY by DOCTOR and the
conditions pursuant to this Section 3. 11 or pursuant to Section 3.12 hereof.
3.13 DOCTOR'S Account. COMPANY shall operate the DOCTOR'S Account
for the purpose's stated herein. In connection herewith and throughout the Term,
DOCTOR hereby appoints COMPANY as DOCTOR'S true and lawful agent and
attorney-in-fact, and grants COMPANY a special power of attorney and COMPANY
hereby accepts such special power of attorney and appointment, to deposit in the
DOCTOR'S Account all funds, fees, and revenues generated from the provision of
Professional Services and collected by COMPANY, and to make withdrawals and sign
checks for disbursements , in amounts of less than of Two Thousand Dollars
($2,000.00) with one (1) signature from the DOCTOR'S Account solely for the
purpose of withdrawing the Collected Revenues to be applied to the Management
Fee and DOCTOR's Expenses. DOCTOR shall execute any and all additional documents
required by the bank where the DOCTOR'S Account is held to effectuate the power
of attorney and conditions of the account granted herein. Notwithstanding the
limited power of attorney granted to COMPANY hereunder. COMPANY shall furnish to
DOCTOR, on a monthly basis, its normal Cash Receipts and Disbursements Report.
3.13.1 Cash Flow and Funding COMPANY will provide to DOCTOR a line of
Credit in the amount of One Hundred Thousand dollars ($100,000) at floating
prime interest rate plus 1 % to be made available upon execution of this
agreement and the execution of a signed note by the DOCTOR. Loan will be all due
and payable within the term of the FULL SERVICE FACILITY AND
<PAGE> 10
MANAGEMENT AGREEMENT or upon its termination. All interest payments to be made
monthly during such term. COMPANY will take a security interest in the Accounts
Receivable of DOCTOR as evidenced by a signed Security Interest by DOCTOR and
the filing of a signed UCC form.
COMPANY will provide the necessary cash flow of the DOCTOR to allow for
payment of all DOCTOR monthly expenses in addition to the monthly sum of Thirty
Thousand Dollars to DOCTOR as per section 3.14.1. All monies provided by
COMPANY for purposes of this Cash Flow guarantee are separate and apart from the
Line of Credit contained herein.
3.13.2 COLLECTION GUARANTEE. COMPANY GUARANTEES THAT IT WILL COLLECT
80% OF ALL BILLINGS, INCLUDING ADJUSTMENTS AND EXCLUDING ANY WORKERS
COMPENSATION NON COMPENSABLE OR PERSONAL LIABILITY ACCOUNTS, WITHIN NINETY (90)
DAYS FROM INSURANCE CLAIM SUBMISSION DATE. COMPANY WILL FUND ANY EXCEPTION
OCCASIONED BY THEIR FAILURE TO PERFORM TO THIS GUARANTEE.
3.13.3 Stock Option DOCTOR will be granted an option to purchase
150,000 restricted shares of the COMPANY at a price of .70 cents at the time of
the execution of this agreement. Additionally DOCTOR will be given an option to
purchase 150,000 restricted shares of the company at a price equal to seventy
percent (70%), of the then market price), per one million dollars of annual
collected revenue upon each anniversary of this agreement.
In the event of any planned initial public offering of the COMPANY ,
DOCTOR will be given an accelerated annual option based on the then annualized
collection rate of the DOCTOR in advance of the anniversary date. COMPANY has
provided this option in recognition of the amendment to the termination
conditions in section 6.2 of this agreement.
3.13.4 First Right of Refusal-EXCLUSIVITY COMPANY WILL EXTEND TO
DOCTOR THE FIRST RIGHT OF REFUSAL FOR ALL PHYSICAL MEDICINE AND CHRONIC PAIN
EXPANSION OPPORTUNITIES THAT MAY ARISE DURING THE TERM OF THIS AGREEMENT AS IT
IS THE INTENTION OF COMPANY TO HAVE DOCTOR TO ACT AS THE EXCLUSIVE GATEKEEPER
FOR CHRONIC PAIN, PHYSICAL THERAPY AND HYDRO THERAPY RELATED PRACTICE
ACTIVITIES.
3.14 FISCAL MATTERS.
3.14.1 Annual Budget. Annually and at least thirty (30) days prior to
the commencement of each fiscal year of DOCTOR, and upon the execution of this
agreement COMPANY shall prepare and deliver to DOCTOR an operational budget for
such fiscal year ("Annual Budget"), setting forth an estimate of the operating
revenues and expenses associated with the provision of Professional Services at
the Leased Premises (including, without limitation, all costs associated with
the Leased Premises, equipment, supplies, services, and personnel provided by
COMPANY to DOCTOR pursuant to this Agreement, and all compensation costs
associated with DOCTOR and DOCTOR's personnel). Such budget shall separately
address two components: The DOCTOR's Expenses and the COMPANY's Expenses, which
are both defined as direct expenses in support of DOCTOR that are in line with
historical expenses of DOCTOR and which are reasonable and customary for DOCTOR.
Any non-budgeted expenses shall be reviewed and approved by both parties. Any
such non-budgeted expense undertaken by COMPANY or DOCTOR without mutual
agreement (except for emergency circumstances) shall be absorbed by that party
COMPANY shall use its best efforts to perform its
<PAGE> 11
duties and obligations under this Agreement such that the actual revenues,
costs, and expenses associated with the provision of Professional Services at
the Leased Premises during any applicable period of DOCTOR'S fiscal year shall
be consistent with the Annual Budget. COMPANY shall prepare and submit to DOCTOR
for its agreement, and shall thereafter adopt, an Annual Budget for the current
fiscal year as soon as practicable.
It is agreed that the operating expenses of DOCTOR for the first annual
period will represent Fifty Five percent (55%) of collected revenue excluding
DOCTOR'S monthly income guarantee of Thirty Thousand Dollars ($30,000). The
initial budget is made apart of this agreement attachment A
3.14.2 Accounting and Financial Records. COMPANY shall establish and
administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of records and books of account relating to the
provision of Professional Services at the Leased Premises, all of which shall be
prepared and maintained in accordance with generally accepted accounting
principles consistently applied on a cash basis. COMPANY shall prepare and
deliver to DOCTOR, within ninety (90) days of the end of each fiscal year of
DOCTOR, a balance sheet, a profit and loss statement, and a statement of changes
in cash flow reflecting the financial status of the provision of Professional
Services as of the end of such prior fiscal year, all of which shall be prepared
in accordance with generally accepted accounting principles. COMPANY shall also
prepare and deliver to DOCTOR unaudited-audited, monthly financial statements
for management purposes only. Additionally, COMPANY shall prepare and deliver to
DOCTOR such other financial statements or records as COMPANY may from time to
time deem appropriate or DOCTOR may reasonably from time-to-time request.
3.14.3 Access. DOCTOR shall have the right at all reasonable times
during normal business hours to audit, examine, and make copies of books of
account maintained by COMPANY pursuant to this Agreement. COMPANY shall maintain
such records for DOCTOR's access upon request for a period of four (4) years
following the Term hereof.
3.15 REPORTS AND RECORDS.
3.15.1 Patient Records. COMPANY shall establish, monitor, and
maintain procedures and policies for the timely filing and maintenance of all
patient records generated by DOCTOR in connection with DOCTOR'S provision of
Professional Services. All patient records shall be treated in accordance with
all applicable State and federal laws relating to the confidentiality of patient
records. All patient records shall be the property of, maintained by, and in the
custody of DOCTOR, but DOCTOR expressly agrees that COMPANY shall have access to
such patient records, at all reasonable times during normal business hours, to
the extent necessary for COMPANY to fulfill its obligations under this Agreement
and that COMPANY, to the extent lawfully permitted, shall have access to such
patient records, for the purpose of making necessary copies, in the event this
Agreement is terminated. COMPANY shall maintain the confidentiality of all
patient records in accordance with all applicable laws and shall establish
written policies and procedures for such which are to be approved by DOCTOR for
the protection of confidential information.
<PAGE> 12
3.15.2 Other Reports and Records. COMPANY shall timely create,
prepare, and file such additional reports and records as are reasonably
necessary and appropriate hereunder, and shall analyze and interpret such
reports and records upon DOCTOR's request.
3.16 Legal Actions. As requested by DOCTOR, COMPANY shall advise
and assist DOCTOR in instituting or defending, in the name of DOCTOR, all legal
actions or proceedings by or against third parties arising out of DOCTOR'S
provision of Patient Care Service, including, without limitation, those actions
to collect fees for billable Professional Services or other billable services
provided to patients by DOCTOR, and those actions necessary for the protection
and continued operation of DOCTOR.
3.17 Indemnification by COMPANY. DOCTOR, its officers, its
employees, and its agents will incur no liability in connection with the conduct
of COMPANY prior to the effective date of this Agreement. Accordingly, COMPANY
shall and hereby does indemnify, hold harmless, and agrees to defend DOCTOR and
its officers, employees, and agents from and against any claims, obligations,
demands, causes of action, losses, liabilities, damages, costs and expenses,
including reasonable attorney's fees (collectively "Claims") arising out of or
connected with the conduct of COMPANY prior to the effective date of this
Agreement.
DOCTOR shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of the existing or future Claims made
against COMPANY. COMPANY shall and hereby does indemnify, hold harmless, and
agrees to defend DOCTOR, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negligence or fault of COMPANY,
its employees, agents, contractors or COMPANY's performance of its obligations
within its scope of responsibility hereunder.
If any Claim shall arise hereunder DOCTOR shall give prompt written
notice of such Claim to COMPANY; except that any delay or failure of notice
shall not relieve COMPANY of the obligations hereunder except to the extent such
delay has materially prejudiced COMPANY.
3.18 COMPANY's Expenses COMPANY shall be solely responsible and
obligated to pay all reasonable direct and indirect expenses of operating each
Location other than DOCTOR's Expenses as defined herein and contained in the
initial and annual budget.
ARTICLE IV COVENANTS OF DOCTOR.
4.1 Organization/Operation. DOCTOR, is a professional association
created under Texas law and shall at all times during the Term (i) be and remain
legally organized to provide Professional Services in a manner consistent with
all State and federal laws; (ii) be duly authorized to conduct business in the
State of Texas; and (iii) have and maintain a physician to provide Professional
Services in the Leased Premises and all other locations of Doctor who shall (a)
hold a valid and unlimited license to practice medicine in the State of Texas,
and (b) be engaged principally in the provision of Professional Services at each
such location.
<PAGE> 13
4.2 Professional Personnel of DOCTOR. DOCTOR shall employ, at
DOCTOR's expense, all licensed health care personnel, including physicians,
nurses, vocational nurses and physician assistants, as DOCTOR deems reasonably
necessary and appropriate for DOCTOR's operation of his practice and provision
of Professional Services each of whom shall be subject to the applicable
provisions of this Agreement (collectively, "Professional Personnel"). DOCTOR
shall have the sole responsibility for paying the salaries and fringe benefits
of all such personnel, and the sole responsibility to withhold, as required by
law, any sums for income tax, unemployment insurance, social security, or any
other withholding pursuant to any applicable law or governmental requirements
(collectively, "Professional Compensation"). COMPANY shall, in the name of and
on behalf of DOCTOR, establish and administer (out of funds available in the
DOCTOR'S Account) the compensation with respect to, such professional personnel
and, on behalf of DOCTOR and out of funds available in the DOCTOR'S Account,
ensure that proper tax withholdings from such compensation are made and timely
remitted to the appropriate governmental entities. Each physician retained by
DOCTOR shall at all times hold and maintain a valid and unlimited license to
practice in the State of Texas. DOCTOR shall enter into and maintain with each
such physician a written agreement which shall include, without Limitation, the
provisions of Section 4.3 hereof.
4.3 Special Consideration/Damages/Non-Competition. DOCTOR hereby
recognizes and acknowledges that COMPANY will incur substantial costs in
providing any Leased Premises, equipment, supplies, support services, personnel,
marketing, management, administration, and other items and services that are the
subject matter of this Agreement. Accordingly, DOCTOR covenants and agrees that
DOCTOR and all of its personnel shall devote their best efforts to the success
of DOCTOR's practice and the provision of Professional Services by DOCTOR.
During the term of this Agreement and any extension hereof, plus two
(2) years thereafter, neither DOCTOR nor any employee, agent, partner,
shareholder, director, officer, affiliate or any entity with any beneficial
interest or any control interest in DOCTOR, either directly or indirectly, for
himself or herself, or on behalf of or in conjunction with any other person,
persons, partnership, associations or corporations shall (a) divert or attempt
to divert any business of, or any patients of DOCTOR to or interest in any other
competitive establishment that is located within a TEN (10) mile radius of any
company Location, except where such referral is in the best interest of the
patient, or (b) solicit or employ any employee or independent contractor
physician of DOCTOR or COMPANY without prior written approval from the other
party hereto. IT IS HOWEVER AGREED THAT THIS PROVISION DOES NOT APPLY TO DOCTORS
CURRENT LOCATIONS AS STIPULATED HEREIN.
DOCTOR shall continuously and uninterruptedly, during the term hereof,
during all business hours and on such days as businesses of like nature in the
area are open for business, provide services in a manner calculated to produce
the maximum volume of revenue which is consistent with the professional
obligation of DOCTOR and in the best interest of DOCTOR's patients. DOCTOR shall
cause the work load, patient load and surgical criteria for each of its
<PAGE> 14
Professional Personnel to remain substantially the same as their historical
practice during the immediate past three (3) years.
During the Term hereof and for a period of five (5) years thereafter,
except as may be required by law, DOCTOR and its employees, agents, directors,
officers, shareholders and partners shall not disclose, communicate or disclose
to, or use for the direct or indirect benefit of any other person or entity any
confidential information regarding COMPANY's business methods, business
policies, procedures, techniques, or trade secrets or other knowledge or
processes developed by COMPANY or any other confidential information relating to
or dealing with the business operations or activities of COMPANY, made known to
DOCTOR or learned or acquired by DOCTOR hereunder.
If any restriction contained in this Section 4.3 is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and the remaining restrictions set forth herein shall be enforced
independently of each other.
4.4 DOCTOR'S Insurance. DOCTOR shall provide, obtain, and maintain
throughout the Term appropriate workers' compensation insurance coverage for
DOCTOR'S employed personnel and shall carry professional liability insurance
covering DOCTOR and all of DOCTOR'S physician Professional Personnel in the
minimum amount of One Million Dollars ($1,000,000) for each occurrence and Three
Million Dollars ($3,000,000) annual aggregate, and such amounts as may be
reasonable for all other Professional Personnel (collectively, "Professional
Insurance"). Such professional insurance policy or policies maintained by DOCTOR
shall include COMPANY as additional insured, if permitted by the insurer. DOCTOR
shall provide to COMPANY a certificate of insurance evidencing such coverage on
an annual basis. The insurance policy or policies shall provide for at least
thirty (30) days advance written notice to DOCTOR from the insurer as to any
alteration of coverage, cancellation, or proposed cancellation of coverage for
any cause. The certificate of insurance shall require such notice to also be
given to COMPANY. DOCTOR shall notify COMPANY of all legal actions or
proceedings instituted by or against DOCTOR arising out of or related to
DOCTOR'S operation of a medical practice.
4.5 Indemnification by DOCTOR. COMPANY, its officers, its
employees, and its agents will incur no liability in connection with the conduct
of DOCTOR prior to the effective date of this Agreement. Accordingly, DOCTOR
shall and hereby does indemnify, hold harmless, and agrees to defend COMPANY and
its officers, employees, and agents from and against any claims, obligations,
demands, causes of action, losses, liabilities, damages, costs and expenses,
including reasonable attorney's fees (collectively "CLAIMS") arising out of or
connected with the conduct of DOCTOR prior to the effective date of this
Agreement.
COMPANY shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of existing or future Claims made
against DOCTOR. DOCTOR shall and hereby does indemnify, hold harmless, and
agrees to defend COMPANY, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negli-
<PAGE> 15
gence or fault of DOCTOR, its employees, agents, contractors or DOCTOR's
performance of its obligations hereunder.
If any Claim shall arise hereunder COMPANY shall give prompt written
notice of such Claim to DOCTOR; except that any delay or failure of notice shall
not relieve DOCTOR of the obligations hereunder except to the extent such delay
has materially prejudiced DOCTOR.
4.6 DOCTOR's Expenses. DOCTOR shall be solely responsible and
obligated to pay only the reasonable Professional Compensation including the
compensation benefits and employer costs associated with all Physicians and
other licensed health care employees, and Professional Insurance expenses
associated with the Professional Personnel including malpractice and general
liability, retained by DOCTOR in addition to such other expenses as may be
mutually agreed to by the parties hereto (collectively, "DOCTOR's Expenses").
4.7 Equipment. DOCTOR hereby represents and warrants that
sufficient equipment currently exists at each Location as may be required to
provide Professional Services of the type and volume currently provided by
DOCTOR as of the effective date of this Agreement and will treat same with
appropriate care.
ARTICLE V MANAGEMENT FEE.
5.1 Amount of Management Fee. DOCTOR and COMPANY mutually
recognize and acknowledge that COMPANY will incur substantial costs in arranging
for DOCTOR's use of the Locations and in providing the equipment, support
services, personnel, marketing, office space, management, administration, and
other items and services that are subject matter of this Agreement. DOCTOR and
COMPANY further recognize that certain of such costs and expenses can vary to a
considerable degree, according to the extent of DOCTOR's business and services.
Furthermore, DOCTOR and COMPANY agree that it will be impracticable to ascertain
and segregate all of the exact costs and expenses that will be incurred by
COMPANY from time to time in performance of his obligations under this
Agreement. However, it is the intent of the parties that the fees paid to
COMPANY be reasonable and approximate its costs and expenses, plus a reasonable
return, considering the investment and risk taken by COMPANY and the value of
the services provided by COMPANY. DOCTOR agrees to pay a Management Fee to
COMPANY in an amount equal to the actual direct operating expenses of COMPANY
attributable to DOCTOR's business plus an amount equal to eighteen percent
(18.%) of annual collected revenue in excess one million and one dollars up to
Two million dollars ($2,000,000) and twenty percent (20 %) of annual collected
revenue in excess of two million one thousand dollars up to two million five
hundred thousand dollars and thereafter twenty two percent (22.0 %) all annual
collected revenue in excess of two million five hundred thousand dollars. Annual
revenue is hereinafter defined as the twelve month period commencing with the
effective date of this agreement. An amount equal to THREE THOUSAND AND 00/100
DOLLARS ($3,000) each year is specifically designated for the provision of data
processing and other taxable services.
<PAGE> 16
For purposes hereof, "Revenues Collected" shall be defined as an amount
equal to the total of any monies received from patients, and/or third-party
payors and deposited in the DOCTOR's account, less any refunds, during any given
twelve month or agreement anniversary date.
Either party, not more than four times in any twelve month period, upon
giving notice to the other party hereto shall have the right to inspect the
records of DOCTOR to ascertain and audit Revenues Collected, DOCTOR's Expenses,
and COMPANY's Expenses, subject to patient confidentiality laws. If the audit or
examination discloses that the Management Fee was incorrectly computed or any
expense improperly classified, the parties shall within twenty (20) days of such
determination reconcile the difference by a cash payment to the applicable
party. In all events, a reconciliation of the preceding year shall occur
following the preparation of annual financial statements.
5.1.1 PERFORMANCE BONUS. DOCTOR WILL PAY A BONUS TO COMPANY FOR
FISCAL MANAGEMENT PERFORMANCE WHEREBY COMPANY IS ABLE TO MANAGE THE TOTAL
EXPENSES OF DOCTOR UNDER THE BUDGETED LEVEL. SUCH BONUS IS DISCRETIONARY IN
NATURE.
5.2 Payment of Management Fee. An advance on the Management Fee
shall be payable to COMPANY on a quarterly basis for each quarter during the
Term and computed on an estimated annual basis. Such advance will be limited to
seventy five percent (75 %) of the then estimated annual collected revenue and
imputed Management Fee. The balance of twenty five percent (25%) will be held in
reserve pending the final quarter calculation of annual collected revenue.
Payment of the Management Fee is not intended to be, and shall not be,
interpreted or applied as permitting COMPANY to share in DOCTOR's fees for
Professional Services or any other services, but is acknowledged as the parties'
negotiated agreement as to the reasonable, fair market value of the equipment,
support, services, personnel, marketing, office space, management,
administration, and other items and services furnished by COMPANY pursuant to
this Agreement, considering the nature and volume of the services required and
the risks assumed by COMPANY.
ARTICLE VI TERM AND TERMINATION.
6.1 Initial and Renewal Terms. This Agreement shall be effective
as of July 1, 1996 for a period of five (5) years therefrom.
6.2 Termination. This Agreement may be terminated upon the first
to occur of any of the following events:
6.2.1 Termination by Agreement. In the event DOCTOR and COMPANY
shall mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.
<PAGE> 17
6.2.2 Optional Termination. COMPANY or DOCTOR may, with or without
cause, provide thirty (30) days written notice during the first twenty four
months of this agreement.
In the event of any initial public offering by COMPANY this termination
provision will be by mutual consent amended to allow for termination without
cause, by either party during the remainder of the contract period, provided the
terminating party will pay to the non-terminating party, damages in an amount
equal to the collected revenues of DOCTOR during the one (1) year period
preceding the date of termination. Failure to amend this provision will result
in the termination of all agreements then in place between DOCTOR and COMPANY.
6.2.3 Damages or Condemnation of Premises. In the event the Leased
Premises are totally or substantially destroyed by fire, explosion, flood,
windstorm, hail, earthquake, or other casualty or act of God, and the owner
landlord of the Leased Premises decides not to repair or rebuild the Leased
Premises, or in the event all or a substantial portion of the Leased Premises
and the Facility are taken or are to be taken by condemnation or eminent domain
proceeding, then either party may by written notice (sent within thirty (30)
days of such event) to the other terminate this Agreement if suitable
alternative premises cannot be secured within sixty (60) days. In the event the
owner/landlord of the Leased Premises decides to repair or rebuild the Leased
Premises to their original size and condition, the Management Fee and the duties
and obligations of COMPANY and DOCTOR hereunder shall abate until such time as
the Leased Premises are suitable for COMPANY and DOCTOR to resume their
respective duties and obligations hereunder.
6.2.4 Bankruptcy. In the event that either party becomes insolvent,
or if any petition under federal or State law pertaining to bankruptcy or
insolvency or for a reorganization or arrangement or other relief from creditors
shall be filed by or against either party, or if any assignment, trust,
mortgage, or other transfer shall be made of all or a substantial part of the
property of either party, or if either party shall make or offer a composition
in its debts with its creditors, or if a receiver, trustee, or similar officer
or creditor's committee shall be appointed to take charge of any property of or
to operate or wind up the affairs of either party, then the other party may by
written notice immediately terminate this Agreement.
6.2.5 Specific DOCTOR Breaches. At COMPANY's option, in the event of
Dr. Anjali Jain shall die or be involuntarily inducted into the active military
services of the United States, (ii) DOCTOR or any physician employed or retained
by DOCTOR shall fail by omission or commission in any substantial manner to
provide Professional Services in a competent manner, (iii) DOCTOR shall fail to
meet any of the qualifications set forth in Section 4.1 hereof, (iv) Dr. Anjali
Jain's license to practice medicine is revoked, suspended, canceled or limited
in any manner, (v) Dr. Anjali Jain convicted of a felony or any crime of moral
turpitude, or (vi) Dr. Anjali Jain or shall fail to comply with the terms of his
Employment Contract of even date herewith, then COMPANY may by written notice to
DOCTOR immediately terminate this Agreement.
<PAGE> 18
6.2.6 COMPANY Breaches. At DOCTOR's option, in the event COMPANY
fails to make timely payments of the obligations it has undertaken, (ii) fails
or refuses to account to DOCTOR for collection on amounts for services rendered,
or (iii) is in default of any material obligations having an impact upon DOCTOR,
then DOCTOR may by written notice to COMPANY terminate this Agreement if COMPANY
has failed to cure such default within thirty (30) days of DOCTOR's written
notice of such violation, provided if such breach cannot by its nature be
reasonably cured within thirty (30) days then COMPANY shall have such time as
may be reasonable to cure the breach.
6.2.7 Action by Board of Medical Examiners or Other Authority with
legal Jurisdiction. While both parties believe that this Agreement is in full
compliance with the Texas Medical Practice Act, the interpretation of the Act
may be subject to change. In the event the Board of Medical Examiners for the
State or other authority with legal jurisdiction shall, solely by virtue of this
Agreement, initiate an action to revoke the license of any physician retained by
DOCTOR to practice medicine in the State, DOCTOR may, by written notice to
COMPANY, immediately request that the Agreement be amended in a mutually
acceptable manner. Any amendment shall be made in the lawful manner which
results in the least changes to the parties' expectations hereunder. In the
event the offending-provisions of the Agreement cannot be cured as to the
legality of such provisions to the satisfaction of both parties, then either
party may terminate this Agreement upon ten (10) days written notice, and such
termination shall be conducted as set forth in Section 3 of the Master
Agreement. In the event the Board of Medical Examiners shall, on any other
grounds, including, without limitation, improper medical practice or improper
conduct by any physician retained by DOCTOR, restrict, suspend or revoke the
license of such physician to practice medicine in the State, the COMPANY may, by
written notice to DOCTOR, immediately terminate this Agreement.
6.2.8 Default. In the event either party shall give written notice
to the other that such other party has substantially defaulted in the
performance of any material duty or material obligation imposed upon it by this
Agreement, and such default shall not have been cured within thirty (30) days
following the giving of such written notice, the party giving such written
notice shall have the right to immediately terminate this Agreement unless the
defaulting party shall, within said thirty (30) day period, have made a good
faith effort to initiate corrective action and it is contemplated that such
corrective action will be completed within the following @ (30) day period.
6.3 Effects of Termination. Upon termination of this Agreement, as
herein above provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
and (ii) obligations, promises, or covenants set forth herein or in those
collateral agreements of even date herewith that are expressly made to extend
beyond the Term, including, without limitation, indemnities, non-compete and
fees which provisions shall survive the expiration or termination of this
Agreement.
6.4 Continued Professional Services. Following any notice of
termination hereunder, whether given by COMPANY or DOCTOR, DOCTOR and COMPANY
will fully cooperate
<PAGE> 19
with each other in all matters relating to the performance or discontinuance of
Professional Services, as appropriate, at the Locations by DOCTOR and the
orderly transition of patients.
ARTICLE VII MISCELLANEOUS.
7.1 Exhibits, Schedules and Other Instruments. As used herein, the
expression "this Agreement" means the body of this Agreement and all exhibits,
certificates, and schedules; and the expressions " herein, " " hereof, " and "
hereunder " and other words of similar import refer to this Agreement and such
exhibits, certificates, and schedules as a whole and not to a particular part or
subdivision thereof unless otherwise clearly indicated.
7.2 Independent Relationship. It is mutually understood and agreed
that DOCTOR and COMPANY, in performing their respective duties and obligations
under this Agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended nor shall be construed to create an employer/employee relationship or a
joint venture relationship, 6r to allow COMPANY to exercise control or direction
of any nature, kind, or description over the manner. or method by which DOCTOR
performs Professional Services.
7.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given shall be deemed effectively given (i) when
personally delivered, (ii) upon receipt when delivered by telephonic document
transfer, (iii) three (3) business days next following the day the notice is,
mailed by prepaid certified mail, return receipt requested, or (iv) the next
business day following deposit with a reputable overnight courier, addressed as
follows:
DOCTOR: Texas Rehabilitation & Pain Center, P.A.
4151 Southwest Freeway, Suite 350
Houston, Texas 77027
COMPANY: Doctors Practice Management, Inc.
% Management Services Organization, Inc.
Attn: Ken Arrowood
4151 Southwest Freeway, Suite 350
Houston, Texas 77027
or to such other address, and to the attention of such other person or officer
as any party may designate, with copies thereof to the respective counsel
thereof as notified by such party. Rejection or other refusal to accept or the
inability to deliver because of a changed address of which no notice was given
in accordance with the provisions hereof, shall be deemed to be receipt of the
notice sent.
<PAGE> 20
7.4 Legal Fees and Costs. In the event either party brings any
action for relief against the other, declaratory or otherwise, arising out of
this Agreement (including actions to enforce and interpret this Agreement), the
losing party shall pay to the prevailing party, in addition to any other relief
to which such party shall be entitled, a reasonable sum for attorneys fees
incurred in bringing such suit and/or enforcing any judgment granted therein,
all of which shall be deemed to have accrued upon the commencement of such
action and shall be paid whether or not such action is prosecuted to judgment.
Any judgment or order entered in such action shall contain a specific provision
providing for the recovery of attorney fees and costs incurred in enforcing such
judgment, in addition to any other relief to which such party shall be entitled.
7.5 Choice of Law and Venue. THIS AGREEMENT HAS BEEN EXECUTED AND
DELIVERED IN AND SHALL BE INTERPRETED, CONSTRUED, ENFORCED AND GOVERNED BY AND
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THAT THE COURTS OF THAT
STATE IN THE COUNTY OF HARRIS, AND THE UNITED STATES DISTRICT COURT FOR SOUTHERN
DISTRICT OF TEXAS SHALL BE THE EXCLUSIVE COURTS OF JURISDICTION AND VENUE FOR
ANY LITIGATION, SPECIAL PROCEEDING OR OTHER PROCEEDING AS BETWEEN THE PARTIES
THAT MAY BE BROUGHT, OR ARISE OUT OF, IN CONNECTION WITH, OR BY REASON OF THIS
AGREEMENT. SELLER HEREBY CONSENTS TO THE JURISDICTION OF SUCH COURTS.
7.6 Assignment. It is specifically provided that Company has
entered into a sub contract agreement with Management Service Organization, Inc.
for the non cancelable term or for as long as this FULL SERVICE MANAGEMENT
AGREEMENT is in effect and as such is a stipulated Third Party to this
agreement. Except as provided above, this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that DOCTOR shall
not assign, transfer or pledge his rights and obligations under this Agreement
or collaterally assign or hypothecate this agreement without the prior written
consent of COMPANY. COMPANY shall have the right to (i) assign its rights and
obligations hereunder to any affiliated third party and (ii) collaterally assign
its interest in this Agreement and its right to collect Management Fees
hereunder to any financial institution or other third party without the consent
of DOCTOR. COMPANY must provide ten days prior written notice to DOCTOR prior to
assigning this Agreement but in no event will it terminate the sub contract
agreement with Management Service Organization, Inc..
7.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
7.8 Enforcement. All claims and disputes relating to this
Agreement shall be subject to confidential arbitration in accordance with the
National Health Lawyers Association Alternative Dispute Resolution Rules of
Procedure for Arbitration then obtaining and with individuals knowledgeable of
the medical industry serving as arbitrators. Written notice of demand for
arbitration shall be filed with the other party to the Agreement and with the
National Health Lawyers Association in Washington, D.C., within a reasonable
time after the dispute has arisen. In the event
<PAGE> 21
either party resorts to legal action to enforce the arbitration results or any
other provision of this Agreement, the prevailing party shall be entitled to
recover the costs of such action so incurred, including, without limitation,
reasonable attorneys' fees.
7.9 Gender and Number. Whenever the context of this Agreement
requires, the gender of all words herein shall include the masculine, feminine,
and neuter, and the number of all words herein shall include the singular and
plural. The term "person" when used herein shall mean an individual,
partnership, joint venture, corporation, trust, government entity, and
association.
7.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Agreement shall be
self-operative and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute such
additional instruments and take such additional acts as are reasonable and as
the requesting party may deem necessary to effectuate this Agreement.
7.11 Consents, Approvals, and Exercise of Discretion. Except as may
be herein specifically provided to the contrary, whenever this
Agreement-requires any consent or approval to be given by either party, or
either party must or may exercise discretion, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and such
discretion shall be reasonably exercised in good faith.
7.12 Force Majeure. Neither party shall be liable or deemed to be
in default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party.
7.13 Severability. In the event any provisions of this Agreement is
held to be invalid, illegal, or unenforceable for any reason and in any respect,
if the extent of such invalidity, illegality or unenforceability does not
destroy the basis of the bargain herein such invalidity, illegality, or
unenforceability shall in no event affect, prejudice, or disturb the validity of
the remainder of this Agreement, which shall be in full force and effect,
enforceable in accordance with its terms as if such provisions had not been
included, or had been modified as provided below, as the case may be. To carry
out the intent of the parties hereto as fully as possible, the invalid, illegal
or unenforceable provision(s), if possible, shall be deemed modified to the
extent necessary and possible to render such provision(s) valid and enforceable.
In the event this Agreement cannot be modified to the satisfaction of the
parties hereto, then either party may terminate this Agreement upon ten (10)
days written notice.
7.14 Divisions and Heading-s. The division of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
<PAGE> 22
7.15 Amendments and Agreement Execution. This Agreement and
amendments thereto shall be in writing and executed in multiple copies on behalf
of DOCTOR by its duly authorized representative and on behalf of COMPANY by its
duly authorized representative. Each multiple copy shall be deemed an original,
but all multiple copies together shall constitute one and the same instrument.
7.16 Time of Essence. Time shall be of the essence with respect to
this Agreement.
7.17 Entire Agreement/Amendment. This Agreement and collateral
agreements of even date herewith supersede all previous agreements (written or
oral), and constitutes the entire agreement of whatsoever kind or nature
existing between or among the parties respecting the within subject matter and
no party shall be entitled to benefits other than those specified herein. As
between or among the parties, no oral statements or prior written material not
specifically incorporated herein shall be of any force and effect; the parties
specifically acknowledge that in entering into and executing this Agreement, the
parties rely solely upon the representations and agreements contained in this
Agreement and no others. All prior representations or agreements, whether
written or verbal, not expressly incorporated herein are superseded. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by all parties hereto. This Agreement may be
executed in two or more counterparts, each and all of which shall be deemed an
original and all of which together shall constitute one instrument. It shall not
be necessary that the signatures of all of the parties appear on each
counterpart; it shall be sufficient that the signature of each party appear on
one or more counterparts.
7.18 Rules of Construction. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement, and the parties hereby
agree that the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments or exhibits, certificates and
schedules hereto. The term " include " or " including " shall mean without
limitation by reason of enumeration. All references in this Agreement to Dollars
or monetary payment shall be deemed to refer to U.S. Dollars.
7.19 Reproduced Copies of Documents. This Agreement and all
documents relating hereto other than promissory notes, including without
limitation, (a) consents, waivers, and modifications which may hereinafter be
executed, (b) documents received by any party at the Closing, (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any means or process including electronic or
mechanical means. Any reproduction shall be admissible into evidence as the
original itself in any Litigation without regard to whether the original is in
existence. If a party signs this Agreement and then transmits an electronic
facsimile of the signature page the recipient may rely upon the electronic
facsimile as a signed original of this Agreement without modification or change
unless same is noted thereon.
7.20 Third Parties. None of the provisions of this Agreement shall
be for the benefit of third parties or enforceable by any third party except as
otherwise contained herein. Any agreement to pay an amount and any assumption of
a liability herein contained, expressed or implied, shall
<PAGE> 23
only be for the BENEFIT of the parties hereto and such agreement or assumption
shall not inure to the benefit of the any third party, including an obligee.
IN WITNESS WHEREOF, DOCTOR and COMPANY have executed this Agreement in multiple
originals as of the date written above.
DOCTOR:
HOUSTON PHYSICAL MEDICINE ASSOCIATES, M.D., P.A.
d/b/a TEXAS REHABILITATION & PAIN CENTER, P.A.
By: /s/ Dr. Anjali Jain
-------------------------------------
Dr. Anjali Jain, President
COMPANY:
DOCTORS PRACTICE MANAGEMENT, INC.
By: /s/ Chiu Chan
-------------------------------------
Chiu Chan, President
MANAGEMENT SERVICE ORGANIZATION, INC.
By: /s/ Kenneteh R. Arrowood
-------------------------------------
Kenneth R. Arrowood, President
<PAGE> 24
AMENDMENT ONE TO THE FULL SERVICE FACILITY AND MANAGEMENT
AGREEMENT BY AND BETWEEN HOUSTON PHYSICAL MEDICINE ASSOCIATES
M.D., P.A. AND DOCTORS PRACTICE MANAGEMENT, INC.
This Amendment One to the Full Service Facility and Management Agreement dated
July 1, 1996 is agreed to by Houston Physical Medicine Associates, M.D., P.A.,
referred to herein as "Doctor") and Doctors Practice Management, Inc., referred
to herein as ("Company").
In consideration of the mutual promises between Doctor and Company, Item 3.13.3
included in the Full Service Facility and Management Agreement dated July 1,
1996 between Doctor and Company is hereby amended and replaced in its entirety
as follows:
3.13.3 Stock Option
Upon the successful completion of an initial public offering ("IPO") by
the Company, the Doctor will be granted an option to purchase 150,000 shares or
one-tenth of one percent (0.01%), whichever is smaller of the Company's then
outstanding common stock at the time of the IPO, at a price equal to seventy
percent of the then market price (70%). Additionally, Doctor will be given an
option to purchase 150,000 shares or one-tenth of one percent (0.01%) of the
Company's restricted shares at a price equal to seventy percent of the then
market price (70%), per one million dollars of annual collected revenues upon
each anniversary of this Agreement.
Such Amendment One to the Full Service Facility and Management Agreement shall
be effective as of July 1, 1996.
DOCTOR:
HOUSTON PHYSICAL MEDICINE ASSOCIATES, M.D. P.A.
D/B/A TEXAS REHABILITATION & PAIN CENTER, P.A.
By: /s/ Anjali Jain
-------------------------------------
Dr. Anjali Jain, President
COMPANY
DOCTORS PRACTICE MANAGEMENT, INC.
By: /s/ Philip Chan
-------------------------------------
Philip Chan, Vice President
MANAGEMENT SERVICE ORGANIZATION, INC.
By: /s/ Kenneth R. Arrowood
-------------------------------------
Kenneth R. Arrowood, President
<PAGE> 1
EXHIBIT 10.9
FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT
THIS FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT, entered into
effective as of May 1 1996, is by and between MEDICAL DIAGNOSTIC IMAGING CENTER
a Texas corporation ("FACILITY")and DOCTORS PRACTICE MANAGEMENT , INC., a Texas
corporation ("COMPANY").
WITNESSETH:
WHEREAS, FACILITY is a duly incorporated and validly existing Texas
corporation that is engaged in the business of providing Professional Technical
Services, specifically including diagnostic imaging services, in Texas
("Professional Technical Services"); and
WHEREAS, COMPANY is a duly incorporated and validly existing Texas
corporation, qualified to do business in Texas, that is experienced in providing
management and related items and services including, without limitation,
capital, personnel, facilities and equipment to licensed health care personnel,
professional associations, and other professional health care entities and
individuals; and
WHEREAS, FACILITY's employees and/or independent contractors provide
professional diagnostic imaging services in Texas and desire and intend to
continue to operate a technical component professional health care operation to
provide Professional Technical Services and related health care services in
facilities designed and equipped for such services,
WHEREAS, FACILITY further desires and intends to provide Professional
Technical Services and related health care services at various locations in the
Houston, Texas Standard Metropolitan Statistical Area, as defined by the U.S.
Department of Commerce, Bureau of the Census, including, without limitation, the
provision of such services at 4135 Spencer Highway, , Pasadena, Texas 77504
(Used Premises");
WHEREAS, FACILITY prefers to devote substantially all of its time to
the practice of providing diagnostic imaging services and the delivery of
medical services to its clients and, therefore, desires and intends to obtain
such management, administrative, and business services as are reasonably
necessary and appropriate for FACILITY to efficiently provide Professional
Technical Services at the Leased Premises and other locations and Company
desires to provide and is fully capable of providing all such management,
administrative and business services; and
WHEREAS, COMPANY desires to and is capable of making Leased Premises
available to FACILITY and COMPANY desires to and is capable of providing the
management, administrative, and business services necessary and appropriate for
FACILITY'S provision of Professional Technical Services at the Leased Premises
and other locations; and
WHEREAS, FACILITY and COMPANY mutually desire an arrangement that:
(a) facilitates consistency of service, both in the medical care provided
by FACILITY and in the administrative and business services provided by COMPANY;
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<PAGE> 2
(b) facilitates effective utilization of FACILITY'S resources;
(c) facilitates appropriate staffing and scheduling of personnel for and by
FACILITY, as the case may be;
(d) facilitates the management and administration of the day-to-day
business operations of FACILITY;
(e) ensures that each party will receive the total revenue attributable to
such party's services, capital investment, and business risks, and no portion of
the revenue attributable to the services, capital investment, and business risks
of the other party; and
(f) ensures that (1) FACILITY and licensed health care personnel employed
by FACILITY shall (a) owe their first duty to their clients; and (b) preserve
the confidential nature of the FACILITY-patient relationship; (2) FACILITY
controls patient care in the medical and administrative procedures to be
followed; and (3) that COMPANY does not commit any act constituting the practice
of medicine or use any licensed health care practitioner's license to practice
medicine all for the benefit of those seeking services as clients.
NOW, THEREFORE, for and in consideration of the agreements contained
herein and other good and valuable consideration, the receipt and adequacy all
of which are forever acknowledged and confessed, the parties hereto agree as
follows:
Article I DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
following meanings ascribed thereto, unless otherwise clearly required by the
context in which such term is used.
1.1 Agreement. The term "Agreement" shall mean this FULL SERVICE
FACILITY AND MANAGEMENT AGREEMENT between FACILITY and COMPANY and any
amendments hereto, as may from time to time be adopted, as hereinafter provided.
1.2 Professional Technical Services. The term "Professional
Technical Services" shall mean the Professional Technical Services, specifically
including diagnostic imaging services, and related health care services provided
by FACILITY.
1.3 FACILITY. The term "FACILITY" shall mean MEDICAL DIAGNOSTIC
IMAGING CENTER,., a Texas corporation.
1.4 FACILITY'S Account. The term "FACILITY'S Account" shall mean
the bank account of COMPANY established as described in Section 3.12 hereof.
1.5 Facility. The term "Facility" shall mean the offices owned or
leased by COMPANY where Professional Technical Services are provided by
FACILITY.
2
<PAGE> 3
1.6 COMPANY. The term -"COMPANY" shall mean Doctors Practice
Management, Inc..
1.7 Management Fee. The term "Management Fee" shall mean COMPANY's
compensation as described in Article V hereof.
1.8 State. The term "State" shall mean the State of Texas.
1.9 Term. The term "Term" shall mean the initial and any renewal
periods of duration of this Agreement as described in Section 6.1 hereof.
1.10 Location. The term "Location" shall mean the Facility(s) in
the Houston, Texas, Standard Metropolitan Statistical area and such Facility(s)
as may exist in the future.
ARTICLE II APPOINTMENT AND AUTHORITY .
2.1 Appointment. FACILITY hereby appoints COMPANY as its sole and
exclusive agent for the management and administration of the business functions
and services related to FACILITY'S provision of Professional Technical Services,
and COMPANY hereby accepts such appointment, subject at all times to the
provisions of this Agreement.
2.2 Authority of COMPANY. Consistent with the provisions of this
Agreement, COMPANY shall have the responsibility and commensurate authority to
provide full service management services for FACILITY, including, without
limitation, equipment, supplies, support services, personnel (but specifically
excluding licensed medical personnel), marketing, billing and collection
services, management, administration, financial record keeping and reporting,
and other business office services as provided herein. COMPANY, subject to the
ultimate control and direction of FACILITY, is hereby expressly authorized to
provide all such services in any reasonable manner COMPANY deems appropriate to
meet the day-to-day requirements of the business functions of FACILITY. To the
extent practicable, COMPANY, at its discretion, shall perform some or all of the
services specified hereunder for FACILITY.
2.3 Authority of FACILITY. FACILITY, through licensed health care
personnel, shall be solely responsible for and have sole and complete authority,
supervision and control over the provision of Professional Technical Services
and other related health care services performed for clients of FACILITY, and
procedures, and other professional health care services shall be provided and
performed exclusively by or under the supervision of licensed health care
personnel retained by FACILITY, as FACILITY, in its sole discretion, deems
appropriate and in accordance with all laws. FACILITY will have the ultimate
authority in the hiring and termination of all Licensed clinical staff. FACILITY
also has the right to request COMPANY to replace any COMPANY personnel assigned
to the clinic. This Agreement shall in no way be construed to mean or suggest
that COMPANY is engaged in the practice of medicine.
ARTICLE III COVENANTS OF COMPANY.
3.1 Leased Premises and Equipment. COMPANY shall, at COMPANY's
expense, provide to FACILITY the Locations and all equipment that is deemed by
the parties hereto to
3
<PAGE> 4
be reasonably necessary and appropriate for the provision of Professional
Technical Services at the Locations.
3.1.1 Retention of Title. FACILITY shall have access to and use of
the Locations and all equipment located therein throughout the Term, provided,
however, that title to the Locations and all equipment other than items placed
in the Locations by FACILITY shall, at all times, be and remain in COMPANY, or
if applicable, the entity from which COMPANY leases the Locations and/or
equipment.
3.1.2 Repair and Maintenance. COMPANY shall be responsible for the
repair and maintenance of the Locations, and for the repair, maintenance, and
replacement of all equipment located at the Locations, as well as other
obligations under the Lease Agreement regarding the Locations comparable to the
effective date hereof.
3.1.3 Additional Equipment. Should FACILITY, from time to time
during the Term request COMPANY to provide additional patient care equipment,
office, or other equipment for use at the Locations or to replace used or
obsolete equipment, COMPANY and FACILITY shall consult with each other on the
matter. Should COMPANY be unwilling or unable to provide such requested
equipment, FACILITY may acquire and maintain such equipment and title to same
shall be and remain in FACILITY; provided, however, that COMPANY agrees to
provide and maintain all equipment which is usual and customary in a facility
similar to the Locations, throughout the Term hereof.
3.1.4 Disclaimer of Warranty. COMPANY MAKES NO WARRANTY, EITHER
EXPRESSED OR IMPLIED, WITH RESPECT TO THE LOCATIONS, PREMISES OR ANY EQUIPMENT
PROVIDED BY COMPANY PURSUANT TO THIS AGREEMENT, AND ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY EXPRESSLY
DISCLAIMED.
3.2 Utilities and Related Services. COMPANY shall, at COMPANY's
expense arrange for and shall timely pay when due all charges relating to the
provision of necessary electricity, gas, water, telephone, sewage, cleaning and
decorating (interior and exterior), pest extermination, heating and
air-conditioning maintenance, and similar services reasonably necessary and
appropriate for the provision of Professional Technical Services at the
Locations.
3.3 Supplies. COMPANY shall obtain and provide, in its name and
for its own account, all reasonable patient care, office, and other supplies,
and shall ensure that the Leased Premises are at all times adequately stocked
with such supplies as are reasonably necessary and appropriate for the provision
of Professional Technical Services at the Leased Premises. Patient care supplies
shall be provided in accordance with the specifications of FACILITY with respect
to brand names, dosages, quantities and other specifications.
3.4 Waste Disposal. COMPANY shall, at COMPANY's expense, arrange
for the proper disposal of all medical and non-medical wastes generated by
FACILITY. Such waste disposal shall include disposal of any bio-hazardous waste
and any other medical waste that requires special disposal, provided that all
Physicians and non-physician personnel employed by
4
<PAGE> 5
FACILITY comply with all guidelines established by COMPANY for waste disposal.
FACILITY shall at all times comply with guidelines set forth by COMPANY for all
waste disposal, including the disposal of sharps, bio-hazardous waste and any
other waste products. FACILITY shall also comply with any guidelines set forth
by COMPANY with respect to the operation and maintenance of any equipment or
other item that has environmental law implications.
3.5 Support Services. COMPANY, at COMPANY's expense, shall arrange
for the provision of all laundry, linen, printing, stationery, forms, postage,
duplication or photocopying services, patient record transcribing services, and
other similar support services as are reasonably necessary and appropriate for
the provision of Professional Technical Services.
3.6 Licenses and Permits. COMPANY shall, at COMPANY's expense and
on behalf of and in the name of FACILITY, coordinate all development and
planning processes, and apply for and use COMPANY's best efforts to obtain and
maintain all federal, State and local licenses and regulatory permits required
for or in connection with the operation of the Facility and the equipment
(existing and future) located therein, other than those relating to the practice
of medicine.
3.7 PERSONNEL.
3.7.1 Provision of Company Personnel. COMPANY shall employ or
otherwise retain, at COMPANY's expense, and shall be responsible for selecting,
training, supervising, and terminating all management, administrative, clerical,
secretarial, bookkeeping, accounting, payroll, billing and collection, and other
non-professional personnel as COMPANY deems reasonably necessary and appropriate
for COMPANY's performance of its duties and obligations under this Agreement.
COMPANY shall have the sole responsibility for determining the salaries and
fringe benefits of personnel retained by COMPANY, for paying such salaries and
providing such fringe benefits, or for withholding, as required by law, any sums
of income tax, unemployment insurance, social security, or any other withholding
pursuant to any applicable law or governmental requirement.
3.7.2 Non-Exclusivity. In recognition of the fact that the personnel
retained by COMPANY to provide services pursuant to this Agreement may from time
to time perform services for others, this Agreement shall not prevent COMPANY
from performing such services for others or restrict COMPANY from using its
personnel to provide services to others, provided such activity does not cause
any material detriment to FACILITY. In recognition of the professional
obligations of FACILITY, FACILITY shall have the right and obligation to-
retain, at FACILITY's expense, any additional professional or other personnel as
FACILITY deems necessary or appropriate for the provision of health care
services.
3.7.3 Equal Employment Opportunity. COMPANY shall abide and provide
assistance to FACILITY, and abide by any and all applicable federal and/or State
equal employment opportunity statutes, rules, and regulations, including,
without limitation, Title VII of the Civil Rights Act of 1964, the Equal
Employment Opportunity Act of 1972, the Age Discrimination in Employment Act of
1967, the Equal Pay Act of 1963, the National Labor Relations Act, the Fair
Labor Standards Act, the Rehabilitation Act of 1973, and the Occupational Safety
and Health Act
5
<PAGE> 6
of 1970, all as may from time to time be modified or amended.
3.7.4 Labor Reports. COMPANY shall appropriately prepare, maintain,
and file all requisite reports and statements regarding income tax withholdings,
unemployment insurance, social security, workers' compensation, equal employment
opportunity, or other reports and statements required with respect to personnel
provided by COMPANY or FACILITY pursuant to this Agreement.
3.8 Consultants. COMPANY shall render such business and financial
management, consultation, and advice as may from time-to-time be requested by
FACILITY in connection with the business operations of FACILITY and FACILITY's
provision of Professional Technical Services. In addition, COMPANY shall make
available to FACILITY, for consultation and advice, to the extent available and
as reasonably necessary, COMPANY's specialists in such areas as accounting,
auditing, budgeting, medical practice management, finance, law, government
programs, housekeeping, insurance, management development, patient records,
nursing, recruitment, quality assurance, systems and procedures, and third party
reimbursement.
3.9 Contract Negotiations. Upon the request of FACILITY, COMPANY
shall advise with respect to and negotiate on FACILITY's behalf, all contractual
arrangements with third parties as are reasonably necessary and appropriate for
FACILITY's provision of Professional Technical Services, including, without
limitation, negotiated price agreements with third party payors, managed care
providers, or the purchasers of group health care services.
3.10 Marketing. In accordance with applicable law and ethical
standards and restrictions, COMPANY shall establish and implement a marketing
and public relations program promoting FACILITY'S provision of Professional
Technical Services to the general public and to other health care professionals
and suppliers. In connection with such marketing program and in accordance with
applicable law and ethical standards and restrictions, COMPANY shall establish
signs on or about the Facility identifying the operations of the Facility and
the provision of Professional Technical Services therein. COMPANY shall
implement all marketing programs at the direction of FACILITY.
3.11 License to Use Trade names and Trademarks of COMPANY. COMPANY,
at some time in the future may grant to FACILITY, but only subject to the terms
and conditions of this Agreement, a license to use certain names in connection
with the provision of Professional Technical Services in combination with such
color schemes, patterns, appearances, characteristics and words as are
specifically approved by COMPANY. FACILITY'S use of any trademarks, trade names,
service marks, insignia, slogans, emblems, symbols, designs or other identifying
characteristics owned by or associated with COMPANY or any of its subsidiaries
or affiliates (collectively, "COMPANY MARKS") shall be subject to the prior
written approval of COMPANY. FACILITY acknowledges that such names and COMPANY
Marks have acquired a secondary meaning in connection with COMPANY's operations.
FACILITY may also apply to COMPANY for permission to use any other COMPANY Marks
which permission may or may not be granted in the absolute discretion of
COMPANY. The use of any COMPANY Marks in any signs, advertising or any
promotional material shall be subject to the prior approval of COMPANY.
6
<PAGE> 7
The restrictions imposed hereunder shall extend to all other COMPANY
Marks licensed to FACILITY by COMPANY. Except as specifically authorized by this
Agreement, FACILITY will not use COMPANY Marks nor use, imitate or infringe upon
any of the foregoing in whole or in part. On the termination of this Agreement
for whatever cause, including COMPANY's breach, FACILITY shall forthwith, at its
expense, make whatever changes may be necessary in any signs, advertising and
promotional material in order to comply with the provisions of this Section and
cease using the name and any COMPANY Marks. FACILITY's covenants under this
Section are unconditional and in no way dependent upon the performance of
COMPANY of any of its agreements hereunder.
FACILITY will always acknowledge and recognize both before and after
the expiration of this Agreement the exclusive right of COMPANY to use or to
grant to others the right or license to use, whether separately or as a part of
or in connection with other words, any COMPANY Mark. If FACILITY utilizes any
COMPANY Mark, FACILITY shall take all actions which are necessary to maintain
COMPANY's good will and reputation or cease utilizing, at COMPANY's demand, the
name and any and all COMPANY Marks.
3.12 Billing and Collection. On behalf of FACILITY and for the
purpose depositing all receipts arising from FACILITY's patient activities,
COMPANY shall maintain the FACILITY'S account.. Such account will Such
FACILITY'S account will be under the COMPANY FEIN . COMPANY shall establish and
maintain credit and billing and collection policies and procedures, and shall
use COMPANY's best efforts to timely bill and collect all professional and other
fees for all billable Professional Technical Services provided by FACILITY; it
being understood, however that FACILITY, in his sole discretion, shall establish
the fees for all billable Professional Technical Services provided by FACILITY.
FACILITY shall timely advise COMPANY of any changes in FACILITY'S fee schedule
to permit COMPANY to implement such changes. In connection with this Section
3.12 and throughout the Term, FACILITY hereby grants a special power of attorney
to and appoints COMPANY as FACILITY's true and lawful agent and
attorney-in-fact, and COMPANY hereby accepts such special power of attorney and
appointment, for the following purposes:
3.12.1 To bill FACILITY'S clients, in FACILITY'S name and on
FACILITY'S behalf, for billable Professional Technical Services provided by
FACILITY.
3.12.2 To bill, in FACILITY'S name and on FACILITY'S behalf, all
claims for reimbursement or indemnification from Blue Shield/Blue Cross,
Medicare, Medicaid and all other third party payors for covered billable
Professional Technical Services provided by FACILITY.
3.12.3 To collect and receive, in FACILITY'S name and on FACILITY'S
behalf, all accounts receivable generated by such billings and claims for
reimbursement or indemnification, and to deposit all amounts collected in the
FACILITY'S Account, which account shall be and remain in COMPANY'S name. In
connection herewith, FACILITY covenants to transfer and deliver to COMPANY all
funds received by FACILITY from clients or third party payors for Professional
Technical Services. Upon receipt by COMPANY of any funds from clients or third
party payors or from FACILITY pursuant hereto for Professional Technical
Services, COMPANY shall deposit same into the FACILITY'S Account.
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3.12.4 To take custody of, endorse in the name of FACILITY, and
deposit into the FACILITY'S Account any notes, checks, money orders, insurance
payments, and any other instruments received in payment of the accounts
receivable for Professional Technical Services.
Upon request of COMPANY, FACILITY shall execute and deliver to COMPANY
or the financial institution wherein the FACILITY'S Account is maintained, such
additional documents or instruments as may be reasonably necessary to evidence
or effect the special power of attorney granted to COMPANY by FACILITY and the
conditions pursuant to this Section 3. 11 or pursuant to Section 3.12 hereof.
3.13 FACILITY'S Account. COMPANY shall operate the FACILITY'S
Account for the purpose's stated herein. In connection herewith and throughout
the Term, FACILITY hereby appoints COMPANY as FACILITY'S true and lawful agent
and attorney-in-fact, and grants COMPANY a special power of attorney and COMPANY
hereby accepts such special power of attorney and appointment, to deposit in the
FACILITY'S Account all funds, fees, and revenues generated from the provision of
Professional Technical Services and collected by COMPANY, and to make
withdrawals and sign checks for disbursements from the FACILITY'S Account solely
for the purpose of withdrawing the Collected Revenues to be applied to the
Management Fee and FACILITY's Expenses. FACILITY shall execute any and all
additional documents required by the bank where the FACILITY'S Account is held
to effectuate the power of attorney and conditions of the account granted
herein. Notwithstanding the limited power of attorney granted to COMPANY
hereunder. COMPANY shall furnish to FACILITY, on a monthly basis, its normal
Cash Receipts and Disbursements Report.
3.14 FISCAL MATTERS.
3.14.1 Accounting and Financial Records. COMPANY shall establish and
administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of records and books of account relating to the
provision of Professional Technical Services at the Leased Premises, all of
which shall be prepared and maintained in accordance with generally accepted
accounting principles consistently applied on a cash basis. COMPANY shall
prepare and deliver to FACILITY, within ninety (90) days of the end of each
fiscal year of FACILITY, a balance sheet, a profit and loss statement, and a
statement of changes in cash flow reflecting the financial status of the
provision of Professional Technical Services as of the end of such prior fiscal
year, all of which shall be prepared in accordance with generally accepted
accounting principles. COMPANY shall also prepare and deliver to FACILITY
unaudited-audited, monthly financial statements for management purposes only.
Additionally, COMPANY shall prepare and deliver to FACILITY such other financial
statements or records as COMPANY may from time to time deem appropriate or
FACILITY may reasonably from time-to-time request.
3.14.3 Access. FACILITY shall have the right at all reasonable times
during normal business hours to audit, examine, and make copies of books of
account maintained by COMPANY pursuant to this Agreement. COMPANY shall maintain
such records for FACILITY's access upon request for a period of four (4) years
following the Term hereof.
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3.15 REPORTS AND RECORDS.
3.15.1 Patient Records. COMPANY shall establish, monitor, and
maintain procedures and policies for the timely filing and maintenance of all
patient records generated by FACILITY in connection with FACILITY'S provision of
Professional Technical Services. All patient records shall be treated in
accordance with all applicable State and federal laws relating to the
confidentiality of patient records. All patient records shall be the property
of, maintained by, and in the custody of FACILITY, but FACILITY expressly agrees
that COMPANY shall have access to such patient records, at all reasonable times
during normal business hours, to the extent necessary for COMPANY to fulfill its
obligations under this Agreement and that COMPANY, to the extent lawfully
permitted, shall have access to such patient records, for the purpose of making
necessary copies, in the event this Agreement is terminated. COMPANY shall
maintain the confidentiality of all patient records in accordance with all
applicable laws and shall establish written policies and procedures for such
which are to be approved by FACILITY for the protection of confidential
information.
3.15.2 Other Management Reports and Records. COMPANY shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate hereunder, and shall analyze and interpret such
reports and records upon FACILITY's request.
3.16 Legal Actions. As requested by FACILITY, COMPANY shall advise
and assist FACILITY in instituting or defending, in the name of FACILITY, all
legal actions or proceedings by or against third parties arising out of
FACILITY'S provision of Patient Care Service, including, without limitation,
those actions to collect fees for billable Professional Technical Services or
other billable services provided to clients by FACILITY, and those actions
necessary for the protection and continued operation of FACILITY. Both parties
shall agree in advance upon the selection of counsel.
3.17 Indemnification by COMPANY. FACILITY, its officers, its
employees, and its agents will incur no liability in connection with the conduct
of COMPANY prior to the effective date of this Agreement. Accordingly, COMPANY
shall and hereby does indemnify, hold harmless, and agrees to defend FACILITY
and its officers, employees, and agents from and against any claims,
obligations, demands, causes of action, losses, liabilities, damages, costs and
expenses, including reasonable attorney's fees (collectively " Claims ") arising
out of or connected with the conduct of COMPANY prior to the effective date of
this Agreement.
FACILITY shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of the existing or future Claims made
against COMPANY. COMPANY shall and hereby does indemnify, hold harmless, and
agrees to defend FACILITY, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negligence or fault of COMPANY,
its employees, agents, contractors or COMPANY's performance of its obligations
within its scope of responsibility hereunder.
If any Claim shall arise hereunder FACILITY shall give prompt written
notice of such Claim to COMPANY; except that any delay or failure of notice
shall not relieve COMPANY of the obligations hereunder except to the extent such
delay has materially prejudiced COMPANY.
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ARTICLE IV COVENANTS OF FACILITY.
4.1 Organization/Operation. FACILITY, is a Texas corporation
created under Texas law and shall at all times during the Term (i) be and remain
legally organized to provide Professional Technical Services in a manner
consistent with all State and federal laws; (ii) be duly authorized to conduct
business in the State of Texas; and (iii) have and maintain a physician to
provide Professional Technical Services in the Leased Premises and all other
locations of FACILITY who shall (a) hold a valid and unlimited license to
provide FACILITY services in the State of Texas , and (b) be engaged principally
in the provision of Professional Technical Services at each such location.
4.2 Professional Personnel of FACILITY. FACILITY shall employ, at
FACILITY's expense, all licensed health care personnel, including physicians,
nurses, vocational nurses and physician assistants, as FACILITY deems reasonably
necessary and appropriate for FACILITY's operation of his practice and provision
of Professional Technical Services each of whom shall be subject to the
applicable provisions of this Agreement (collectively, "Professional
Personnel"). FACILITY shall have the sole responsibility for paying the salaries
and fringe benefits of all such personnel, and the sole responsibility to
withhold, as required by law, any sums for income tax, unemployment insurance,
social security, or any other withholding pursuant to any applicable law or
governmental requirements (collectively, "Professional Compensation"). COMPANY
shall, in the name of and on behalf of FACILITY, establish and administer (out
of funds available in the FACILITY'S Account) the compensation with respect to,
such professional personnel and, on behalf of FACILITY and out of funds
available in the FACILITY'S Account, ensure that proper tax withholdings from
such compensation are made and timely remitted to the appropriate governmental
entities.
During the term of this Agreement and any extension hereof, plus two
(2) years thereafter, neither FACILITY nor any employee, agent, partner,
shareholder, director, officer, affiliate or any entity with any beneficial
interest or any control interest in FACILITY, either directly or indirectly, for
himself or herself, or on behalf of or in conjunction with any other person,
persons, partnership, associations or corporations shall (a) divert or attempt
to divert any business of, or any clients of FACILITY to or interest in any
other competitive establishment that is located within a Ten (10) mile radius of
any Location,.
FACILITY shall continuously and uninterruptedly, during the term
hereof, during all business hours and on such days as businesses of like nature
in the area are open for business, provide services in a manner calculated to
produce the maximum volume of revenue which is consistent with the professional
obligation of FACILITY and in the best interest of FACILITY's clients. FACILITY
shall cause the work load, patient load for each of its Professional Personnel
to remain substantially the same as their historical practice during the
immediate past three (3) years.
During the Term hereof and for a period of five (5) years thereafter,
except as may be required by law, FACILITY and its employees, agents, directors,
officers, shareholders and partners shall not disclose, communicate or disclose
to, or use for the direct or indirect benefit of any other person or entity any
confidential information regarding COMPANY's business
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methods, business policies, procedures, techniques, or trade secrets or other
knowledge or processes developed by COMPANY or any other confidential
information relating to or dealing with the business operations or activities of
COMPANY, made known to FACILITY or learned or acquired by FACILITY hereunder.
If any restriction contained in this Section 4.3 is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and the remaining restrictions set forth herein shall be enforced
independently of each other.
4.4 FACILITY'S Insurance. FACILITY shall provide, obtain, and
maintain throughout the Term appropriate workers' compensation insurance
coverage for FACILITY'S employed personnel and shall carry professional
liability insurance covering FACILITY and all of FACILITY'S physician
Professional Personnel in the minimum amount of Three Hundred Thousand Dollars
($ _00,000) for each occurrence and Five Hundred Thousand Dollars ($ 500,000)
annual aggregate, and such amounts as may be reasonable for all other
Professional Personnel (collectively, "Professional Insurance"). Such
professional insurance policy or policies maintained by FACILITY shall include
COMPANY as additional insured, if permitted by the insurer. FACILITY shall
provide to COMPANY a certificate of insurance evidencing such coverage on an
annual basis. The insurance policy or policies shall provide for at least thirty
(30) days advance written notice to FACILITY from the insurer as to any
alteration of coverage, cancellation, or proposed cancellation of coverage for
any cause. The certificate of insurance shall require such notice to also be
given to COMPANY. FACILITY shall notify COMPANY of all legal actions or
proceedings instituted by or against FACILITY arising out of or related to
FACILITY'S operation of a medical practice.
4.5 Indemnification by FACILITY. COMPANY, its officers, its
employees, and its agents will incur no liability in connection with the conduct
of FACILITY prior to the effective date of this Agreement. Accordingly, FACILITY
shall and hereby does indemnify, hold harmless, and agrees to defend COMPANY and
its officers, employees, and agents from and against any claims, obligations,
demands, causes of action, losses, liabilities, damages, costs and expenses,
including reasonable attorney's fees (collectively "CLAIMS") arising out of or
connected with the conduct of FACILITY prior to the effective date of this
Agreement.
COMPANY shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of existing or future Claims made
against FACILITY. FACILITY shall and hereby does indemnify, hold harmless, and
agrees to defend COMPANY, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negligence or fault of
FACILITY, its employees, agents, contractors or FACILITY's performance of its
obligations hereunder.
If any Claim shall arise hereunder COMPANY shall give prompt written
notice of such Claim to FACILITY; except that any delay or failure of notice
shall not relieve FACILITY of the obligations hereunder except to the extent
such delay has materially prejudiced FACILITY.
4.6 FACILITY's Expenses. FACILITY shall be solely responsible and
obligated to pay only the reasonable Professional Compensation including the
compensation benefits and
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employer costs associated with all Physicians and other licensed health care
employees, and Professional Insurance expenses associated with the Professional
Personnel including malpractice and general liability, retained by FACILITY in
addition to such other expenses as may be mutually agreed to by the parties
hereto (collectively, "FACILITY's Expenses").
4.7 Equipment. FACILITY hereby represents and warrants that
sufficient equipment currently exists at each Location as may be required to
provide Professional Technical Services of the type and volume currently
provided by FACILITY as of the effective date of this Agreement and will treat
same with appropriate care.
ARTICLE V MANAGEMENT FEE.
5.1 Amount of Management Fee. FACILITY and COMPANY mutually
recognize and acknowledge that COMPANY will incur substantial costs in arranging
for FACILITY's use of the Locations and in providing the equipment, support
services, personnel, marketing, office space, management, administration, and
other items and services that are subject matter of this Agreement. FACILITY and
COMPANY further recognize that certain of such costs and expenses can vary to a
considerable degree, according to the extent of FACILITY's business and
services. Furthermore, FACILITY and COMPANY agree that it will be impracticable
to ascertain and segregate all of the exact costs and expenses that will be
incurred by COMPANY from time to time in performance of his obligations under
this Agreement. However, it is the intent of the parties that the fees paid to
COMPANY be reasonable and approximate its costs and expenses, plus a reasonable
return, considering the investment and risk taken by COMPANY and the value of
the services provided by COMPANY. FACILITY agrees to pay a Management Fee to
COMPANY in an amount equal to Sixty Five percent of annual collected revenue.
Annual revenue is hereinafter defined as the twelve month period commencing with
the effective date of this agreement.
For purposes hereof, "Revenues Collected" shall be defined as an amount
equal to the total of any moneys received from clients, and/or third-party
payors and deposited in the FACILITY's account, less any refunds, during any
given twelve month or agreement anniversary date..
Either party, not more than Twelve times in any twelve month period,
upon giving notice to the other party hereto shall have the right to inspect the
records of FACILITY to ascertain and audit Revenues Collected, FACILITY's
Expenses, and COMPANY's Expenses, subject to patient confidentiality laws. If
the audit or examination discloses that the Management Fee was incorrectly
computed or any expense improperly classified, the parties shall within twenty
(20) days of such determination reconcile the difference by a cash payment to
the applicable party. In all events, a reconciliation of the preceding year
shall occur following the preparation of annual financial statements.
5.2 Payment of Management Fee. The Management Fee shall be payable
to COMPANY on a monthly basis for each month during the Term of this agreement.
Payment of the Management Fee is not intended to be, and shall not be,
interpreted or
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applied as permitting COMPANY to share in FACILITY's fees for Professional
Technical Services or any other services, but is acknowledged as the parties'
negotiated agreement as to the reasonable, fair market value of the equipment,
support, services, personnel, marketing, office space, management,
administration, and other items and services furnished by COMPANY pursuant to
this Agreement, considering the nature and volume of the services required and
the risks assumed by COMPANY.
ARTICLE VI TERM AND TERMINATION.
6.1 Initial and Renewal Terms. This Agreement shall be effective
as of May 1, 1996 for a period of Fifteen (15) years therefrom.
6.2 Termination. This Agreement may be terminated upon the first
to occur of any of the following events:
6.2.1 Termination by Agreement. In the event FACILITY and COMPANY
shall mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.
6.2.2 Damages or Condemnation of Premises. In the event the Leased
Premises are totally or substantially destroyed by fire, explosion, flood,
windstorm, hail, earthquake, or other casualty or act of God, and the owner
landlord of the Leased Premises decides not to repair or rebuild the Leased
Premises, or in the event all or a substantial portion of the Leased Premises
and the Facility are taken or are to be taken by condemnation or eminent domain
proceeding, then either party may by written notice (sent within thirty (30)
days of such event) to the other terminate this Agreement if suitable
alternative premises cannot be secured within sixty (60) days. In the event the
owner/landlord of the Leased Premises decides to repair or rebuild the Leased
Premises to their original size and condition, the Management Fee and the duties
and obligations of COMPANY and FACILITY hereunder shall abate until such time as
the Leased Premises are suitable for COMPANY and FACILITY to resume their
respective duties and obligations hereunder.
6.2.3 Bankruptcy. In the event that either party becomes insolvent,
or if any petition under federal or State law pertaining to bankruptcy or
insolvency or for a reorganization or arrangement or other relief from creditors
shall be filed by or against either party, or if any assignment, trust,
mortgage, or other transfer shall be made of all or a substantial part of the
property of either party, or if either party shall make or offer a composition
in its debts with its creditors, or if a receiver, trustee, or similar officer
or creditor's committee shall be appointed to take charge of any property of or
to operate or wind up the affairs of either party, then the other party may by
written notice immediately terminate this Agreement.
6.2.4 Specific FACILITY Breaches. At COMPANY's option, in the event
of (i) FACILITY or any employee or retained independent contractor of FACILITY
shall fail by omission or commission in any substantial manner to provide
Professional Technical Services in a competent manner, (ii) FACILITY shall fail
to meet any of the qualifications set forth in Section 4.1 hereof, (iv), then
COMPANY may by written notice to FACILITY immediately
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terminate this Agreement.
6.2.6 COMPANY Breaches. At FACILITY's option, in the event COMPANY
fails to make timely payments of the obligations it has undertaken, (ii) fails
or refuses to account to FACILITY for collection on amounts for services
rendered, or (iii) is in default of any material obligations having an impact
upon FACILITY, then FACILITY may by written notice to COMPANY terminate this
Agreement if COMPANY has failed to cure such default within thirty (30) days of
FACILITY's written notice of such violation, provided if such breach cannot by
its nature be reasonably cured within thirty (30) days then COMPANY shall have
such time as may be reasonable to cure the breach.
6.2.8 Default. In the event either party shall give written notice
to the other that such other party has substantially defaulted in the
performance of any material duty or material obligation imposed upon it by this
Agreement, and such default shall not have been cured within thirty (30) days
following the giving of such written notice, the party giving such written
notice shall have the right to immediately terminate this Agreement unless the
defaulting party shall, within said thirty (30) day period, have made a good
faith effort to initiate corrective action and it is contemplated that such
corrective action will be completed within the following (30) day period.
6.3 Effects of Termination. Upon termination of this Agreement, as
herein above provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
and (ii) obligations, promises, or covenants set forth herein or in those
collateral agreements of even date herewith that are expressly made to extend
beyond the Term, including, without limitation, indemnities, non-compete and
fees which provisions shall survive the expiration or termination of this
Agreement.
In the event of termination all outstanding loans , interest and
management fees will be due and payable by FACILITY prior to but no later than
effective cancellation date.
6.4 Continued Professional Technical Services. Following any
notice of termination hereunder, whether given by COMPANY or FACILITY, FACILITY
and COMPANY will fully cooperate with each other in all matters relating to the
performance or discontinuance of Professional Technical Services, as
appropriate, at the Locations by FACILITY and the orderly transition of clients.
ARTICLE VII MISCELLANEOUS.
7.1 Exhibits, Schedules and Other Instruments. As used herein, the
expression "this Agreement" means the body of this Agreement and all exhibits,
certificates, and schedules; and the expressions " herein, " " hereof, " and "
hereunder " and other words of similar import refer to this Agreement and such
exhibits, certificates, and schedules as a whole and not to a particular part or
subdivision thereof unless otherwise clearly indicated.
7.2 Independent Relationship. It is mutually understood and agreed
that FACILITY and COMPANY, in performing their respective duties and obligations
under this Agreement, are
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at all times acting and performing as independent contractors with respect to
each other, and nothing in this Agreement is intended nor shall be construed to
create an employer/employee relationship or a joint venture relationship, 6r to
allow COMPANY to exercise control or direction of any nature, kind, or
description over the manner. or method by which FACILITY performs Professional
Technical Services.
7.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given shall be deemed effectively given (i) when
personally delivered, (ii) upon receipt when delivered by telephonic document
transfer, (iii) three (3) business days next following the day the notice is,
mailed by prepaid certified mail, return receipt requested, or (iv) the next
business day following deposit with a reputable overnight courier, addressed as
follows:
FACILITY Medical Diagnostic Imaging Center
4135 Spencer Highway
Pasadena, Texas 77504
COMPANY: DOCTORS Practice Management, Inc.
Chiu Chan, CEO
4301 A Vista
Pasadena, Texas 77504
or to such other address, and to the attention of such other person or officer
as any party may designate, with copies thereof to the respective counsel
thereof as notified by such party. Rejection or other refusal to accept or the
inability to deliver because of a changed address of which no notice was given
in accordance with the provisions hereof, shall be deemed to be receipt of the
notice sent.
7.4 Legal Fees and Costs. In the event either party brings any
action for relief against the other, declaratory or otherwise, arising out of
this Agreement (including actions to enforce and interpret this Agreement), the
losing party shall pay to the prevailing party, in addition to any other relief
to which such party shall be entitled, a reasonable sum for attorneys fees
incurred in bringing such suit and/or enforcing any judgment granted therein,
all of which shall be deemed to have accrued upon the commencement of such
action and shall be paid whether or not such action is prosecuted to judgment.
Any judgment or order entered in such action shall contain a specific provision
providing for the recovery of attorney fees and costs incurred in enforcing such
judgment, in addition to any other relief to which such party shall be entitled.
7.5 Choice of Law and Venue. THIS AGREEMENT HAS BEEN EXECUTED AND
DELIVERED IN AND SHALL BE INTERPRETED, CONSTRUED, ENFORCED AND GOVERNED BY AND
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THAT THE COURTS OF THAT
STATE IN THE COUNTY OF HARRIS, AND THE UNITED STATES DISTRICT COURT FOR SOUTHERN
DISTRICT OF TEXAS SHALL BE THE EXCLUSIVE COURTS OF JURISDICTION AND VENUE FOR
ANY LITIGATION, SPECIAL PROCEEDING OR OTHER PROCEEDING AS BETWEEN THE PARTIES
THAT MAY BE BROUGHT, OR ARISE OUT OF, IN CONNECTION WITH, OR BY REASON OF
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THIS AGREEMENT. SELLER HEREBY CONSENTS TO THE JURISDICTION OF SUCH COURTS.
7.6 Assignment. Except as provided above, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective legal representatives, successors, and assigns; provided, however,
that FACILITY shall not assign, transfer or pledge his rights and obligations
under this Agreement or collaterally assign or hypothecate this agreement
without the prior written consent of COMPANY. COMPANY shall have the right to
(i) assign its rights and obligations hereunder to any affiliated third party
and (ii) collaterally assign its interest in this Agreement and its right to
collect Management Fees hereunder to any financial institution or other third
party without the consent of FACILITY. COMPANY must provide ten days prior
written notice to FACILITY prior to assigning this Agreement .
7.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
7.8 Enforcement. All claims and disputes relating to this
Agreement shall be subject to confidential arbitration in accordance with the
National Health Lawyers Association Alternative Dispute Resolution Rules of
Procedure for Arbitration then obtaining and with individuals knowledgeable of
the medical industry serving as arbitrators. Written notice of demand for
arbitration shall be filed with the other party to the Agreement and with the
National Health Lawyers Association in Washington, D.C., within a reasonable
time after the dispute has arisen. In the event either party resorts to legal
action to enforce the arbitration results or any other provision of this
Agreement, the prevailing party shall be entitled to recover the costs of such
action so incurred, including, without limitation, reasonable attorneys' fees.
7.9 Gender and Number. Whenever the context of this Agreement
requires, the gender of all words herein shall include the masculine, feminine,
and neuter, and the number of all words herein shall include the singular and
plural. The term "person" when used herein shall mean an individual,
partnership, joint venture, corporation, trust, government entity, and
association.
7.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Agreement shall be
self-operative and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute such
additional instruments and take such additional acts as are reasonable and as
the requesting party may deem necessary to effectuate this Agreement.
7.11 Consents, Approvals, and Exercise of Discretion. Except as may
be herein specifically provided to the contrary, whenever this
Agreement-requires any consent or approval to be given by either party, or
either party must or may exercise discretion, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and such
discretion shall be reasonably exercised in good faith.
7.12 Force Majeure. Neither party shall be liable or deemed to be
in default for any delay or failure in performance under this Agreement or other
interruption of service deemed to
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result, directly or indirectly, from acts of God, civil or military authority,
acts of public enemy, war, accidents, fires, explosions, earthquakes, floods,
failure of transportation, strikes or other work interruptions by either party's
employees, or any other similar cause beyond the reasonable control of either
party.
7.13 Severability. In the event any provisions of this Agreement is
held to be invalid, illegal, or unenforceable for any reason and in any respect,
if the extent of such invalidity, illegality or unenforceability does not
destroy the basis of the bargain herein such invalidity, illegality, or
unenforceability shall in no event affect, prejudice, or disturb the validity of
the remainder of this Agreement, which shall be in full force and effect,
enforceable in accordance with its terms as if such provisions had not been
included, or had been modified as provided below, as the case may be. To carry
out the intent of the parties hereto as fully as possible, the invalid, illegal
or unenforceable provision(s), if possible, shall be deemed modified to the
extent necessary and possible to render such provision(s) valid and enforceable.
In the event this Agreement cannot be modified to the satisfaction of the
parties hereto, then either party may terminate this Agreement upon ten (10)
days written notice.
7.14 Divisions and Heading-s. The division of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
7.15 Amendments and Agreement Execution. This Agreement and
amendments thereto shall be in writing and executed in multiple copies on behalf
of FACILITY by its duly authorized representative and on behalf of COMPANY by
its duly authorized representative. Each multiple copy shall be deemed an
original, but all multiple copies together shall constitute one and the same
instrument.
7.16 Time of Essence. Time shall be of the essence with respect to
this Agreement.
7.17 Entire Agreement/Amendment. This Agreement and collateral
agreements of even date herewith supersede all previous agreements (written or
oral), and constitutes the entire agreement of whatsoever kind or nature
existing between or among the parties respecting the within subject matter and
no party shall be entitled to benefits other than those specified herein. As
between or among the parties, no oral statements or prior written material not
specifically incorporated herein shall be of any force and effect; the parties
specifically acknowledge that in entering into and executing this Agreement, the
parties rely solely upon the representations and agreements contained in this
Agreement and no others. All prior representations or agreements, whether
written or verbal, not expressly incorporated herein are superseded. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by all parties hereto. This Agreement may be
executed in two or more counterparts, each and all of which shall be deemed an
original and all of which together shall constitute one instrument. It shall not
be necessary that the signatures of all of the parties appear on each
counterpart; it shall be sufficient that the signature of each party appear on
one or more counterparts.
7.18 Rules of Construction. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement, and the parties hereby
agree that the normal rule of
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construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits, certificates and schedules hereto. The term "
include " or " including " shall mean without limitation by reason of
enumeration. All references in this Agreement to Dollars or monetary payment
shall be deemed to refer to U.S. Dollars.
7.19 Reproduced Copies of Documents. This Agreement and all
documents relating hereto other than promissory notes, including without
limitation, (a) consents, waivers, and modifications which may hereinafter be
executed, (b) documents received by any party at the Closing, (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any means or process including electronic or
mechanical means. Any reproduction shall be admissible into evidence as the
original itself in any Litigation without regard to whether the original is in
existence. If a party signs this Agreement and then transmits an electronic
facsimile of the signature page the recipient may rely upon the electronic
facsimile as a signed original of this Agreement without modification or change
unless same is noted thereon.
7.20 Third Parties. None of the provisions of this Agreement shall
be for the benefit of third parties or enforceable by any third party except as
otherwise contained herein. Any agreement to pay an amount and any assumption of
a liability herein contained, expressed or implied, shall only be for the
BENEFIT of the parties hereto and such agreement or assumption shall not inure
to the benefit of the any third party, including an obligee.
IN WITNESS WHEREOF, FACILITY and COMPANY have executed this Agreement in
multiple originals as of the date written above.
FACILITY:
MEDICAL DIAGNOSTIC IMAGING CENTER
By: /s/ Ringo Cheng
-------------------------------
COMPANY:
DOCTORS PRACTICE MANAGEMENT, INC.
By: /s/ Chiu Chan
-------------------------------
Chiu Chan, President
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EXHIBIT 10.10
FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT
THIS FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT, entered into
effective as of May 1, 1996, is by and between R. S. ARORA, M.D. , a sole
proprietor ("DOCTOR")and DOCTORS PRACTICE MANAGEMENT , INC., a Texas corporation
("COMPANY").
WITNESSETH:
WHEREAS, DOCTOR is a sole proprietor that is engaged in the business of
providing professional services, specifically including physician services, in
Texas ("Professional Services"); and
WHEREAS, COMPANY is a duly incorporated and validly existing Texas
corporation, qualified to do business in Texas, that is experienced in providing
management and related items and services including, without limitation,
capital, personnel, facilities and equipment to licensed health care personnel,
professional associations, and other professional health care entities and
individuals; and
WHEREAS, DOCTOR's physician employees and/or independent physician
contractors practice medicine in Texas and desire and intend to continue to
operate a professional health care practice to provide Professional Services and
related health care services in facilities designed and equipped for such
services,
WHEREAS, DOCTOR further desires and intends to provide Professional
Services and related health care services at various locations in the Houston,
Texas Standard Metropolitan Statistical Area, as defined by the U.S. Department
of Commerce, Bureau of the Census, including, without limitation, the provision
of such services at 4301 A Vista, Pasadena, Texas 77504 (Used Premises");
WHEREAS, DOCTOR prefers to devote substantially all of its time to the
practice of medicine and the delivery of medical services to its patients and,
therefore, desires and intends to obtain such management, administrative, and
business services as are reasonably necessary and appropriate for DOCTOR to
efficiently provide Professional Services at the Leased Premises and other
locations and Company desires to provide and is fully capable of providing all
such management, administrative and business services; and
WHEREAS, COMPANY desires to and is capable of making Leased Premises
available to DOCTOR and COMPANY desires to and is capable of providing the
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management, administrative, and business services necessary and appropriate for
DOCTOR's provision of Professional Services at the Leased Premises and other
locations; and
WHEREAS, DOCTOR and COMPANY mutually desire an arrangement that:
(a) facilitates consistency of service, both in the medical care provided
by DOCTOR and in the administrative and business services provided by COMPANY;
(b) facilitates effective utilization of DOCTOR'S resources;
(c) facilitates appropriate staffing and scheduling of personnel for and by
DOCTOR, as the case may be;
(d) facilitates the management and administration of the day-to-day
business operations of DOCTOR;
(e) ensures that each party will receive the total revenue attributable to
such party's services, capital investment, and business risks, and no portion of
the revenue attributable to the services, capital investment, and business risks
of the other party; and
(f) ensures that (1) DOCTOR and licensed health care personnel employed by
DOCTOR shall (a) owe their first duty to their patients; and (b) preserve the
confidential nature of the doctor-patient relationship; (2) DOCTOR controls
patient care in the medical and administrative procedures to be followed; and
(3) that COMPANY does not commit any act constituting the practice of medicine
or use any licensed health care practitioner's license to practice medicine all
for the benefit of those seeking services as patients.
NOW, THEREFORE, for and in consideration of the agreements contained
herein and other good and valuable consideration, the receipt and adequacy all
of which are forever acknowledged and confessed, the parties hereto agree as
follows:
Article I DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
following meanings ascribed thereto, unless otherwise clearly required by the
context in which such term is used.
1.1 Agreement. The term "Agreement" shall mean this FULL SERVICE
FACILITY AND MANAGEMENT AGREEMENT between DOCTOR and COMPANY and any amendments
hereto, as may from time to time be adopted, as hereinafter provided.
1.2 Professional Services. The term "Professional Services" shall
mean the professional services, specifically including physician services, and
related health care services provided by DOCTOR and their Physicians under
Independent Contract
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Agreements.
1.3 DOCTOR. The term "DOCTOR" shall mean R. S. ARORA, M.D., a
sole proprietor.
1.4 DOCTOR'S Account. The term "DOCTOR'S Account" shall mean the
bank account of COMPANY established as described in Section 3.12 hereof.
1.5 Facility. The term "Facility" shall mean the medical offices
owned or leased by COMPANY where Professional Services are provided by DOCTOR.
1.6 COMPANY. The term "COMPANY" shall mean Doctors Practice
Management, Inc. and Management Service Organization, Inc. Texas corporations.
1.7 Management Fee. The term "Management Fee" shall mean COMPANY's
compensation as described in Article V hereof.
1.8 State. The term "State" shall mean the State of Texas.
1.9 Term. The term "Term" shall mean the initial and any renewal
periods of duration of this Agreement as described in Section 6.1 hereof.
1.10 Location. The term "Location" shall mean the Facility(s) in
the Houston, Texas, Standard Metropolitan Statistical area and such Facility(s)
as may exist in the future.
ARTICLE II APPOINTMENT AND AUTHORITY.
2.1 Appointment. DOCTOR hereby appoints COMPANY as its sole and
exclusive agent for the management and administration of the business functions
and services related to DOCTOR'S provision of Professional Services, and COMPANY
hereby accepts such appointment, subject at all times to the provisions of this
Agreement.
2.2 Authority of COMPANY. Consistent with the provisions of this
Agreement, COMPANY shall have the responsibility and commensurate authority to
provide full service management services for DOCTOR, including, without
limitation, equipment, supplies, support services, personnel (but specifically
excluding licensed medical personnel), marketing, billing and collection
services, management, administration, financial record keeping and reporting,
and other business office services as provided herein. COMPANY, subject to the
ultimate control and direction of DOCTOR, is hereby expressly authorized to
provide all such services in any reasonable manner COMPANY deems appropriate to
meet the day-to-day requirements of the business functions of DOCTOR. To the
extent practicable, COMPANY, at its discretion, shall perform some or all of the
services specified hereunder for DOCTOR.
2.3 Authority of DOCTOR. DOCTOR, through licensed health care
personnel,
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shall be solely responsible for and have sole and complete authority,
supervision and control over the provision of Professional Services and other
related health care services performed for patients of DOCTOR, and all
diagnoses, treatments, procedures, and other professional health care services
shall be provided and performed exclusively by or under the supervision of
licensed health care personnel retained by DOCTOR, as DOCTOR, in its sole
discretion, deems appropriate and in accordance with all laws. DOCTOR will have
the ultimate authority in the hiring and termination of all Licensed clinical
staff. DOCTOR also has the right to request COMPANY to replace any COMPANY
personnel assigned to the clinic. This Agreement shall in no way be construed to
mean or suggest that COMPANY is engaged in the practice of medicine.
ARTICLE III COVENANTS OF COMPANY.
3.1 Leased Premises and Equipment. COMPANY shall, at COMPANY's
expense, provide to DOCTOR the Locations and all equipment that is deemed by the
parties hereto to be reasonably necessary and appropriate for the provision of
Professional Services at the Locations.
3.1.1 Retention of Title. DOCTOR shall have access to and use of the
Locations and all equipment located therein throughout the Term, provided,
however, that title to the Locations and all equipment other than items placed
in the Locations by DOCTOR shall, at all times, be and remain in COMPANY, or if
applicable, the entity from which COMPANY leases the Locations and/or equipment.
3.1.2 Repair and Maintenance. COMPANY shall be responsible for the
repair and maintenance of the Locations, and for the repair, maintenance, and
replacement of all equipment located at the Locations, as well as other
obligations under the Lease Agreement regarding the Locations comparable to the
effective date hereof.
3.1.3 Additional Equipment. Should DOCTOR, from time to time during
the Term request COMPANY to provide additional patient care equipment, office,
or other equipment for use at the Locations or to replace used or obsolete
equipment, COMPANY and DOCTOR shall consult with each other on the matter.
Should COMPANY be unwilling or unable to provide such requested equipment,
DOCTOR may acquire and maintain such equipment and title to same shall be and
remain in DOCTOR; provided, however, that COMPANY agrees to provide and maintain
all equipment which is usual and customary in a facility similar to the
Locations, throughout the Term hereof.
3.1.4 Disclaimer of Warranty. COMPANY MAKES NO WARRANTY, EITHER
EXPRESSED OR IMPLIED, WITH RESPECT TO THE LOCATIONS, PREMISES OR ANY EQUIPMENT
PROVIDED BY COMPANY PURSUANT TO THIS AGREEMENT, AND ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY EXPRESSLY
DISCLAIMED.
3.2 Utilities and Related Services. COMPANY shall, at COMPANY's
expense
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arrange for and shall timely pay when due all charges relating to the provision
of necessary electricity, gas, water, telephone, sewage, cleaning and decorating
(interior and exterior), pest extermination, heating and air-conditioning
maintenance, and similar services reasonably necessary and appropriate for the
provision of Professional Services at the Locations.
3.3 Supplies. COMPANY shall obtain and provide, in its name and
for its own account, all reasonable patient care, office, and other supplies,
and shall ensure that the Leased Premises are at all times adequately stocked
with such supplies as are reasonably necessary and appropriate for the provision
of Professional Services at the Leased Premises. Patient care supplies shall be
provided in accordance with the specifications of DOCTOR with respect to brand
names, dosages, quantities and other specifications.
3.4 Waste Disposal. COMPANY shall, at COMPANY's expense, arrange
for the proper disposal of all medical and non-medical wastes generated by
DOCTOR. Such waste disposal shall include disposal of any bio-hazardous waste
and any other medical waste that requires special disposal, provided that all
Physicians and non-physician personnel employed by DOCTOR comply with all
guidelines established by COMPANY for waste disposal. DOCTOR shall at all times
comply with guidelines set forth by COMPANY for all waste disposal, including
the disposal of sharps, bio-hazardous waste and any other waste products. DOCTOR
shall also comply with any guidelines set forth by COMPANY with respect to the
operation and maintenance of any equipment or other item that has environmental
law implications.
3.5 Support Services. COMPANY, at COMPANY's expense, shall arrange
for the provision of all laundry, linen, printing, stationery, forms, postage,
duplication or photocopying services, patient record transcribing services, and
other similar support services as are reasonably necessary and appropriate for
the provision of Professional Services.
3.6 Licenses and Permits. COMPANY shall, at COMPANY's expense and
on behalf of and in the name of DOCTOR, coordinate all development and planning
processes, and apply for and use COMPANY's best efforts to obtain and maintain
all federal, State and local licenses and regulatory permits required for or in
connection with the operation of the Facility and the equipment (existing and
future) located therein, other than those relating to the practice of medicine.
3.7 PERSONNEL.
3.7.1 Provision of Company Personnel. COMPANY shall employ or
otherwise retain, at COMPANY's expense, and shall be responsible for selecting,
training, supervising, and terminating all management, administrative, clerical,
secretarial, bookkeeping, accounting, payroll, billing and collection, and other
non-professional personnel as COMPANY deems reasonably necessary and appropriate
for COMPANY's performance of its duties and obligations under this Agreement.
COMPANY shall have the sole responsibility for determining the salaries and
fringe benefits of personnel
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retained by COMPANY, for paying such salaries and providing such fringe
benefits, or for withholding, as required by law, any sums of income tax,
unemployment insurance, social security, or any other withholding pursuant to
any applicable law or governmental requirement.
3.7.2 Non-Exclusivity. In recognition of the fact that the personnel
retained by COMPANY to provide services pursuant to this Agreement may from time
to time perform services for others, this Agreement shall not prevent COMPANY
from performing such services for others or restrict COMPANY from using its
personnel to provide services to others, provided such activity does not cause
any material detriment to DOCTOR. In recognition of the professional obligations
of DOCTOR, DOCTOR shall have the right and obligation to retain, at DOCTOR's
expense, any additional professional or other personnel as DOCTOR deems
necessary or appropriate for the provision of health care services.
3.7.3 Equal Employment Opportunity. COMPANY shall abide and provide
assistance to DOCTOR, and abide by any and all applicable federal and/or State
equal employment opportunity statutes, rules, and regulations, including,
without limitation, Title VII of the Civil Rights Act of 1964, the Equal
Employment Opportunity Act of 1972, the Age Discrimination in Employment Act of
1967, the Equal Pay Act of 1963, the National Labor Relations Act, the Fair
Labor Standards Act, the Rehabilitation Act of 1973, and the Occupational Safety
and Health Act of 1970, all as may from time to time be modified or amended.
3.7.4 Labor Reports. COMPANY shall appropriately prepare, maintain,
and file all requisite reports and statements regarding income tax withholdings,
unemployment insurance, social security, workers' compensation, equal employment
opportunity, or other reports and statements required with respect to personnel
provided by COMPANY or DOCTOR pursuant to this Agreement.
3.8 Consultants. COMPANY shall render such business and financial
management, consultation, and advice as may from time-to-time be requested by
DOCTOR in connection with the business operations of DOCTOR and DOCTOR's
provision of Professional Services. In addition, COMPANY shall make available to
DOCTOR, for consultation and advice, to the extent available and as reasonably
necessary, COMPANY's specialists in such areas as accounting, auditing,
budgeting, medical practice management, finance, law, government programs,
housekeeping, insurance, management development, patient records, nursing,
recruitment, quality assurance, systems and procedures, and third party
reimbursement.
3.9 Contract Negotiations. Upon the request of DOCTOR, COMPANY
shall advise with respect to and negotiate on DOCTOR's behalf, all contractual
arrangements with third parties as are reasonably necessary and appropriate for
DOCTOR's provision of Professional Services, including, without limitation,
negotiated price agreements with third party payors, managed care providers, or
the purchasers of group health care services.
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3.10 Marketing. In accordance with applicable law and ethical
standards and restrictions, COMPANY shall establish and implement a marketing
and public relations program promoting DOCTOR'S provision of Professional
Services to the general public and to other health care professionals and
suppliers. In connection with such marketing program and in accordance with
applicable law and ethical standards and restrictions, COMPANY shall establish
signs on or about the Facility identifying the operations of the Facility and
the provision of Professional Services therein. COMPANY shall implement all
marketing programs at the direction of DOCTOR.
3.11 License to Use Trade names and Trademarks of COMPANY. COMPANY,
at some time in the future may grant to DOCTOR, but only subject to the terms
and conditions of this Agreement, a license to use certain names in connection
with the provision of Professional Services in combination with such color
schemes, patterns, appearances, characteristics and words as are specifically
approved by COMPANY. DOCTOR'S use of any trademarks, trade names, service marks,
insignia, slogans, emblems, symbols, designs or other identifying
characteristics owned by or associated with COMPANY or any of its subsidiaries
or affiliates (collectively, "COMPANY MARKS") shall be subject to the prior
written approval of COMPANY. DOCTOR acknowledges that such names and COMPANY
Marks have acquired a secondary meaning in connection with COMPANY's operations.
DOCTOR may also apply to COMPANY for permission to use any other COMPANY Marks
which permission may or may not be granted in the absolute discretion of
COMPANY. The use of any COMPANY Marks in any signs, advertising or any
promotional material shall be subject to the prior approval of COMPANY.
The restrictions imposed hereunder shall extend to all other COMPANY
Marks licensed to DOCTOR by COMPANY. Except as specifically authorized by this
Agreement, DOCTOR will not use COMPANY Marks nor use, imitate or infringe upon
any of the foregoing in whole or in part. On the termination of this Agreement
for whatever cause, including COMPANY's breach, DOCTOR shall forthwith, at its
expense, make whatever changes may be necessary in any signs, advertising and
promotional material in order to comply with the provisions of this Section and
cease using the name and any COMPANY Marks. DOCTOR's covenants under this
Section are unconditional and in no way dependent upon the performance of
COMPANY of any of its agreements hereunder.
DOCTOR will always acknowledge and recognize both before and after the
expiration of this Agreement the exclusive right of COMPANY to use or to grant
to others the right or license to use, whether separately or as a part of or in
connection with other words, any COMPANY Mark. If DOCTOR utilizes any COMPANY
Mark, DOCTOR shall take all actions which are necessary to maintain COMPANY's
good will and reputation or cease utilizing, at COMPANY's demand, the name and
any and all COMPANY Marks.
3.12 Billing and Collection. On behalf of DOCTOR and for the
purpose depositing all receipts arising from DOCTOR's patient activities,
COMPANY shall
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maintain the DOCTOR'S account.. Such account DOCTOR'S account will be under the
COMPANY FEIN . COMPANY shall establish and maintain credit and billing and
collection policies and procedures, and shall use COMPANY's best efforts to
timely bill and collect all professional and other fees for all billable
Professional Services provided by DOCTOR; it being understood, however that
DOCTOR, in his sole discretion, shall establish the fees for all billable
Professional Services provided by DOCTOR. DOCTOR shall timely advise COMPANY of
any changes in DOCTOR'S fee schedule to permit COMPANY to implement such
changes. In connection with this Section 3.12 and throughout the Term, DOCTOR
hereby grants a special power of attorney to and appoints COMPANY as DOCTOR's
true and lawful agent and attorney-in-fact, and COMPANY hereby accepts such
special power of attorney and appointment, for the following purposes:
3.12.1 To bill DOCTOR'S patients, in DOCTOR'S name and on DOCTOR'S
behalf, for billable Professional Services provided by DOCTOR.
3.12.2 To bill, in DOCTOR'S name and on DOCTOR'S behalf, all claims
for reimbursement or indemnification from Blue Shield/Blue Cross, Medicare,
Medicaid and all other third party payors for covered billable Professional
Services provided by DOCTOR.
3.12.3 To collect and receive, in DOCTOR'S name and on DOCTOR'S
behalf, all accounts receivable generated by such billings and claims for
reimbursement or indemnification, and to deposit all amounts collected in the
DOCTOR'S Account, which account shall be and remain in COMPANY'S name. In
connection herewith, DOCTOR covenants to transfer and deliver to COMPANY all
funds received by DOCTOR from patients or third party payors for Professional
Services. Upon receipt by COMPANY of any funds from patients or third party
payors or from DOCTOR pursuant hereto for Professional Services, COMPANY shall
deposit same into the DOCTOR'S Account.
3.12.4 To take custody of, endorse in the name of DOCTOR, and deposit
into the DOCTOR'S Account any notes, checks, money orders, insurance payments,
and any other instruments received in payment of the accounts receivable for
Professional Services.
Upon request of COMPANY, DOCTOR shall execute and deliver to COMPANY or
the financial institution wherein the DOCTOR'S Account is maintained, such
additional documents or instruments as may be reasonably necessary to evidence
or effect the special power of attorney granted to COMPANY by DOCTOR and the
conditions pursuant to this Section 3. 11 or pursuant to Section 3.12 hereof.
3.13 DOCTOR'S Account. COMPANY shall operate the DOCTOR'S Account
for the purpose's stated herein. In connection herewith and throughout the Term,
DOCTOR hereby appoints COMPANY as DOCTOR'S true and lawful agent and
attorney-in-fact, and grants COMPANY a special power of attorney and COMPANY
hereby accepts such special power of attorney and appointment, to deposit in the
DOCTOR'S Account all funds, fees, and revenues generated from the provision of
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Professional Services and collected by COMPANY, and to make withdrawals and sign
checks for disbursements from the DOCTORS Account solely for the purpose of
withdrawing the Collected Revenues to be applied to the Management Fee and
DOCTOR's Expenses. DOCTOR shall execute any and all additional documents
required by the bank where the DOCTOR'S Account is held to effectuate the power
of attorney and conditions of the account granted herein. Notwithstanding the
limited power of attorney granted to COMPANY hereunder. COMPANY shall furnish to
DOCTOR, on a monthly basis, its normal Cash Receipts and Disbursements Report.
3.13.1 Cash Flow and Funding COMPANY will provide to DOCTOR a line of
Credit in the amount of One Hundred Thousand dollars ($100,000) at Eight percent
interest to be made available upon execution of this agreement and the execution
of a signed note by the DOCTOR. Loan will be all due and payable within the term
of the FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT or upon its termination.
All interest payments to be made monthly during such term. COMPANY will take a
security interest in the Accounts Receivable of DOCTOR as evidenced by a signed
Security Interest by DOCTOR and the filing of a signed UCC form .
3.14 FISCAL MATTERS.
3.14.1 Accounting and Financial Records. COMPANY shall establish and
administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of records and books of account relating to the
provision of Professional Services at the Leased Premises, all of which shall be
prepared and maintained in accordance with generally accepted accounting
principles consistently applied on a cash basis. COMPANY shall prepare and
deliver to DOCTOR, within ninety (90) days of the end of each fiscal year of
DOCTOR, a balance sheet, a profit and loss statement, and a statement of changes
in cash flow reflecting the financial status of the provision of Professional
Services as of the end of such prior fiscal year, all of which shall be prepared
in accordance with generally accepted accounting principles. COMPANY shall also
prepare and deliver to DOCTOR unaudited-audited, monthly financial statements
for management purposes only. Additionally, COMPANY shall prepare and deliver
to DOCTOR such other financial statements or records as COMPANY may from time to
time deem appropriate or DOCTOR may reasonably from time-to-time request.
3.14.2 Access. DOCTOR shall have the right at all reasonable times
during normal business hours to audit, examine, and make copies of books of
account maintained by COMPANY pursuant to this Agreement. COMPANY shall maintain
such records for DOCTOR's access upon request for a period of four (4) years
following the Term hereof.
3.15 REPORTS AND RECORDS.
3.15.1 Patient Records. COMPANY shall establish, monitor, and
maintain procedures and policies for the timely filing and maintenance of all
patient records generated by DOCTOR in connection with DOCTOR'S provision of
Professional Services. All patient records shall be treated in accordance with
all applicable State and federal laws relating to the confidentiality of patient
records. All patient records shall be
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the property of, maintained by, and in the custody of DOCTOR, but DOCTOR
expressly agrees that COMPANY shall have access to such patient records, at all
reasonable times during normal business hours, to the extent necessary for
COMPANY to fulfill its obligations under this Agreement and that COMPANY, to the
extent lawfully permitted, shall have access to such patient records, for the
purpose of making necessary copies, in the event this Agreement is terminated.
COMPANY shall maintain the confidentiality of all patient records in accordance
with all applicable laws and shall establish written policies and procedures for
such which are to be approved by DOCTOR for the protection of confidential
information.
3.15.2 Other Management Reports and Records. COMPANY shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate hereunder, and shall analyze and interpret such
reports and records upon DOCTOR's request.
3.16 Legal Actions. As requested by DOCTOR, COMPANY shall advise
and assist DOCTOR in instituting or defending, in the name of DOCTOR, all legal
actions or proceedings by or against third parties arising out of DOCTOR'S
provision of Patient Care Service, including, without limitation, those actions
to collect fees for billable Professional Services or other billable services
provided to patients by DOCTOR, and those actions necessary for the protection
and continued operation of DOCTOR. Both parties shall agree in advance upon the
selection of counsel.
3.17 Indemnification by COMPANY. DOCTOR, its officers, its
employees, and its agents will incur no liability in connection with the conduct
of COMPANY prior to the effective date of this Agreement. Accordingly, COMPANY
shall and hereby does indemnify, hold harmless, and agrees to defend DOCTOR and
its officers, employees, and agents from and against any claims, obligations,
demands, causes of action, losses, liabilities, damages, costs and expenses,
including reasonable attorney's fees (collectively " Claims ") arising out of or
connected with the conduct of COMPANY prior to the effective date of this
Agreement.
DOCTOR shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of the existing or future Claims made
against COMPANY. COMPANY shall and hereby does indemnify, hold harmless, and
agrees to defend DOCTOR, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negligence or fault of COMPANY,
its employees, agents, contractors or COMPANY's performance of its obligations
within its scope of responsibility hereunder.
If any Claim shall arise hereunder DOCTOR shall give prompt written
notice of such Claim to COMPANY; except that any delay or failure of notice
shall not relieve COMPANY of the obligations hereunder except to the extent such
delay has materially prejudiced COMPANY.
ARTICLE IV COVENANTS OF DOCTOR.
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4.1 Organization/Operation. DOCTOR, is a professional association
created under Texas law and shall at all times during the Term (i) be and remain
legally organized to provide Professional Services in a manner consistent with
all State and federal laws; (ii) be duly authorized to conduct business in the
State of Texas; and (iii) have and maintain a physician to provide Professional
Services in the Leased Premises and all other locations of Doctor who shall (a)
hold a valid and unlimited license to practice medicine in the State of Texas ,
and (b) be engaged principally in the provision of Professional Services at each
such location.
4.2 Professional Personnel of DOCTOR. DOCTOR shall employ, at
DOCTOR's expense, all licensed health care personnel, including physicians,
nurses, vocational nurses and physician assistants, as DOCTOR deems reasonably
necessary and appropriate for DOCTOR's operation of his practice and provision
of Professional Services each of whom shall be subject to the applicable
provisions of this Agreement (collectively, "Professional Personnel"). DOCTOR
shall have the sole responsibility for paying the salaries and fringe benefits
of all such personnel, and the sole responsibility to withhold, as required by
law, any sums for income tax, unemployment insurance, social security, or any
other withholding pursuant to any applicable law or governmental requirements
(collectively, "Professional Compensation"). COMPANY shall, in the name of and
on behalf of DOCTOR, establish and administer (out of funds available in the
DOCTOR'S Account) the compensation with respect to, such professional personnel
and, on behalf of DOCTOR and out of funds available in the DOCTOR'S Account,
ensure that proper tax withholdings from such compensation are made and timely
remitted to the appropriate governmental entities. Each physician retained by
DOCTOR shall at all times hold and maintain a valid and unlimited license to
practice in the State of Texas. DOCTOR shall enter into and maintain with each
such physician a written agreement which shall include, without Limitation, the
provisions of Section 4.3 hereof.
4.3 Special Consideration/Damages/Non-Competition. DOCTOR hereby
recognizes and acknowledges that COMPANY will incur substantial costs in
providing the Leased Premises, equipment, supplies, support services, personnel,
marketing, management, administration, and other items and services that are the
subject matter of this Agreement. Accordingly, DOCTOR covenants and agrees that
DOCTOR and all of its personnel shall devote their best efforts to the success
of DOCTOR's practice and the provision of Professional Services by DOCTOR. It is
further agreed, that in addition to the provisions contained in Article VI
"Term and Termination", that DOCTOR acknowledges and agrees that the COMPANY
will undertake considerable expense on behalf of DOCTOR in the development of
DOCTORS practice. Therefore DOCTOR will pay the sum of Two Hundred and Fifty
Thousand Dollars ($250,000) in liquidated damages to COMPANY if this contract
is canceled or breached by DOCTOR.
During the term of this Agreement and any extension hereof, plus two
(2) years thereafter, neither DOCTOR nor any employee, independent contractor,
agent, partner, shareholder, director, officer, affiliate or any entity with any
beneficial interest or any control interest in DOCTOR, either directly or
indirectly, for himself or herself, or on behalf of or in conjunction with any
other person, persons, partnership, associations or
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corporations shall (a) divert or attempt to divert any business of, or any
patients of DOCTOR to or interest in any other competitive establishment that is
located within a Ten (10) mile radius of any Location,.
DOCTOR shall continuously and uninterruptedly, during the term hereof,
during all business hours and on such days as businesses of like nature in the
area are open for business, provide services in a manner calculated to produce
the maximum volume of revenue which is consistent with the professional
obligation of DOCTOR and in the best interest of DOCTOR's patients. DOCTOR shall
cause the work load, patient load and surgical criteria for each of its
Professional Personnel to remain substantially the same as their historical
practice during the immediate past three (3) years.
During the Term hereof and for a period of five (5) years thereafter,
except as may be required by law, DOCTOR and its employees, agents, directors,
officers, shareholders and partners shall not disclose, communicate or disclose
to, or use for the direct or indirect benefit of any other person or entity any
confidential information regarding COMPANY's business methods, business
policies, procedures, techniques, or trade secrets or other knowledge or
processes developed by COMPANY or any other confidential information relating to
or dealing with the business operations or activities of COMPANY, made known to
DOCTOR or learned or acquired by DOCTOR hereunder.
If any restriction contained in this Section 4.3 is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and the remaining restrictions set forth herein shall be enforced
independently of each other.
4.4 DOCTOR'S Insurance. DOCTOR shall provide, obtain, and maintain
throughout the Term appropriate workers' compensation insurance coverage for
DOCTOR'S employed personnel and shall carry professional liability insurance
covering DOCTOR and all of DOCTOR'S physician Professional Personnel in the
minimum amount of Three Hundred Thousand Dollars ($ 300,000) for each occurrence
and Five Hundred Thousand Dollars ($ 500,000) annual aggregate, and such amounts
as may be reasonable for all other Professional Personnel (collectively,
"Professional Insurance"). Such professional insurance policy or policies
maintained by DOCTOR shall include COMPANY as additional insured, if permitted
by the insurer. DOCTOR shall provide to COMPANY a certificate of insurance
evidencing such coverage on an annual basis. The insurance policy or policies
shall provide for at least thirty (30) days advance written notice to DOCTOR
from the insurer as to any alteration of coverage, cancellation, or proposed
cancellation of coverage for any cause. The certificate of insurance shall
require such notice to also be given to COMPANY. DOCTOR shall notify COMPANY of
all legal actions or proceedings instituted by or against DOCTOR arising out of
or related to DOCTOR'S operation of a medical practice.
4.5 Indemnification by DOCTOR. COMPANY, its officers, its
employees, and its agents will incur no liability in connection with the conduct
of DOCTOR prior to the effective date of this Agreement. Accordingly, DOCTOR
shall and hereby does indemnify, hold harmless, and agrees to defend COMPANY and
its officers, employees,
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and agents from and against any claims, obligations, demands, causes of action,
losses, liabilities, damages, costs and expenses, including reasonable
attorney's fees (collectively "CLAIMS") arising out of or connected with the
conduct of DOCTOR prior to the effective date of this Agreement.
COMPANY shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of existing or future Claims made
against DOCTOR. DOCTOR shall and hereby does indemnify, hold harmless, and
agrees to defend COMPANY, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negligence or fault of DOCTOR,
its employees, agents, contractors or DOCTOR's performance of its obligations
hereunder.
If any Claim shall arise hereunder COMPANY shall give prompt written
notice of such Claim to DOCTOR; except that any delay or failure of notice shall
not relieve DOCTOR of the obligations hereunder except to the extent such delay
has materially prejudiced DOCTOR.
4.6 DOCTOR's Expenses. DOCTOR shall be solely responsible and
obligated to pay only the reasonable Professional Compensation including the
compensation benefits and employer costs associated with all Physicians and
other licensed health care employees, and Professional Insurance expenses
associated with the Professional Personnel including malpractice and general
liability, retained by DOCTOR in addition to such other expenses as may be
mutually agreed to by the parties hereto (collectively, "DOCTOR's Expenses").
4.7 Equipment. DOCTOR hereby represents and warrants that
sufficient equipment currently exists at each Location as may be required to
provide Professional Services of the type and volume currently provided by
DOCTOR as of the effective date of this Agreement and will treat same with
appropriate care.
4.8 Succession Planning. DOCTOR hereby undertakes to provide for
estate planning whereby in the event of his disability or death the COMPANY is
appointed exclusive agent for the sale of all of the assets .of DOCTOR in order
to ensure continuity of DOCTORS practice. All proceeds to be paid to DOCTOR or
DOCTORS estate less cost incurred by COMPANY. A copy of appropriate Wills and
Trusts to be provided by DOCTOR to COMPANY as soon as practicable.
ARTICLE V MANAGEMENT FEE.
5.1 Amount of Management Fee. DOCTOR and COMPANY mutually
recognize and acknowledge that COMPANY will incur substantial costs in arranging
for DOCTOR's use of the Locations and in providing the equipment, support
services, personnel, marketing, office space, management, administration, and
other items and services that are subject matter of this Agreement. DOCTOR and
COMPANY further recognize that certain of such costs and expenses can vary to a
considerable degree, according to the extent of DOCTOR's business and services.
Furthermore, DOCTOR and
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COMPANY agree that it will be impracticable to ascertain and segregate all of
the exact costs and expenses that will be incurred by COMPANY from time to time
in performance of his obligations under this Agreement. However, it is the
intent of the parties that the fees paid to COMPANY be reasonable and
approximate its costs and expenses, plus a reasonable return, considering the
investment and risk taken by COMPANY and the value of the services provided by
COMPANY. DOCTOR agrees to pay a Management Fee to COMPANY in an amount equal to
Sixty Five percent (65%) of annual revenues collected. Annual revenue is
hereinafter defined as the twelve month period commencing with the effective
date of this agreement.
For purposes hereof, "Revenues Collected" shall be defined as an amount
equal to the total of any moneys received from patients, and/or third-party
payors and deposited in the DOCTOR's account, less any refunds, during any given
twelve month or agreement anniversary date.
Either party, not more than Twelve times in any twelve month period,
upon giving notice to the other party hereto shall have the right to inspect the
records of DOCTOR to ascertain and audit Revenues Collected, DOCTOR's Expenses,
and COMPANY's Expenses, subject to patient confidentiality laws. If the audit or
examination discloses that the Management Fee was incorrectly computed or any
expense improperly classified, the parties shall within twenty (20) days of such
determination reconcile the difference by a cash payment to the applicable
party. In all events, a reconciliation of the preceding year shall occur
following the preparation of annual financial statements.
5.2 Payment of Management Fee. The Management Fee shall be payable
to COMPANY on a monthly basis for each month during the Term of this agreement.
Payment of the Management Fee is not intended to be, and shall not be,
interpreted or applied as permitting COMPANY to share in DOCTOR's fees for
Professional Services or any other services, but is acknowledged as the parties'
negotiated agreement as to the reasonable, fair market value of the equipment,
support, services, personnel, marketing, office space, management,
administration, and other items and services furnished by COMPANY pursuant to
this Agreement, considering the nature and volume of the services required and
the risks assumed by COMPANY.
ARTICLE VI TERM AND TERMINATION.
6.1 Initial and Renewal Terms. This Agreement shall be effective
as of May 1st 1996 for a period of Fifteen (15) years therefrom.
6.2 Termination. This Agreement may be terminated upon the first
to occur of any of the following events:
6.2.1 Termination by Agreement. In the event DOCTOR and COMPANY
shall mutually agree in writing, this Agreement may be terminated on the date
specified in such
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written agreement.
6.2.2 The death or disability of DOCTOR majority shareholder to
practice medicine.
6.2.3 Damages or Condemnation of Premises. In the event the Leased
Premises are totally or substantially destroyed by fire, explosion, flood,
windstorm, hail, earthquake, or other casualty or act of God, and the owner
landlord of the Leased Premises decides not to repair or rebuild the Leased
Premises, or in the event all or a substantial portion of the Leased Premises
and the Facility are taken or are to be taken by condemnation or eminent domain
proceeding, then either party may by written notice (sent within thirty (30)
days of such event) to the other terminate this Agreement if suitable
alternative premises cannot be secured within sixty (60) days. In the event the
owner/landlord of the Leased Premises decides to repair or rebuild the Leased
Premises to their original size and condition, the Management Fee and the duties
and obligations of COMPANY and DOCTOR hereunder shall abate until such time as
the Leased Premises are suitable for COMPANY and DOCTOR to resume their
respective duties and obligations hereunder.
6.2.4 Bankruptcy. In the event that either party becomes insolvent,
or if any petition under federal or State law pertaining to bankruptcy or
insolvency or for a reorganization or arrangement or other relief from creditors
shall be filed by or against either party, or if any assignment, trust,
mortgage, or other transfer shall be made of all or a substantial part of the
property of either party, or if either party shall make or offer a composition
in its debts with its creditors, or if a receiver, trustee, or similar officer
or creditor's committee shall be appointed to take charge of any property of or
to operate or wind up the affairs of either party, then the other party may by
written notice immediately terminate this Agreement.
6.2.5 Specific DOCTOR Breaches. At COMPANY's option, in the event of
Dr. R. S. Arora shall die or be involuntarily inducted into the active military
services of the United States, (ii) DOCTOR or any physician employed or retained
by DOCTOR shall fail by omission or commission in any substantial manner to
provide Professional Services in a competent manner, (iii) DOCTOR shall fail to
meet any of the qualifications set forth in Section 4.1 hereof, (iv) Dr. R. S.
Arora's license to practice medicine is revoked, suspended, canceled or limited
in any manner, (v) Dr. R. S. Arora is convicted of a felony or any crime of
moral turpitude, or (vi) Dr. R. S. Arora shall fail to comply with the terms of
his Employment Contract of even date herewith, then COMPANY may by written
notice to DOCTOR immediately terminate this Agreement.
6.2.6 COMPANY Breaches. At DOCTOR's option, in the event COMPANY
fails to make timely payments of the obligations it has undertaken, (ii) fails
or refuses to account to DOCTOR for collection on amounts for services rendered,
or (iii) is in default of any material obligations having an impact upon DOCTOR,
then DOCTOR may by written notice to COMPANY terminate this Agreement if COMPANY
has failed to cure such default within thirty (30) days of DOCTOR's written
notice of such violation, provided if such breach cannot by its nature be
reasonably cured within thirty (30) days
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then COMPANY shall have such time as may be reasonable to cure the breach.
6.2.7 Action by Board of Medical Examiners or Other Authority with
legal Jurisdiction. While both parties believe that this Agreement is in full
compliance with the Texas Medical Practice Act, the interpretation of the Act
may be subject to change. In the event the Board of Medical Examiners for the
State or other authority with legal jurisdiction shall, solely by virtue of this
Agreement, initiate an action to revoke the license of any physician retained by
DOCTOR to practice medicine in the State, DOCTOR may, by written notice to
COMPANY, immediately request that the Agreement be amended in a mutually
acceptable manner. Any amendment shall be made in the lawful manner which
results in the least changes to the parties' expectations hereunder. In the
event the offending-provisions of the Agreement cannot be cured as to the
legality of such provisions to the satisfaction of both parties, then either
party may terminate this Agreement upon ten (10) days written notice, and such
termination shall be conducted as set forth in Section 3 of the Master
Agreement. In the event the Board of Medical Examiners shall, on any other
grounds, including, without limitation, improper medical practice or improper
conduct by any physician retained by DOCTOR, restrict, suspend or revoke the
license of such physician to practice medicine in the State, the COMPANY may, by
written notice to DOCTOR, immediately terminate this Agreement.
6.2.8 Default. In the event either party shall give written notice
to the other that such other party has substantially defaulted in the
performance of any material duty or material obligation imposed upon it by this
Agreement, and such default shall not have been cured within thirty (30) days
following the giving of such written notice, the party giving such written
notice shall have the right to immediately terminate this Agreement unless the
defaulting party shall, within said thirty (30) day period, have made a good
faith effort to initiate corrective action and it is contemplated that such
corrective action will be completed within the following (30) day period.
6.3 Effects of Termination. Upon termination of this Agreement, as
herein above provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
and (ii) obligations, promises, or covenants set forth herein or in those
collateral agreements of even date herewith that are expressly made to extend
beyond the Term, including, without limitation, indemnities, non-compete and
fees which provisions shall survive the expiration or termination of this
Agreement.
In the event of termination all outstanding loans , interest and
management fees will be due and payable by DOCTOR prior to but no later than
effective cancellation date.
6.4 Continued Professional Services. Following any notice of
termination hereunder, whether given by COMPANY or DOCTOR, DOCTOR and COMPANY
will fully cooperate with each other in all matters relating to the performance
or discontinuance of Professional Services, as appropriate, at the Locations by
DOCTOR and the orderly transition of patients.
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ARTICLE VII MISCELLANEOUS.
7.1 Exhibits, Schedules and Other Instruments. As used herein, the
expression "this Agreement" means the body of this Agreement and all exhibits,
certificates, and schedules; and the expressions " herein, " " hereof, " and "
hereunder " and other words of similar import refer to this Agreement and such
exhibits, certificates, and schedules as a whole and not to a particular part or
subdivision thereof unless otherwise clearly indicated.
7.2 Independent Relationship. It is mutually understood and agreed
that DOCTOR and COMPANY, in performing their respective duties and obligations
under this Agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended nor shall be construed to create an employer/employee relationship or a
joint venture relationship, 6r to allow COMPANY to exercise control or direction
of any nature, kind, or description over the manner. or method by which DOCTOR
performs Professional Services.
7.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given shall be deemed effectively given (i) when
personally delivered, (ii) upon receipt when delivered by telephonic document
transfer, (iii) three (3) business days next following the day the notice is,
mailed by prepaid certified mail, return receipt requested, or (iv) the next
business day following deposit with a reputable overnight courier, addressed as
follows:
DOCTOR: R.S. Arora, M.D.
4301 A Vista
Pasadena, Texas 77504
COMPANY: Doctors Practice Management, Inc.
Chiu Chan, CEO
4301 A Vista
Pasadena, Texas 77504
or to such other address, and to the attention of such other person or officer
as any party may designate, with copies thereof to the respective counsel
thereof as notified by such party. Rejection or other refusal to accept or the
inability to deliver because of a changed address of which no notice was given
in accordance with the provisions hereof, shall be deemed to be receipt of the
notice sent.
7.4 Legal Fees and Costs. In the event either party brings any
action for relief against the other, declaratory or otherwise, arising out of
this Agreement (including actions to enforce and interpret this Agreement), the
losing party shall pay to the prevailing party, in addition to any other relief
to which such party shall be entitled, a
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reasonable sum for attorneys fees incurred in bringing such suit and/or
enforcing any judgment granted therein, all of which shall be deemed to have
accrued upon the commencement of such action and shall be paid whether or not
such action is prosecuted to judgment. Any judgment or order entered in such
action shall contain a specific provision providing for the recovery of attorney
fees and costs incurred in enforcing such judgment, in addition to any other
relief to which such party shall be entitled.
7.5 Choice of Law and Venue. THIS AGREEMENT HAS BEEN EXECUTED AND
DELIVERED IN AND SHALL BE INTERPRETED, CONSTRUED, ENFORCED AND GOVERNED BY AND
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THAT THE COURTS OF THAT
STATE IN THE COUNTY OF HARRIS, AND THE UNITED STATES DISTRICT COURT FOR SOUTHERN
DISTRICT OF TEXAS SHALL BE THE EXCLUSIVE COURTS OF JURISDICTION AND VENUE FOR
ANY LITIGATION, SPECIAL PROCEEDING OR OTHER PROCEEDING AS BETWEEN THE PARTIES
THAT MAY BE BROUGHT, OR ARISE OUT OF, IN CONNECTION WITH, OR BY REASON OF THIS
AGREEMENT. SELLER HEREBY CONSENTS TO THE JURISDICTION OF SUCH COURTS.
7.6 Assignment. Except as provided above, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective legal representatives, successors, and assigns; provided, however,
that DOCTOR shall not assign, transfer or pledge his rights and obligations
under this Agreement or collaterally assign or hypothecate this agreement
without the prior written consent of COMPANY. COMPANY shall have the right to
(i) assign its rights and obligations hereunder to any affiliated third party
and (ii) collaterally assign its interest in this Agreement and its right to
collect Management Fees hereunder to any financial institution or other third
party without the consent of DOCTOR. COMPANY must provide ten days prior written
notice to DOCTOR prior to assigning this Agreement.
7.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
7.8 Enforcement. All claims and disputes relating to this
Agreement shall be subject to confidential arbitration in accordance with the
National Health Lawyers Association Alternative Dispute Resolution Rules of
Procedure for Arbitration then obtaining and with individuals knowledgeable of
the medical industry serving as arbitrators. Written notice of demand for
arbitration shall be filed with the other party to the Agreement and with the
National Health Lawyers Association in Washington, D.C., within a reasonable
time after the dispute has arisen. In the event either party resorts to legal
action to enforce the arbitration results or any other provision of this
Agreement, the prevailing party shall be entitled to recover the costs of such
action so incurred, including, without limitation, reasonable attorneys' fees.
7.9 Gender and Number. Whenever the context of this Agreement
requires, the gender
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of all words herein shall include the masculine, feminine, and neuter, and the
number of all words herein shall include the singular and plural. The term
"person" when used herein shall mean an individual, partnership, joint venture,
corporation, trust, government entity, and association.
7.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Agreement shall be
self-operative and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute such
additional instruments and take such additional acts as are reasonable and as
the requesting party may deem necessary to effectuate this Agreement.
7.11 Consents, Approvals, and Exercise of Discretion. Except as may
be herein specifically provided to the contrary, whenever this
Agreement-requires any consent or approval to be given by either party, or
either party must or may exercise discretion, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and such
discretion shall be reasonably exercised in good faith.
7.12 Force Majeure. Neither party shall be liable or deemed to be
in default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party.
7.13 Severability. In the event any provisions of this Agreement is
held to be invalid, illegal, or unenforceable for any reason and in any respect,
if the extent of such invalidity, illegality or unenforceability does not
destroy the basis of the bargain herein such invalidity, illegality, or
unenforceability shall in no event affect, prejudice, or disturb the validity of
the remainder of this Agreement, which shall be in full force and effect,
enforceable in accordance with its terms as if such provisions had not been
included, or had been modified as provided below, as the case may be. To carry
out the intent of the parties hereto as fully as possible, the invalid, illegal
or unenforceable provision(s), if possible, shall be deemed modified to the
extent necessary and possible to render such provision(s) valid and enforceable.
In the event this Agreement cannot be modified to the satisfaction of the
parties hereto, then either party may terminate this Agreement upon ten (10)
days written notice.
7.14 Divisions and Heading-s. The division of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
7.15 Amendments and Agreement Execution. This Agreement and
amendments thereto shall be in writing and executed in multiple copies on behalf
of DOCTOR by its duly authorized representative and on behalf of COMPANY by its
duly authorized representative. Each
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multiple copy shall be deemed an original, but all multiple copies together
shall constitute one and the same instrument.
7.16 Time of Essence. Time shall be of the essence with respect to
this Agreement.
7.17 Entire Agreement/Amendment. This Agreement and collateral
agreements of even date herewith supersede all previous agreements (written or
oral), and constitutes the entire agreement of whatsoever kind or nature
existing between or among the parties respecting the within subject matter and
no party shall be entitled to benefits other than those specified herein. As
between or among the parties, no oral statements or prior written material not
specifically incorporated herein shall be of any force and effect; the parties
specifically acknowledge that in entering into and executing this Agreement, the
parties rely solely upon the representations and agreements contained in this
Agreement and no others. All prior representations or agreements, whether
written or verbal, not expressly incorporated herein are superseded. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by all parties hereto. This Agreement may be
executed in two or more counterparts, each and all of which shall be deemed an
original and all of which together shall constitute one instrument. It shall not
be necessary that the signatures of all of the parties appear on each
counterpart; it shall be sufficient that the signature of each party appear on
one or more counterparts.
7.18 Rules of Construction. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement, and the parties hereby
agree that the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments or exhibits, certificates and
schedules hereto. The term " include " or " including " shall mean without
limitation by reason of enumeration. All references in this Agreement to Dollars
or monetary payment shall be deemed to refer to U.S. Dollars.
7.19 Reproduced Copies of Documents. This Agreement and all
documents relating hereto other than promissory notes, including without
limitation, (a) consents, waivers, and modifications which may hereinafter be
executed, (b) documents received by any party at the Closing, (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any means or process including electronic or
mechanical means. Any reproduction shall be admissible into evidence as the
original itself in any Litigation without regard to whether the original is in
existence. If a party signs this Agreement and then transmits an electronic
facsimile of the signature page the recipient may rely upon the electronic
facsimile as a signed original of this Agreement without modification or change
unless same is noted thereon.
7.20 Third Parties. None of the provisions of this Agreement shall
be for the benefit of third parties or enforceable by any third party except as
otherwise contained herein. Any agreement to pay an amount and any assumption of
a liability herein
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contained, expressed or implied, shall only be for the BENEFIT of the parties
hereto and such agreement or assumption shall not inure to the benefit of the
any third party, including an obligee.
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IN WITNESS WHEREOF, DOCTOR and COMPANY have executed this Agreement in multiple
originals as of the date written above.
DOCTOR:
R.S. ARORA, M.D.
By: /S/ R.S. ARORA, M.D.
--------------------------------
COMPANY:
DOCTORS PRACTICE MANAGEMENT, INC.
By: /S/ CHIU CHAN
--------------------------------
Chiu Chan, President
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ATTACHMENT A
ANNUAL BUDGET
FOUR PAGES
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EXHIBIT 10.11
FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT
THIS FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT, entered into
effective as of May 1st 1996, is by and between JCW MEDICAL ASSOCIATES, P.A. a
Texas professional association ("DOCTOR")and DOCTORS PRACTICE MANAGEMENT, INC.,
a Texas corporation ("COMPANY").
WITNESSETH:
WHEREAS, DOCTOR is a duly incorporated and validly existing Texas
professional association that is engaged in the business of providing
professional services, specifically including physician services, in Texas
("Professional Services"); and
WHEREAS, COMPANY is a duly incorporated and validly existing Texas
corporation, qualified to do business in Texas, that is experienced in providing
management and related items and services including, without limitation,
capital, personnel, facilities and equipment to licensed health care personnel,
professional associations, and other professional health care entities and
individuals; and
WHEREAS, DOCTOR's physician employees and/or independent physician
contractors practice medicine in Texas and desire and intend to continue to
operate a professional health care practice to provide Professional Services and
related health care services in facilities designed and equipped for such
services,
WHEREAS, DOCTOR further desires and intends to provide Professional
Services and related health care services at various locations in the Houston,
Texas Standard Metropolitan Statistical Area, as defined by the U.S. Department
of Commerce, Bureau of the Census, including, without limitation, the provision
of such services at 1313 Holland Street, Houston , Texas 77029 and 4301 Vista,
Pasadena, Texas 77504 (Used Premises");
WHEREAS, DOCTOR prefers to devote substantially all of its time to the
practice of medicine and the delivery of medical services to its patients and,
therefore, desires and intends to obtain such management, administrative, and
business services as are reasonably necessary and appropriate for DOCTOR to
efficiently provide Professional Services at the Leased Premises and other
locations and Company desires to provide and is fully capable of providing all
such management, administrative and business services; and
WHEREAS, COMPANY desires to and is capable of making Leased Premises
available to DOCTOR and COMPANY desires to and is capable of providing the
management, administrative, and business services necessary and appropriate for
DOCTOR'S provision of Professional Services at the Leased Premises and other
locations; and
WHEREAS, DOCTOR and COMPANY mutually desire an arrangement that:
(a) facilitates consistency of service, both in the medical care provided by
DOCTOR and in the administrative and business services provided by COMPANY;
<PAGE> 2
(b) facilitates effective utilization of DOCTOR'S resources;
(c) facilitates appropriate staffing and scheduling of personnel for and by
DOCTOR, as the case may be;
(d) facilitates the management and administration of the day-to-day business
operations of DOCTOR;
(e) ensures that each party will receive the total revenue attributable to such
party's services, capital investment, and business risks, and no portion of the
revenue attributable to the services, capital investment, and business risks of
the other party; and
(f) ensures that (1) DOCTOR and licensed health care personnel employed by
DOCTOR shall (a) owe their first duty to their patients; and (b) preserve the
confidential nature of the doctor- patient relationship; (2) DOCTOR controls
patient care in the medical and administrative procedures to be followed; and
(3) that COMPANY does not commit any act constituting the practice of medicine
or use any licensed health care practitioner's license to practice medicine all
for the benefit of those seeking services as patients.
NOW, THEREFORE, for and in consideration of the agreements contained
herein and other good and valuable consideration, the receipt and adequacy all
of which are forever acknowledged and confessed, the parties hereto agree as
follows:
Article I DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
following meanings ascribed thereto, unless otherwise clearly required by the
context in which such term is used.
1.1 Agreement. The term "Agreement" shall mean this FULL SERVICE
FACILITY AND MANAGEMENT AGREEMENT between DOCTOR and COMPANY and any amendments
hereto, as may from time to time be adopted, as hereinafter provided.
1.2 Professional Services. The term "Professional Services" shall mean
the professional services, specifically including physician services, and
related health care services provided by DOCTOR.
1.3 DOCTOR. The term "DOCTOR" shall mean JCW MEDICAL ASSOCIATES,
P.A.,., a Texas professional association.
1.4 DOCTOR'S Account. The term "DOCTOR'S Account" shall mean the bank
account of COMPANY established as described in Section 3.12 hereof.
1.5 Facility. The term "Facility" shall mean the medical offices owned
or leased by COMPANY where Professional Services are provided by DOCTOR.
1.6 COMPANY. The term -"COMPANY" shall mean Doctors Practice
Management, Inc. and Management Service Organization, Inc. Texas corporations.
<PAGE> 3
1.7 Management Fee. The term "Management Fee" shall mean COMPANY's
compensation as described in Article V hereof.
1.8 State. The term "State" shall mean the State of Texas.
1.9 Term. The term "Term" shall mean the initial and any renewal
periods of duration of this Agreement as described in Section 6.1 hereof.
1.10 Location. The term "Location" shall mean the Facility(s) in the
Houston, Texas, Standard Metropolitan Statistical area and such Facility(s) as
may exist in the future.
ARTICLE II APPOINTMENT AND AUTHORITY .
2.1 Appointment. DOCTOR hereby appoints COMPANY as its sole and
exclusive agent for the management and administration of the business functions
and services related to DOCTOR'S provision of Professional Services, and COMPANY
hereby accepts such appointment, subject at all times to the provisions of this
Agreement.
2.2 Authority of COMPANY. Consistent with the provisions of this
Agreement, COMPANY shall have the responsibility and commensurate authority to
provide full service management services for DOCTOR, including, without
limitation, equipment, supplies, support services, personnel (but specifically
excluding licensed medical personnel), marketing, billing and collection
services, management, administration, financial record keeping and reporting,
and other business office services as provided herein. COMPANY, subject to the
ultimate control and direction of DOCTOR, is hereby expressly authorized to
provide all such services in any reasonable manner COMPANY deems appropriate to
meet the day-to-day requirements of the business functions of DOCTOR. To the
extent practicable, COMPANY, at its discretion, shall perform some or all of the
services specified hereunder for DOCTOR.
2.3 Authority of DOCTOR. DOCTOR, through licensed health care
personnel, shall be solely responsible for and have sole and complete authority,
supervision and control over the provision of Professional Services and other
related health care services performed for patients of DOCTOR, and all
diagnoses, treatments, procedures, and other professional health care services
shall be provided and performed exclusively by or under the supervision of
licensed health care personnel retained by DOCTOR, as DOCTOR, in its sole
discretion, deems appro priate and in accordance with all laws. DOCTOR will have
the ultimate authority in the hiring and termination of all Licensed clinical
staff. DOCTOR also has the right to request COMPANY to replace any COMPANY
personnel assigned to the clinic. This Agreement shall in no way be construed to
mean or suggest that COMPANY is engaged in the practice of medicine.
ARTICLE III COVENANTS OF COMPANY.
3.1 Leased Premises and Equipment. COMPANY shall, at COMPANY's expense,
provide to DOCTOR the Locations and all equipment that is deemed by the parties
hereto to be reasonably necessary and appropriate for the provision of
Professional Services at the Locations.
3.1.1 Retention of Title. DOCTOR shall have access to and use of the
Locations and
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all equipment located therein throughout the Term, provided, however, that title
to the Locations and all equipment other than items placed in the Locations by
DOCTOR shall, at all times, be and remain in COMPANY, or if applicable, the
entity from which COMPANY leases the Locations and/or equipment.
3.1.2 Repair and Maintenance. COMPANY shall be responsible for the
repair and maintenance of the Locations, and for the repair, maintenance, and
replacement of all equipment located at the Locations, as well as other
obligations under the Lease Agreement regarding the Locations comparable to the
effective date hereof.
3.1.3 Additional Equipment. Should DOCTOR, from time to time during the
Term request COMPANY to provide additional patient care equipment, office, or
other equipment for use at the Locations or to replace used or obsolete
equipment, COMPANY and DOCTOR shall consult with each other on the matter.
Should COMPANY be unwilling or unable to provide such requested equipment,
DOCTOR may acquire and maintain such equipment and title to same shall be and
remain in DOCTOR; provided, however, that COMPANY agrees to provide and maintain
all equipment which is usual and customary in a facility similar to the
Locations, throughout the Term hereof.
3.1.4 Disclaimer of Warranty. COMPANY MAKES NO WARRANTY, EITHER
EXPRESSED OR IMPLIED, WITH RESPECT TO THE LOCATIONS, PREMISES OR ANY EQUIPMENT
PROVIDED BY COMPANY PURSUANT TO THIS AGREEMENT, AND ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY EXPRESSLY
DISCLAIMED.
3.2 Utilities and Related Services. COMPANY shall, at COMPANY's expense
arrange for and shall timely pay when due all charges relating to the provision
of necessary electricity, gas, water, telephone, sewage, cleaning and decorating
(interior and exterior), pest extermination, heating and air-conditioning
maintenance, and similar services reasonably necessary and appropriate for the
provision of Professional Services at the Locations.
3.3 Supplies. COMPANY shall obtain and provide, in its name and for its
own account, all reasonable patient care, office, and other supplies, and shall
ensure that the Leased Premises are at all times adequately stocked with such
supplies as are reasonably necessary and appropriate for the provision of
Professional Services at the Leased Premises. Patient care sup plies shall be
provided in accordance with the specifications of DOCTOR with respect to brand
names, dosages, quantities and other specifications.
3.4 Waste Disposal. COMPANY shall, at COMPANY's expense, arrange for
the proper disposal of all medical and non-medical wastes generated by DOCTOR.
Such waste disposal shall include disposal of any bio-hazardous waste and any
other medical waste that requires special disposal, provided that all Physicians
and non-physician personnel employed by DOCTOR comply with all guidelines
established by COMPANY for waste disposal. DOCTOR shall at all times comply with
guidelines set forth by COMPANY for all waste disposal, including the disposal
of sharps, bio-hazardous waste and any other waste products. DOCTOR shall also
comply with any guidelines set forth by COMPANY with respect to the operation
and maintenance of any equipment or other item that has environmental law
implications.
<PAGE> 5
3.5 Support Services. COMPANY, at COMPANY's expense, shall arrange for
the provision of all laundry, linen, printing, stationery, forms, postage,
duplication or photocopying services, patient record transcribing services, and
other similar support services as are reasonably necessary and appropriate for
the provision of Professional Services.
3.6 Licenses and Permits. COMPANY shall, at COMPANY's expense and on
behalf of and in the name of DOCTOR, coordinate all development and planning
processes, and apply for and use COMPANY's best efforts to obtain and maintain
all federal, State and local licenses and regulatory permits required for or in
connection with the operation of the Facility and the equipment (existing and
future) located therein, other than those relating to the practice of medicine.
3.7 PERSONNEL.
3.7.1 Provision of Company Personnel. COMPANY shall employ or otherwise
retain, at COMPANY's expense, and shall be responsible for selecting, training,
supervising, and terminating all management, administrative, clerical,
secretarial, bookkeeping, accounting, payroll, billing and collection, and other
non-professional personnel as COMPANY deems reasonably necessary and appropriate
for COMPANY's performance of its duties and obligations under this Agreement.
COMPANY shall have the sole responsibility for determining the salaries and
fringe benefits of personnel retained by COMPANY, for paying such salaries and
providing such fringe benefits, or for withholding, as required by law, any sums
of income tax, unemployment insurance, social security, or any other withholding
pursuant to any applicable law or governmental requirement.
3.7.2 Non-Exclusivity. In recognition of the fact that the personnel
retained by COMPANY to provide services pursuant to this Agreement may from time
to time perform services for others, this Agreement shall not prevent COMPANY
from performing such services for others or restrict COMPANY from using its
personnel to provide services to others, provided such activity does not cause
any material detriment to DOCTOR. In recognition of the professional obligations
of DOCTOR, DOCTOR shall have the right and obligation to- retain, at DOCTOR's
expense, any additional professional or other personnel as DOCTOR deems
necessary or appropriate for the provision of health care services.
3.7.3 Equal Employment Opportunity. COMPANY shall abide and provide
assistance to DOCTOR, and abide by any and all applicable federal and/or State
equal employment opportunity statutes, rules, and regulations, including,
without limitation, Title VII of the Civil Rights Act of 1964, the Equal
Employment Opportunity Act of 1972, the Age Discrimination in Employment Act of
1967, the Equal Pay Act of 1963, the National Labor Relations Act, the Fair
Labor Standards Act, the Rehabilitation Act of 1973, and the Occupational Safety
and Health Act of 1970, all as may from time to time be modified or amended.
3.7.4 Labor Reports. COMPANY shall appropriately prepare, maintain, and
file all requisite reports and statements regarding income tax withholdings,
unemployment insurance, social security, workers' compensation, equal employment
opportunity, or other reports and statements required with respect to personnel
provided by COMPANY or DOCTOR pursuant to this Agreement.
<PAGE> 6
3.8 Consultants. COMPANY shall render such business and financial
management, consultation, and advice as may from time-to-time be requested by
DOCTOR in connection with the business operations of DOCTOR and DOCTOR's
provision of Professional Services. In addition, COMPANY shall make available to
DOCTOR, for consultation and advice, to the extent available and as reasonably
necessary, COMPANY's specialists in such areas as accounting, auditing,
budgeting, medical practice management, finance, law, government programs,
housekeeping, insurance, management development, patient records, nursing,
recruitment, quality assurance, systems and procedures, and third party
reimbursement.
3.9 Contract Negotiations. Upon the request of DOCTOR, COMPANY shall
advise with respect to and negotiate on DOCTOR's behalf, all contractual
arrangements with third parties as are reasonably necessary and appropriate for
DOCTOR's provision of Professional Services, including, without limitation,
negotiated price agreements with third party payors, managed care providers, or
the purchasers of group health care services.
3.10 Marketing. In accordance with applicable law and ethical standards
and restrictions, COMPANY shall establish and implement a marketing and public
relations program promoting DOCTOR'S provision of Professional Services to the
general public and to other health care professionals and suppliers. In
connection with such marketing program and in accordance with applicable law and
ethical standards and restrictions, COMPANY shall establish signs on or about
the Facility identifying the operations of the Facility and the provision of
Professional Services therein. COMPANY shall implement all marketing programs at
the direction of DOCTOR.
3.11 License to Use Trade names and Trademarks of COMPANY. COMPANY, at
some time in the future may grant to DOCTOR, but only subject to the terms and
conditions of this Agreement, a license to use certain names in connection with
the provision of Professional Services in combination with such color schemes,
patterns, appearances, characteristics and words as are specifically approved by
COMPANY. DOCTOR'S use of any trademarks, trade names, service marks, insignia,
slogans, emblems, symbols, designs or other identifying characteristics owned by
or associated with COMPANY or any of its subsidiaries or affiliates
(collectively, "COMPANY MARKS") shall be subject to the prior written approval
of COMPANY. DOCTOR acknowledges that such names and COMPANY Marks have acquired
a secondary meaning in connection with COMPANY's operations. DOCTOR may also
apply to COMPANY for permission to use any other COMPANY Marks which permission
may or may not be granted in the absolute discretion of COMPANY. The use of any
COMPANY Marks in any signs, advertising or any promotional material shall be
subject to the prior approval of COMPANY.
The restrictions imposed hereunder shall extend to all other COMPANY
Marks licensed to DOCTOR by COMPANY. Except as specifically authorized by this
Agreement, DOCTOR will not use COMPANY Marks nor use, imitate or infringe upon
any of the foregoing in whole or in part. On the termination of this Agreement
for whatever cause, including COMPANY's breach, DOCTOR shall forthwith, at its
expense, make whatever changes may be necessary in any signs, advertising and
promotional material in order to comply with the provisions of this Section and
cease using the name and any COMPANY Marks. DOCTOR's covenants under this
Section are unconditional and in no way dependent upon the performance of
COMPANY of any of its agreements hereunder.
<PAGE> 7
DOCTOR will always acknowledge and recognize both before and after the
expiration of this Agreement the exclusive right of COMPANY to use or to grant
to others the right or license to use, whether separately or as a part of or in
connection with other words, any COMPANY Mark. If DOCTOR utilizes any COMPANY
Mark, DOCTOR shall take all actions which are necessary to maintain COMPANY's
good will and reputation or cease utilizing, at COMPANY's demand, the name and
any and all COMPANY Marks.
3.12 Billing and Collection. On behalf of DOCTOR and for the purpose
depositing all receipts arising from DOCTOR's patient activities, COMPANY shall
maintain the DOCTOR'S account. Such account will Such DOCTOR'S account will be
under the COMPANY FEIN. COMPANY shall establish and maintain credit and billing
and collection policies and procedures, and shall use COMPANY's best efforts to
timely bill and collect all professional and other fees for all billable
Professional Services provided by DOCTOR; it being understood, however that
DOCTOR, in his sole discretion, shall establish the fees for all billable
Professional Services provided by DOCTOR. DOCTOR shall timely advise COMPANY of
any changes in DOCTOR'S fee schedule to permit COMPANY to implement such
changes. In connection with this Section 3.12 and throughout the Term, DOCTOR
hereby grants a special power of attorney to and appoints COMPANY as DOCTOR's
true and lawful agent and attorney-in-fact, and COMPANY hereby accepts such
special power of attorney and appointment, for the following purposes:
3.12.1 To bill DOCTOR'S patients, in DOCTOR'S name and on DOCTOR'S
behalf, for billable Professional Services provided by DOCTOR.
3.12.2 To bill, in DOCTOR'S name and on DOCTOR'S behalf, all claims for
reimbursement or indemnification from Blue Shield/Blue Cross, Medicare, Medicaid
and all other third party payors for covered billable Professional Services
provided by DOCTOR.
3.12.3 To collect and receive, in DOCTOR'S name and on DOCTOR'S behalf,
all accounts receivable generated by such billings and claims for reimbursement
or indemnification, and to deposit all amounts collected in the DOCTOR'S
Account, which account shall be and remain in COMPANY'S name. In connection
herewith, DOCTOR covenants to transfer and deliver to COMPANY all funds received
by DOCTOR from patients or third party payors for Professional Services. Upon
receipt by COMPANY of any funds from patients or third party payors or from
DOCTOR pursuant hereto for Professional Services, COMPANY shall deposit same
into the DOCTOR'S Account.
3.12.4 To take custody of, endorse in the name of DOCTOR, and deposit
into the DOCTOR'S Account any notes, checks, money orders, insurance payments,
and any other instruments received in payment of the accounts receivable for
Professional Services.
Upon request of COMPANY, DOCTOR shall execute and deliver to COMPANY or
the financial institution wherein the DOCTOR'S Account is maintained, such
additional documents or instruments as may be reasonably necessary to evidence
or effect the special power of attorney granted to COMPANY by DOCTOR and the
conditions pursuant to this Section 3.11 or pursuant to Section 3.12 hereof.
3.13 DOCTOR'S Account. COMPANY shall operate the DOCTOR'S Account for
the
<PAGE> 8
purpose's stated herein. In connection herewith and throughout the Term, DOCTOR
hereby appoints COMPANY as DOCTOR'S true and lawful agent and attorney-in-fact,
and grants COMPANY a special power of attorney and COMPANY hereby accepts such
special power of attorney and appointment, to deposit in the DOCTOR'S Account
all funds, fees, and revenues generated from the provision of Professional
Services and collected by COMPANY, and to make withdrawals and sign checks for
disbursements from the DOCTORS Account solely for the purpose of withdrawing the
Collected Revenues to be applied to the Management Fee and DOCTOR's Expenses.
DOCTOR shall execute any and all additional documents required by the bank where
the DOCTOR'S Account is held to effectuate the power of attorney and conditions
of the account granted herein. Notwithstanding the limited power of attorney
granted to COMPANY hereunder. COMPANY shall furnish to DOCTOR, on a monthly
basis, its normal Cash Receipts and Disbursements Report.
3.13.1 Cash Flow and Funding. COMPANY will provide to DOCTOR a line of
Credit in the amount of Six Hundred Seventy Five Thousand dollars ($675,000) at
Eight Percent (8%) interest rate to be made available upon execution of this
agreement and the execution of a signed note by the DOCTOR. Loan will be all due
and payable within the term of the FULL SERVICE FACILITY AND MANAGEMENT
AGREEMENT or upon its termination. All interest payments to be made monthly
during such term. COMPANY will take a security interest in the Accounts
Receivable of DOCTOR as evidenced by a signed Security Interest by DOCTOR and
the filing of a signed UCC form.
3.14 FISCAL MATTERS.
3.14.2 Accounting and Financial Records. COMPANY shall establish and
administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of records and books of account relating to the
provision of Professional Services at the Leased Premises, all of which shall be
prepared and maintained in accordance with generally accepted accounting
principles consistently applied on a cash basis. COMPANY shall prepare and
deliver to DOCTOR, within ninety (90) days of the end of each fiscal year of
DOCTOR, a balance sheet, a profit and loss statement, and a statement of changes
in cash flow reflecting the financial status of the provision of Professional
Services as of the end of such prior fiscal year, all of which shall be prepared
in accordance with generally accepted accounting principles. COMPANY shall also
prepare and deliver to DOCTOR unaudited-audited, monthly financial statements
for management purposes only. Additionally, COMPANY shall prepare and deliver to
DOCTOR such other financial statements or records as COMPANY may from time to
time deem appropriate or DOCTOR may reasonably from time-to-time request.
3.14.3 Access. DOCTOR shall have the right at all reasonable times
during normal business hours to audit, examine, and make copies of books of
account maintained by COMPANY pursuant to this Agreement. COMPANY shall maintain
such records for DOCTOR's access upon request for a period of four (4) years
following the Term hereof.
3.15 REPORTS AND RECORDS.
3.15.1 Patient Records. COMPANY shall establish, monitor, and maintain
procedures and policies for the timely filing and maintenance of all patient
records generated by DOCTOR in connection with DOCTOR'S provision of
Professional Services. All patient records shall be
<PAGE> 9
treated in accordance with all applicable State and federal laws relating to the
confidentiality of patient records. All patient records shall be the property
of, maintained by, and in the custody of DOCTOR, but DOCTOR expressly agrees
that COMPANY shall have access to such patient records, at all reasonable times
during normal business hours, to the extent necessary for COMPANY to fulfill its
obligations under this Agreement and that COMPANY, to the extent lawfully
permitted, shall have access to such patient records, for the purpose of making
necessary copies, in the event this Agreement is terminated. COMPANY shall
maintain the confidentiality of all patient records in accordance with all
applicable laws and shall establish written policies and procedures for such
which are to be approved by DOCTOR for the protection of confidential
information.
3.15.2 Other Management Reports and Records. COMPANY shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate hereunder, and shall analyze and interpret such
reports and records upon DOCTOR's request.
3.16 Legal Actions. As requested by DOCTOR, COMPANY shall advise and
assist DOCTOR in instituting or defending, in the name of DOCTOR, all legal
actions or proceedings by or against third parties arising out of DOCTOR'S
provision of Patient Care Service, including, without limitation, those actions
to collect fees for billable Professional Services or other billable services
provided to patients by DOCTOR, and those actions necessary for the protection
and continued operation of DOCTOR. Both parties shall agree in advance upon the
selection of counsel.
3.17 Indemnification by COMPANY. DOCTOR, its officers, its employees,
and its agents will incur no liability in connection with the conduct of COMPANY
prior to the effective date of this Agreement. Accordingly, COMPANY shall and
hereby does indemnify, hold harmless, and agrees to defend DOCTOR and its
officers, employees, and agents from and against any claims, obligations,
demands, causes of action, losses, liabilities, damages, costs and expenses,
including reasonable attorney's fees (collectively " Claims ") arising out of or
connected with the conduct of COMPANY prior to the effective date of this
Agreement.
DOCTOR shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of the existing or future Claims made
against COMPANY. COMPANY shall and hereby does indemnify, hold harmless, and
agrees to defend DOCTOR, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negligence or fault of COMPANY,
its employees, agents, contractors or COMPANY's performance of its obligations
within its scope of responsibility hereunder.
If any Claim shall arise hereunder DOCTOR shall give prompt written
notice of such Claim to COMPANY; except that any delay or failure of notice
shall not relieve COMPANY of the obligations hereunder except to the extent such
delay has materially prejudiced COMPANY.
ARTICLE IV COVENANTS OF DOCTOR.
4.1 Organization/Operation. DOCTOR, is a professional association
created under Texas law and shall at all times during the Term (i) be and remain
legally organized to provide Professional Services in a manner consistent with
all State and federal laws; (ii) be duly authorized to conduct business in the
State of Texas; and (iii) have and maintain a physician to
<PAGE> 10
provide Professional Services in the Leased Premises and all other locations of
Doctor who shall (a) hold a valid and unlimited license to practice medicine in
the State of Texas, and (b) be engaged principally in the provision of
Professional Services at each such location.
4.2 Professional Personnel of DOCTOR. DOCTOR shall employ, at DOCTOR's
expense, all licensed health care personnel, including physicians, nurses,
vocational nurses and physician assistants, as DOCTOR deems reasonably necessary
and appropriate for DOCTOR's operation of his practice and provision of
Professional Services each of whom shall be subject to the applicable provisions
of this Agreement (collectively, "Professional Personnel"). DOCTOR shall have
the sole responsibility for paying the salaries and fringe benefits of all such
personnel, and the sole responsibility to withhold, as required by law, any sums
for income tax, unemployment insurance, social security, or any other
withholding pursuant to any applicable law or governmental requirements
(collectively, "Professional Compensation"). COMPANY shall, in the name of and
on behalf of DOCTOR, establish and administer (out of funds available in the
DOCTOR'S Account) the compensation with respect to, such professional personnel
and, on behalf of DOCTOR and out of funds available in the DOCTOR'S Account,
ensure that proper tax withholdings from such compensation are made and timely
remitted to the appropriate governmental entities. Each physician retained by
DOCTOR shall at all times hold and maintain a valid and unlimited license to
practice in the State of Texas. DOCTOR shall enter into and maintain with each
such physician a written agreement which shall include, without Limitation, the
provisions of Section 4.3 hereof.
4.3 Special Consideration/Damages/Non-Competition. DOCTOR hereby
recognizes and acknowledges that COMPANY will incur substantial costs in
providing the Leased Premises, equipment, supplies, support services, personnel,
marketing, management, administration, and other items and services that are the
subject matter of this Agreement. Accordingly, DOCTOR covenants and agrees that
DOCTOR and all of its personnel shall devote their best efforts to the success
of DOCTOR's practice and the provision of Professional Services by DOCTOR. It is
further agreed, that in addition to the provisions contained in Article VI
"Term and Termination", that DOCTOR acknowledges and agrees that the COMPANY
will undertake considerable expense on behalf of DOCTOR in the development of
DOCTOR, therefore DOCTOR will pay the sum of Two Hundred Fifty Thousand Dollars
($250,000) in liquidated damages to COMPANY if this contract is canceled by
DOCTOR.
During the term of this Agreement and any extension hereof, plus two
(2) years thereafter, neither DOCTOR nor any employee, agent, partner,
shareholder, director, officer, affiliate or any entity with any beneficial
interest or any control interest in DOCTOR, either directly or indirectly, for
himself or herself, or on behalf of or in conjunction with any other person,
persons, partnership, associations or corporations shall (a) divert or attempt
to divert any business of, or any patients of DOCTOR to or interest in any other
competitive establishment that is located within a Ten (10) mile radius of any
Location.
DOCTOR shall continuously and uninterruptedly, during the term hereof,
during all business hours and on such days as businesses of like nature in the
area are open for business, provide services in a manner calculated to produce
the maximum volume of revenue which is consistent with the professional
obligation of DOCTOR and in the best interest of DOCTOR's patients. DOCTOR shall
cause the work load, patient load and surgical criteria for each of its
Professional Personnel to remain substantially the same as their historical
practice during the
<PAGE> 11
immediate past three (3) years.
During the Term hereof and for a period of five (5) years thereafter,
except as may be required by law, DOCTOR and its employees, agents, directors,
officers, shareholders and partners shall not disclose, communicate or disclose
to, or use for the direct or indirect benefit of any other person or entity any
confidential information regarding COMPANY's business methods, business
policies, procedures, techniques, or trade secrets or other knowledge or
processes developed by COMPANY or any other confidential information relating to
or dealing with the business operations or activities of COMPANY, made known to
DOCTOR or learned or acquired by DOCTOR hereunder.
If any restriction contained in this Section 4.3 is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and the remaining restrictions set forth herein shall be enforced
independently of each other.
4.4 DOCTOR'S Insurance. DOCTOR shall provide, obtain, and maintain
throughout the Term appropriate workers' compensation insurance coverage for
DOCTOR'S employed personnel and shall carry professional liability insurance
covering DOCTOR and all of DOCTOR'S physician Professional Personnel in the
minimum amount of Three Hundred Thousand Dollars ($ 300,000) for each occurrence
and Five Hundred Thousand Dollars ($ 500,000) annual aggregate, and such amounts
as may be reasonable for all other Professional Personnel (collectively,
"Professional Insurance"). Such professional insurance policy or policies
maintained by DOCTOR shall include COMPANY as additional insured, if permitted
by the insurer. DOCTOR shall provide to COMPANY a certificate of insurance
evidencing such coverage on an annual basis. The insurance policy or policies
shall provide for at least thirty (30) days advance written notice to DOCTOR
from the insurer as to any alteration of coverage, cancellation, or proposed
cancellation of coverage for any cause. The certificate of insurance shall
require such notice to also be given to COMPANY. DOCTOR shall notify COMPANY of
all legal actions or proceedings instituted by or against DOCTOR arising out of
or related to DOCTOR'S operation of a medical practice.
4.5 Indemnification by DOCTOR. COMPANY, its officers, its employees,
and its agents will incur no liability in connection with the conduct of DOCTOR
prior to the effective date of this Agreement. Accordingly, DOCTOR shall and
hereby does indemnify, hold harmless, and agrees to defend COMPANY and its
officers, employees, and agents from and against any claims, obligations,
demands, causes of action, losses, liabilities, damages, costs and expenses,
including reasonable attorney's fees (collectively "CLAIMS") arising out of or
connected with the conduct of DOCTOR prior to the effective date of this
Agreement.
COMPANY shall not, by entering into this Agreement and performing
hereunder, assume or become liable for any of existing or future Claims made
against DOCTOR. DOCTOR shall and hereby does indemnify, hold harmless, and
agrees to defend COMPANY, its officers, employees, and agents, from and against
any Claims arising out of or connected with the negligence or fault of DOCTOR,
its employees, agents, contractors or DOCTOR's performance of its obligations
hereunder.
If any Claim shall arise hereunder COMPANY shall give prompt written
notice of such Claim to DOCTOR; except that any delay or failure of notice shall
not relieve DOCTOR of the
<PAGE> 12
obligations hereunder except to the extent such delay has materially prejudiced
DOCTOR.
4.6 DOCTOR's Expenses. DOCTOR shall be solely responsible and obligated
to pay only the reasonable Professional Compensation including the compensation
benefits and employer costs associated with all Physicians and other licensed
health care employees, and Professional Insurance expenses associated with the
Professional Personnel including malpractice and general liability, retained by
DOCTOR in addition to such other expenses as may be mutually agreed to by the
parties hereto (collectively, "DOCTOR's Expenses").
4.7 Equipment. DOCTOR hereby represents and warrants that sufficient
equipment currently exists at each Location as may be required to provide
Professional Services of the type and volume currently provided by DOCTOR as of
the effective date of this Agreement and will treat same with appropriate care.
4.8 Succession Planning. DOCTOR hereby undertakes to provide for estate
planning whereby in the event of his disability or death the COMPANY is
appointed exclusive agent for the sale of all of the assets of DOCTOR in order
to ensure continuity of DOCTORS practice. All proceeds to be paid to DOCTOR or
DOCTORS estate less cost incurred by COMPANY. A copy of appropriate Wills and
Trusts to be provided by DOCTOR to COMPANY as soon as practicable.
ARTICLE V MANAGEMENT FEE.
5.1 Amount of Management Fee. DOCTOR and COMPANY mutually recognize and
acknowledge that COMPANY will incur substantial costs in arranging for DOCTOR's
use of the Locations and in providing the equipment, support services,
personnel, marketing, office space, management, administration, and other items
and services that are subject matter of this Agreement. DOCTOR and COMPANY
further recognize that certain of such costs and expenses can vary to a
considerable degree, according to the extent of DOCTOR's business and services.
Furthermore, DOCTOR and COMPANY agree that it will be impracticable to ascertain
and segregate all of the exact costs and expenses that will be incurred by
COMPANY from time to time in performance of his obligations under this
Agreement. However, it is the intent of the parties that the fees paid to
COMPANY be reasonable and approximate its costs and expenses, plus a reasonable
return, considering the investment and risk taken by COMPANY and the value of
the services provided by COMPANY. DOCTOR agrees to pay a Management Fee to
COMPANY in an amount equal to Sixty Five Percent (65%) of annual collected
revenue. Annual revenue is hereinafter defined as the twelve month period
commencing with the effective date of this agreement.
For purposes hereof, "Revenues Collected" shall be defined as an amount
equal to the total of any moneys received from patients, and/or third-party
payors and deposited in the DOCTOR's account, less any refunds, during any given
twelve month or agreement anniversary date.
Either party, not more than Twelve times in any twelve month period,
upon giving notice to the other party hereto shall have the right to inspect the
records of DOCTOR to ascertain and audit Revenues Collected, DOCTOR's Expenses,
and COMPANY's Expenses, subject to patient confidentiality laws. If the audit or
examination discloses that the Management Fee was incor rectly computed or any
expense improperly classified, the parties shall within twenty (20) days
<PAGE> 13
of such determination reconcile the difference by a cash payment to the
applicable party. In all events, a reconciliation of the preceding year shall
occur following the preparation of annual financial statements.
5.2 Payment of Management Fee. The Management Fee shall be payable to
COMPANY on a monthly basis for each month during the Term of this agreement.
Payment of the Management Fee is not intended to be, and shall not be,
interpreted or applied as permitting COMPANY to share in DOCTOR's fees for
Professional Services or any other services, but is acknowledged as the parties'
negotiated agreement as to the reasonable, fair market value of the equipment,
support, services, personnel, marketing, office space, management,
administration, and other items and services furnished by COMPANY pursuant to
this Agreement, considering the nature and volume of the services required and
the risks assumed by COMPANY.
ARTICLE VI TERM AND TERMINATION.
6.1 Initial and Renewal Terms. This Agreement shall be effective as of
May 1, 1996 for a period of Fifteen (15) years therefrom.
6.2 Termination. This Agreement may be terminated upon the first to
occur of any of the following events:
6.2.1 Termination by Agreement. In the event DOCTOR and COMPANY shall
mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.
6.2.2 The death or disability of DOCTOR to practice medicine.
6.2.3 Damages or Condemnation of Premises. In the event the Leased
Premises are totally or substantially destroyed by fire, explosion, flood,
windstorm, hail, earthquake, or other casualty or act of God, and the owner
landlord of the Leased Premises decides not to repair or rebuild the Leased
Premises, or in the event all or a substantial portion of the Leased Premises
and the Facility are taken or are to be taken by condemnation or eminent domain
proceeding, then either party may by written notice (sent within thirty (30)
days of such event) to the other terminate this Agreement if suitable
alternative premises cannot be secured within sixty (60) days. In the event the
owner/landlord of the Leased Premises decides to repair or rebuild the Leased
Premises to their original size and condition, the Management Fee and the duties
and obligations of COMPANY and DOCTOR hereunder shall abate until such time as
the Leased Premises are suitable for COMPANY and DOCTOR to resume their
respective duties and obligations hereunder.
6.2.4 Bankruptcy. In the event that either party becomes insolvent, or
if any petition under federal or State law pertaining to bankruptcy or
insolvency or for a reorganization or arrangement or other relief from creditors
shall be filed by or against either party, or if any assignment, trust,
mortgage, or other transfer shall be made of all or a substantial part of the
property of either party, or if either party shall make or offer a composition
in its debts with its creditors, or if a receiver, trustee, or similar officer
or creditor's committee shall be appointed to take charge of any property of or
to operate or wind up the affairs of either party, then the
<PAGE> 14
other party may by written notice immediately terminate this Agreement.
6.2.5 Specific DOCTOR Breaches. At COMPANY's option, in the event of
Dr. Jerome C. Wasserstein shall die or be involuntarily inducted into the active
military services of the United States, (ii) DOCTOR or any physician employed or
retained by DOCTOR shall fail by omission or commission in any substantial
manner to provide Professional Services in a competent manner, (iii) DOCTOR
shall fail to meet any of the qualifications set forth in Section 4.1 hereof,
(iv) Dr. Jerome C. Wasserstein license to practice medicine is revoked,
suspended, canceled or limited in any manner, (v) Dr. Jerome C. Wasserstein is
convicted of a felony or any crime of moral turpitude, or (vi) Dr. Jerome C.
Wasserstein or shall fail to comply with the terms of his Employment Contract of
even date herewith, then COMPANY may by written notice to DOCTOR immediately
terminate this Agreement.
6.2.6 COMPANY Breaches. At DOCTOR's option, in the event COMPANY fails
to make timely payments of the obligations it has undertaken, (ii) fails or
refuses to account to DOCTOR for collection on amounts for services rendered, or
(iii) is in default of any material obligations having an impact upon DOCTOR,
then DOCTOR may by written notice to COMPANY terminate this Agreement if COMPANY
has failed to cure such default within thirty (30) days of DOCTOR's written
notice of such violation, provided if such breach cannot by its nature be
reasonably cured within thirty (30) days then COMPANY shall have such time as
may be reasonable to cure the breach.
6.2.7 Action by Board of Medical Examiners or Other Authority with
legal Jurisdiction. While both parties believe that this Agreement is in full
compliance with the Texas Medical Practice Act, the interpretation of the Act
may be subject to change. In the event the Board of Medical Examiners for the
State or other authority with legal jurisdiction shall, solely by virtue of this
Agreement, initiate an action to revoke the license of any physician retained by
DOCTOR to practice medicine in the State, DOCTOR may, by written notice to
COMPANY, immediately request that the Agreement be amended in a mutually
acceptable manner. Any amendment shall be made in the lawful manner which
results in the least changes to the parties' expectations hereunder. In the
event the offending-provisions of the Agreement cannot be cured as to the
legality of such provisions to the satisfaction of both parties, then either
party may terminate this Agreement upon ten (10) days written notice, and such
termination shall be conducted as set forth in Section 3 of the Master
Agreement. In the event the Board of Medical Examiners shall, on any other
grounds, including, without limitation, improper medical practice or improper
conduct by any physician retained by DOCTOR, restrict, suspend or revoke the
license of such physician to practice medicine in the State, the COMPANY may, by
written notice to DOCTOR, immediately terminate this Agreement.
6.2.8 Default. In the event either party shall give written notice to
the other that such other party has substantially defaulted in the performance
of any material duty or material obligation imposed upon it by this Agreement,
and such default shall not have been cured within thirty (30) days following the
giving of such written notice, the party giving such written notice shall have
the right to immediately terminate this Agreement unless the defaulting party
shall, within said thirty (30) day period, have made a good faith effort to
initiate corrective action and it is contemplated that such corrective action
will be completed within the following a (30) day period.
<PAGE> 15
6.3 Effects of Termination. Upon termination of this Agreement, as
herein above provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
and (ii) obligations, promises, or covenants set forth herein or in those
collateral agreements of even date herewith that are expressly made to extend
beyond the Term, including, without limitation, indemnities, non-compete and
fees which provisions shall survive the expiration or termination of this
Agreement.
In the event of termination all outstanding loans, interest and
management fees will be due and payable by DOCTOR prior to but no later than
effective cancellation date.
6.4 Continued Professional Services. Following any notice of
termination hereunder, whether given by COMPANY or DOCTOR, DOCTOR and COMPANY
will fully cooperate with each other in all matters relating to the performance
or discontinuance of Professional Services, as appropriate, at the Locations by
DOCTOR and the orderly transition of patients.
ARTICLE VII MISCELLANEOUS.
7.1 Exhibits, Schedules and Other Instruments. As used herein, the
expression "this Agreement" means the body of this Agreement and all exhibits,
certificates, and schedules; and the expressions "herein," "hereof," and
"hereunder" and other words of similar import refer to this Agreement and such
exhibits, certificates, and schedules as a whole and not to a particular part or
subdivision thereof unless otherwise clearly indicated.
7.2 Independent Relationship. It is mutually understood and agreed that
DOCTOR and COMPANY, in performing their respective duties and obligations under
this Agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended nor shall be construed to create an employer/employee relationship or a
joint venture relationship, 6r to allow COMPANY to exercise control or direction
of any nature, kind, or description over the manner or method by which DOCTOR
performs Professional Services.
7.3 Notices. Any notice, demand, or communication required, permitted,
or desired to be given shall be deemed effectively given (i) when personally
delivered, (ii) upon receipt when delivered by telephonic document transfer,
(iii) three (3) business days next following the day the notice is, mailed by
prepaid certified mail, return receipt requested, or (iv) the next business day
following deposit with a reputable overnight courier, addressed as follows:
DOCTOR: JCW Medical Associates, P.A.
Jerome C. Wasserstein, D.O.
4301 A Vista
Pasadena, Texas 77504
COMPANY: Doctors Practice Management, Inc.
Chiu Chan, CEO
4301 A Vista
Pasadena, Texas 77504
<PAGE> 16
or to such other address, and to the attention of such other person or officer
as any party may designate, with copies thereof to the respective counsel
thereof as notified by such party. Rejection or other refusal to accept or the
inability to deliver because of a changed address of which no notice was given
in accordance with the provisions hereof, shall be deemed to be receipt of the
notice sent.
7.4 Legal Fees and Costs. In the event either party brings any action
for relief against the other, declaratory or otherwise, arising out of this
Agreement (including actions to enforce and interpret this Agreement), the
losing party shall pay to the prevailing party, in addition to any other relief
to which such party shall be entitled, a reasonable sum for attorneys fees
incurred in bringing such suit and/or enforcing any judgment granted therein,
all of which shall be deemed to have accrued upon the commencement of such
action and shall be paid whether or not such action is prosecuted to judgment.
Any judgment or order entered in such action shall contain a specific provision
providing for the recovery of attorney fees and costs incurred in enforcing such
judgment, in addition to any other relief to which such party shall be entitled.
7.5 Choice of Law and Venue. THIS AGREEMENT HAS BEEN EXECUTED AND
DELIVERED IN AND SHALL BE INTERPRETED, CONSTRUED, ENFORCED AND GOVERNED BY AND
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THAT THE COURTS OF THAT
STATE IN THE COUNTY OF HARRIS, AND THE UNITED STATES DISTRICT COURT FOR SOUTHERN
DISTRICT OF TEXAS SHALL BE THE EXCLUSIVE COURTS OF JURISDICTION AND VENUE FOR
ANY LITIGATION, SPECIAL PROCEEDING OR OTHER PROCEEDING AS BETWEEN THE PARTIES
THAT MAY BE BROUGHT, OR ARISE OUT OF, IN CONNECTION WITH, OR BY REASON OF THIS
AGREEMENT. SELLER HEREBY CONSENTS TO THE JURISDICTION OF SUCH COURTS.
7.6 Assignment. Except as provided above, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that DOCTOR shall
not assign, transfer or pledge his rights and obligations under this Agreement
or collaterally assign or hypothecate this agreement without the prior written
consent of COMPANY. COMPANY shall have the right to (i) assign its rights and
obligations hereunder to any affiliated third party and (ii) collaterally assign
its interest in this Agreement and its right to collect Management Fees
hereunder to any financial institution or other third party without the consent
of DOCTOR. COMPANY must provide ten days prior written notice to DOCTOR prior to
assigning this Agreement.
7.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
7.8 Enforcement. All claims and disputes relating to this Agreement
shall be subject to confidential arbitration in accordance with the National
Health Lawyers Association Alternative Dispute Resolution Rules of Procedure for
Arbitration then obtaining and with individuals knowledgeable of the medical
industry serving as arbitrators. Written notice of demand for arbitration shall
be filed with the other party to the Agreement and with the National Health
Lawyers Association in Washington, D.C., within a reasonable time after the
dispute has arisen.
<PAGE> 17
In the event either party resorts to legal action to enforce the arbitration
results or any other provision of this Agreement, the prevailing party shall be
entitled to recover the costs of such action so incurred, including, without
limitation, reasonable attorneys' fees.
7.9 Gender and Number. Whenever the context of this Agreement requires,
the gender of all words herein shall include the masculine, feminine, and
neuter, and the number of all words herein shall include the singular and
plural. The term "person" when used herein shall mean an individual,
partnership, joint venture, corporation, trust, government entity, and
association.
7.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Agreement shall be
self-operative and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute such
additional instruments and take such additional acts as are reasonable and as
the requesting party may deem necessary to effectuate this Agreement.
7.11 Consents, Approvals, and Exercise of Discretion. Except as may be
herein specifically provided to the contrary, whenever this Agreement requires
any consent or approval to be given by either party, or either party must or may
exercise discretion, the parties agree that such consent or approval shall not
be unreasonably withheld or delayed, and such discretion shall be reasonably
exercised in good faith.
7.12 Force Majeure. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party.
7.13 Severability. In the event any provisions of this Agreement is
held to be invalid, illegal, or unenforceable for any reason and in any respect,
if the extent of such invalidity, illegality or unenforceability does not
destroy the basis of the bargain herein such invalidity, illegality, or
unenforceability shall in no event affect, prejudice, or disturb the validity of
the remainder of this Agreement, which shall be in full force and effect,
enforceable in accordance with its terms as if such provisions had not been
included, or had been modified as provided below, as the case may be. To carry
out the intent of the parties hereto as fully as possible, the invalid, illegal
or unenforceable provision(s), if possible, shall be deemed modified to the
extent necessary and possible to render such provision(s) valid and enforceable.
In the event this Agreement cannot be modified to the satisfaction of the
parties hereto, then either party may terminate this Agreement upon ten (10)
days written notice.
7.14 Divisions and Headings. The division of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
7.15 Amendments and Agreement Execution. This Agreement and amendments
thereto shall be in writing and executed in multiple copies on behalf of DOCTOR
by its duly authorized representative and on behalf of COMPANY by its duly
authorized representative. Each multiple copy shall be deemed an original, but
all multiple copies together shall constitute one and the
<PAGE> 18
same instrument.
7.16 Time of Essence. Time shall be of the essence with respect to this
Agreement.
7.17 Entire Agreement/Amendment. This Agreement and collateral
agreements of even date herewith supersede all previous agreements (written or
oral), and constitutes the entire agreement of whatsoever kind or nature
existing between or among the parties respecting the within subject matter and
no party shall be entitled to benefits other than those specified herein. As
between or among the parties, no oral statements or prior written material not
specifically incorporated herein shall be of any force and effect; the parties
specifically acknowledge that in entering into and executing this Agreement, the
parties rely solely upon the representations and agreements contained in this
Agreement and no others. All prior representations or agreements, whether
written or verbal, not expressly incorporated herein are superseded. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by all parties hereto. This Agreement may be
executed in two or more counterparts, each and all of which shall be deemed an
original and all of which together shall constitute one instrument. It shall not
be necessary that the signatures of all of the parties appear on each
counterpart; it shall be sufficient that the signature of each party appear on
one or more counterparts.
7.18 Rules of Construction. The parties acknowledge that each party and
its counsel have reviewed and revised this Agreement, and the parties hereby
agree that the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments or exhibits, certificates
and schedules hereto. The term "include" or "including" shall mean without
limitation by reason of enumeration. All references in this Agreement to Dollars
or monetary payment shall be deemed to refer to U.S. Dollars.
7.19 Reproduced Copies of Documents. This Agreement and all documents
relating hereto other than promissory notes, including without limitation, (a)
consents, waivers, and modifications which may hereinafter be executed, (b)
documents received by any party at the Closing, (c) financial statements,
certificates and other information previously or hereafter furnished, may be
reproduced by any means or process including electronic or mechanical means. Any
reproduction shall be admissible into evidence as the original itself in any
Litigation without regard to whether the original is in existence. If a party
signs this Agreement and then transmits an electronic facsimile of the signature
page the recipient may rely upon the electronic facsimile as a signed original
of this Agreement without modification or change unless same is noted thereon.
7.20 Third Parties. None of the provisions of this Agreement shall be
for the benefit of third parties or enforceable by any third party except as
otherwise contained herein. Any agreement to pay an amount and any assumption of
a liability herein contained, expressed or implied, shall only be for the
benefit of the parties hereto and such agreement or assumption shall not inure
to the benefit of the any third party, including an obligee.
<PAGE> 19
IN WITNESS WHEREOF, DOCTOR and COMPANY have executed this Agreement in multiple
originals as of the date written above.
DOCTOR:
JCW MEDICAL ASSOCIATES, P.A.
By: /s/ Jerome C. Wasserstein
--------------------------------------
Dr. Jerome C. Wasserstein, President
COMPANY:
DOCTORS PRACTICE MANAGEMENT, INC.
By: /s/ Chiu Chan
--------------------------------------
Chiu Chan, President
<PAGE> 20
AMENDMENT ONE TO THE FULL SERVICE FACILITY AND MANAGEMENT AGREEMENT BY AND
BETWEEN JCW MEDICAL ASSOCIATES, P.A. AND DOCTORS PRACTICE MANAGEMENT, INC.
This Amendment One to the Full Service Facility and Management Agreement dated
May 1, 1996 is agreed to by JCW Medicial Associates, P.A., referred to herein as
("Doctor") and Doctors Practice Management, Inc., referred to herein as
("Company");
In consideration of the mutual promises between Doctor and Company, Artile V
included in the Full Service Facility and Management Agreement dated May 1, 1996
between Doctor and Company is hereby amended and replaced in its entirety as
follows:
Article V Management Fee
"DOCTOR agrees to pay a Management Fee to COMPANY in an amount equal
to Sixty Five percent (65%) of annual revenues collected" is hereby amended to
Forty percent (40%) of annual revenues collected.
Such Amendment One to the Full Service Facility and Management Agreement shall
be effective as of May 1, 1996.
DOCTOR:
JCW MEDICIAL ASSOCIATES, P.A.
By: /s/ Jerome Wasserstein
-----------------------------------
Dr. Jerome Wasserstein
COMPANY:
DOCTORS PRACTICE MANAGEMENT, INC.
By: /s/ Philip Chan
-----------------------------------
Philip Chan, Vice President
<PAGE> 1
EXHIBIT 10.12
FULL SERVICE MANAGEMENT AGREEMENT
This FULL SERVICE MANAGEMENT AGREEMENT ("Agreement") is entered into
and effective as of the 1st day of March, 1996 (notwithstanding the date of
actual execution) by and between DOCTORS PRACTICE MANAGEMENT, INC., A Texas
business corporation ("Manager"), and Ping S. Chu, M.D., a Texas sole
proprietor ("Physician").
WITNESSETH:
WHEREAS, Physician is a duly and validly existing Texas sole
proprietorship that has been organized for the purpose of operating a medical
practice and providing medical and related healthcare services ("Healthcare
Services") to the general public in the Greater Houston, Texas area;
WHEREAS, Manager is experienced in providing management and related
items and services to physicians, professional associations, and other
professional healthcare entities and individuals;
WHEREAS, Physician desires and intends to obtain such management,
administrative, and business services necessary and appropriate for Physician's
business operations and the provision of Healthcare Services by Physician, and
Manager desires to provide, and is capable of providing, all such management,
administrative, and business services; and
WHEREAS, Physician and Manager mutually desire an arrangement that:
(1) ensures consistency of service, quality of care, and safety of
Physician's patients;
(2) facilitates effective utilization of Healthcare services;
(3) ensures consistent and customary patterns for the provision of
Healthcare Services;
(4) facilitates the management and administration of the day-to-day
business operations of the Physician; and
(5) facilitates the establishment and maintenance of a public image of
excellence and high quality for the Physician,
all for the benefit of those persons seeking Healthcare Services as patients of
the Physician.
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby forever acknowledged and confessed, the parties
hereto agree as follows:
I. Definitions
For the purposes of this Agreement, the following terms shall have the
following meanings
<PAGE> 2
described thereto, unless otherwise clearly required by the context in which
such term is used.
1.1 Agreement. The term "Agreement" shall mean this Full Service
Management Agreement between Physician and Manager and any amendments hereto as
may from time to time be adopted as hereinafter provided.
1.2 Annual Budget. The term "Annual Budget" shall mean the operational
budget of the Physician, for a given fiscal year, prepared by Manager in
consultation with Physician.
1.3 Physician. The term "Physician" shall mean Ping S. Chu, M. D., a
Texas sole proprietor.
1.4 Manger/Physician Account. The term "Manager/Physician Account" shall
mean the bank account of the Manager established on behalf of the Physician as
described in Section 3.9 hereof.
1.5 Physician Expense or Physician's Expense. The term "Physician
Expense" or "Physician's Expense" shall mean an expense or cost incurred by
Physician or Manager on behalf of Physician and for which Physician is
financially liable, including management fee, regardless of whether the
transfer of Physician's funds to satisfy the Physician's financial liability is
performed by Physician or by Manager on Physician's behalf.
1.6 Facility. The term "Facility" shall mean the physical premises in
which Healthcare Services are furnished to patients by the Physician and shall
include, if applicable, multiple locations.
1.7 Healthcare Services. The term "Healthcare Services" shall mean the
medical and related healthcare services provided by Physician to patients.
1.8 Management Fee. The term "Management Fee" shall mean Manager's
compensation established and described in Article V hereof.
1.9 Manager. The term "Manager" shall mean Doctors Practice Management,
Inc., a Texas business corporation.
1.10 Manager Expense or Manager's Expense. The term "Manager Expense" or
"Manager's Expense" shall mean an expense or cost incurred by Manager on behalf
of Physician and for which Manager is financially liable.
1.11 State. The term "State" shall mean the State of Texas.
1.12 Term. The term "Term" shall mean the initial and any renewal periods
of duration of this Agreement as described in Section 6.1 hereof.
II. Appointment and Authority of Manager
2.1 Appointment. Physician hereby appoints Manager as its sole and
exclusive agent for the management and administration of the business functions
and services related to Physician's
<PAGE> 3
provision of Healthcare Services and Manager hereby accepts such appointment,
subject at all times to the provisions of this Agreement.
2.2 Authority. Consistent with the provisions of this Agreement, Manager
shall have the responsibility and commensurate authority to provide business,
administrative, and full management services for Physician relating to the
provision of Healthcare Services, including, without limitation, management,
administration, billing and collection services, financial consulting,
financial record keeping and reporting, preparation of financial statements,
cash management services, contract negotiation, scheduling of nonphysican
personnel, support services, specified nonphysician personnel, marketing, and
other business office services. Manager is hereby expressly authorized to
provide all such services in whatever reasonable manner Manager deems
appropriate to meet the day-to-day requirements of the business functions of,
or related to, Physician's provision of Healthcare Services at the Facility. To
the extent practicable, Manager, at its discretion, may from time to time
perform some or all of such business office services for Physician at locations
other than the Facility. Except as otherwise provided in this Agreement, all
expenses incurred by Manager in providing management services pursuant to this
Agreement shall be Manager's Expense. The parties acknowledge and agree that
Physician shall be solely responsible for and have sole control over the
provision of Healthcare Services performed for patients at the Facility and
that all diagnoses, treatments, procedures, and other professional healthcare
services shall be provided and performed by Physician or under the supervision
of Physician personnel retained by Physician, as such physician personnel, in
their sole discretion, deem appropriate.
III. Covenants of Manager.
3.1 Facilities and Equipment. Manager shall provide to Physician the
space for the Facility, including all equipment, fixtures, furniture, and
furnishings located therein that Manager deems reasonably necessary for the
provision of Healthcare Services. Manager shall consult with and seek the
advice of Physician in connection with equipping the Facility and in connection
with the purchase of additional or replacement equipment to ensure the
necessity and appropriateness of equipment placed in service at the Facility.
3.1.1 Retention of Title. Physician shall have access to and use of the
space for the clinic, and all equipment, fixtures, furniture, and furnishings
located therein throughout the Term for the sole purpose of providing
Healthcare Services to patients of the Facility; provide, however, that title
to all such equipment, fixtures, furniture, and furnishings therein shall, at
all times, be and remain vested in Manager or Manager's lessor, as the case may
be.
3.1.2 Repair and Maintenance. Manager shall be responsible for the repair
and maintenance of all equipment located in the Facility.
3.1.3 Disclaimer of Warranty. MANAGER MAKES NO REPRESENTATIONS OR
WARRANTIES, EITHER EXPRESSED OR IMPLIED, WITH RESPECT TO ANY EQUIPMENT,
FIXTURES, FURNITURE, FURNISHINGS, OR SUPPLIES PROVIDED BY MANAGER PURSUANT TO
THIS AGREEMENT, AND ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF
<PAGE> 4
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY EXPRESSLY
DISCLAIMED.
3.2 Utilities and Related Services. Manager shall negotiate, enter into,
and retain contracts for, and shall timely pay when due all charges relating to
electricity, gas, water, telephone, sewage, waste disposal, cleaning (interior
and exterior), pest extermination, heating and air-conditioning maintenance,
and similar services reasonably necessary and appropriate for the operation of
the facility and the provision of Healthcare Services therein.
3.3 Supplies. Manager shall obtain and provide all reasonable medical,
office, and other supplies, and shall ensure that the Facility is at all times
adequately stocked with such supplies as are reasonably necessary and
appropriate for the operation of the Facility.
3.4 Support Services. Manager shall provide all laundry, linen, uniform,
stationery, forms, postage, duplication or photocopying services, and other
support services as are reasonably necessary and appropriate for the operation
of the Facility.
3.5 Licenses and Permits. Manager shall coordinate all development and
planning processes, and apply for and use manager's best efforts to obtain and
maintain all federal, State and local licenses and regulatory permits required
for or in connection with the operation of the Facility and the equipment
(existing and future) located therein, other than those relating to the
practice of medicine by physicians retained by Physician.
3.6 Personnel
3.6.1 Management and Clerical Personnel. Manager shall employ or otherwise
retain, and shall be responsible for selecting, training, supervising,
scheduling, and terminating, all management and clerical personnel as Manager
deems reasonably necessary and appropriate for Manager's performance of its
duties and obligations under this Agreement. Manager shall have sole
responsibility for determining the salaries, wages, and fringe benefits of all
such management and clerical personnel, for paying such salaries and wages, and
for providing such fringe benefits, and for withholding, as required by law, any
sums for income tax, unemployment insurance, social security, or any other
withholding required by applicable law or governmental requirement.
3.6.2 Nonexclusivity. In recognition of the fact that the personnel
retained by Manager to provide services pursuant to this Agreement may from time
to time perform services for others, this Agreement shall not prevent Manager
from performing such services for others or restrict Manager from using such
personnel in the performance of services for others.
3.6.3 Contract Negotiations. Upon the request of Physician, Manager shall
advise with respect to and negotiate, either directly or on Physician's behalf,
as appropriate, all contractual arrangements with third parties as are
reasonably necessary and appropriate for Physician's provision of Healthcare
Services.
3.9 Billing and Collection. On behalf of and for the account of
Physician, Manager shall establish and maintain credit and billing and
collection policies and procedures, and shall be
<PAGE> 5
responsible for the billing and collection of all professional and other fees
for billable Healthcare Services provided by Physician. Manager shall advise
and consult with Physician regarding the fees for Healthcare Services provided
by Physician. In connection with the billing and collection services to be
provided hereunder, and throughout the Term, Physician hereby grants Manager an
irrevocable special power of attorney and appoints Manager as Physician's true
and lawful agent and attorney-in-fact, and Manager hereby accepts such special
power of attorney and appointment, for the following purposes:
3.9.1 To bill Physician's patients, in Physician's name and on Physician's
behalf, for all billable Healthcare Services provided by Physician.
3.9.2 To bill, in Physician's name and on Physician's behalf, all claims
for reimbursement or indemnification from Blue Shield/Blue Cross, insurance
companies, Medicare, Medicaid, and all other third-party payors for all covered
billable Healthcare Services provided by Physician;
3.9.3 To collect and receive, in Physician's name and on Physician's
behalf, all accounts receivable generated by such billings and claims for
reimbursement or indemnification, and to deposit all amounts collected into the
Manager/Physician Account, which account shall be maintained at Manager's
Expense and shall be and at all times remain in Manager's name. Physician
covenants to transfer and deliver to Manager all funds received by Physician
from patients or third-party payors for Healthcare services. Upon receipt by
Manager of any funds from patients or third-party payors or from Physician
pursuant hereto for Healthcare Services, Manager shall immediately deposit same
into the Manager/Physician Account; and
3.9.4 To take possession of, endorse in the name of Physician, and deposit
into the Manager/Physician Account any notes, checks, money orders, insurance
payments, and any other instruments received in payment of accounts receivable
for Healthcare Services, and to make withdrawals from the Manager/Physician
Account for payments of those items designated as Manager or Physician Expense.
3.11 Financial Matters
3.11.1 Annual Budget. Annually and at least thirty (30) days prior to
the commencement of each fiscal year of Physician, Manager shall prepare, in
consultation with Physician, and deliver to Physician an operational budget for
such fiscal year setting forth an estimate of facility revenues and expenses
(including, without limitation, all costs associated with the services provided
by Manager hereunder). Manager shall use its best efforts to perform its duties
and obligations under this Agreement such that the actual revenues, costs, and
expenses associated with Physician's provision of Healthcare Service in the
Facility during any applicable period shall be consistent with the Annual
Budget. Manager shall prepare and submit to Physician, and shall thereafter
adopt, an Annual Budget for the current fiscal year as soon as practicable.
3.11.2 Accounting and Financial Records. Manager shall establish and
administer accounting procedures, controls, and systems for the development
preparation, and safekeeping of records and books of accounts relating to the
business and financial affairs of Physician at the Facility all of which shall
be prepared and maintained in accordance with generally accepted accounting
<PAGE> 6
principles consistently applied. Manager shall prepare and deliver to
Physician, within (90) days of the end of each fiscal year of Physician, a
balance sheet, a profit and loss statement, and a statement of cash flow
reflecting the financial status of Physician in respect of the provision of
Healthcare Services at the Facility as of the end of such prior fiscal year,
all of which shall be prepared in accordance with generally accepted accounting
principles consistently applied. Manager shall also prepare and deliver to
Physician interim monthly financial statements for management purposes only.
3.12 Reports and Records
3.12.1 Medical Records. Manager shall establish, monitor, and maintain
procedures and policies for the timely creation, preparation, filing and
retrieval of all medical records generated by Physician in connection with
Physician's provision of Healthcare Services. All such medical records shall be
treated in accordance with all applicable State and federal laws relating to the
confidentiality thereof.
3.13 Legal Actions. As requested by Physician, Manager shall, at
Physician's Expense, advise and assist Physician in instituting or defending,
in the name of Physician, all legal actions or proceedings by or against third
parties arising out of Physician's provision of Healthcare Services at the
Facility, including, without limitation, those actions to collect fees for
billable Healthcare Services or other billable services provided to patients by
Physician, and those actions necessary for the protection and continued
operation of Physician.
3.14 Manager Insurance. Throughout the Term, Manager shall, at Manager's
Expense, obtain and maintain with commercial carriers, through captive
insurance companies, through self-insurance, or some combination thereof,
professional, casualty, and comprehensive general liability insurance covering
Manager, Manager personnel, and all of Manager's equipment in such amounts, on
such basis, and upon such terms and conditions as Manager deems appropriate.
IV. Covenants of Physician
4.1 Qualification. Physician shall at times during the Term (i) be and
remain legally qualified to provide Healthcare Services in a manner consistent
with all State and federal laws; (ii) be engaged in the full time practice of
medicine; and (iii) has general authority to act for and bind Physician in all
matters relevant to this Agreement.
4.2 Personnel
4.2.1 Physician Personnel. Physician shall retain physicians, who shall
hold and maintain valid and unlimited licenses to practice medicine in the
State, to provide Healthcare Services in the Facility. With respect to
Physician's Expense for its physician personnel, Physician shall be responsible
for paying the compensation for such physician personnel and for withholding,
as required by law, any sums for income tax, unemployment insurance, social
security, or any other withholding required by applicable law. Manager shall,
on behalf of Physician, administer the compensation and benefits and make
appropriate withholdings with respect to such physician personnel. All
physician personnel shall be under Physician's control and direction in the
<PAGE> 7
performance of Healthcare Services at the Facility.
4.2.2 Nonphysician Healthcare Personnel. Manager shall employ and be
responsible for the salaries, wages, fringe benefits, and other employment
related expenses with regard to all nonphysician healthcare personnel necessary
for the provision of Healthcare Services to patients at the Facility. Manager
shall determine the salaries, wages, and fringe benefits of all such personnel.
Physician shall be responsible for selecting, scheduling, and terminating all
nurses, laboratory technicians, and other nonphysician healthcare personnel as
Physician deems reasonably necessary and appropriate for the operation of the
Facility; provided, however, that all such nonphysician healthcare personnel
shall be hired and/or terminated by Physician after consultation with Manager.
Manager shall be responsible for training and supervising all nonphysician
healthcare personnel, and all such personnel shall be under Manager's control,
supervision and direction when assisting Physician in the performance of
Healthcare Services in the Facility.
4.3 Standards. As a continuing condition Manager's obligations
hereunder, Physician shall provide Healthcare Services in accordance with
applicable federal, State, and municipal laws, rules, regulations, ordinances,
and orders, and the ethics and standards of care of the medical community
wherein the Facility is located.
4.4 Physician Contracting. Physician shall not, without the prior
written consent of manager, have any right or authority to enter into any
agreements with third parties relating to the Facility, its operation, or any
agreements otherwise binding upon Manager.
4.5 Physician Insurance. Throughout the Term, Physician shall, at
Physician's Expense, obtain and maintain with commercial carriers, acceptable to
Manager, professional and comprehensive general liability insurance covering
Physician and those physician and nonphysician personnel Physician retains to
provide Healthcare Services in the minimum amount One Million Five Hundred
Thousand Dollars ($1,500,000) for each occurrence and Five Hundred
Thousand Dollars ($500,000) in the aggregate for Physician and each physician
and nonphysician personnel Physician retains to provide Healthcare Services.
Such insurance shall name Manager as an additional named insured to the extent
its interest may appear. Physician shall provide to Manager a certificate of
insurance evidencing such coverage. The insurance policy or policies shall
provide for at least thirty (30) day's advance written notice to Physician from
the insurer as to any alteration of coverage, cancellation, or proposed
cancellation for any cause. The certificate of insurance shall require that
such notice also be given to Manager.
4.6 Indemnification by Physician. Physician shall indemnify and hold
Manager harmless from and against any and all liability losses, damages,
claims, causes of action, and expenses, including, without limitation,
reasonable attorney's fees and associated costs, associated with or resulting,
directly or indirectly, from any act or omission of Physician, its employees,
agents, or independent contractors in or about the Facility during the Term. To
be entitled to such indemnification, Manager shall give Physician prompt
written notice of the assertion by a third party of any claim with respect to
which Manager might bring a claim for indemnification hereunder, and in all
events must provide such written notice to Physician within the applicable
period for defense of such claim by Physician. Physician shall, at Physician's
Expense, have the
<PAGE> 8
right to defend and litigate any such third-party claim.
V. Management Fee and Disbursement of Funds
5.1 Amount of Management Fee. Physician agrees to pay a management Fee
of 40% of collection to Manager to cover Manager's Expense. The Management Fee
is not intended and shall not be interpreted or applied as permitting Manager
to share in Physician's fees for Healthcare Services or any other services, but
is acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the items and services furnished by Manager pursuant to this
Agreement, considering the nature of the services required by Physician and the
risks assumed by Manager.
5.2 Payment of management Fee. The Management Fee shall be due and
payable on or before the tenth (10) calendar day of each month for services
provided in the immediately preceding month.
VI. Term and Termination
6.1 Initial and Renewal Terms. The term of this Agreement will be for
a Five (5) year period commencing as of March 1, 1996 and expiring as of
February 28, 2001 unless and until terminated as provided in Section 6.2 of this
Agreement the ("Term").
6.2 Termination
6.2.1 Termination by Manager. Manager may terminate this Agreement upon
the occurrence of any one of the following events:
(a) The revocation, suspension, or cancellation of the license to
practice medicine in the State of any physician retained by
Physician to provide Healthcare services in the Facility;
(b) any physician retained by Physician to provide Healthcare Services
in the Facility is convicted of a felony;
(c) the dissolution of Physician;
(d) the Physician fails to pay Manager the Management Fee as provided
for in Article V of this Agreement within ten (10) days of the date
such amounts are due as provided in Section 5.2 hereof;
(e) upon the expiration of sixty (60) days after Manager has given
Physician written notice of Manager's intent to terminate this
Agreement with or without cause; or
6.2.2 Termination by Physician. Physician may terminate this Agreement
upon the occurrence of the dissolution of Manager.
6.2.3 Termination by Agreement. In the event Physician and Manager shall
mutually agree
<PAGE> 9
in writing, this agreement may be terminated on the date specified in such
written agreement.
6.2.4 Damage or Condemnation. In the event the Facility is totally or
substantially destroyed by fire, explosion, flood, windstorm, hail, earthquake,
hurricane, tornado, or other casualty or act of God, or in the event all or a
substantial portion of the Facility and the premises on which it is situated is
taken or to be taken by condemnation or eminent domain proceeding, then either
party may by written notice to the other immediately terminate this Agreement.
6.2.5 Bankruptcy. In the event that either party become insolvent, or if
any petition under federal or state law pertaining to bankruptcy or insolvency
or for a reorganization or arrangement or other relief from creditors shall be
filed by or against either party, or if any assignment, trust, mortgage, or
other transfer shall be made of all or a substantial part of the property of
either party, or if either party shall make or offer a composition in its debts
with its creditors, or if a receiver, trustee, or similar officer or creditor's
committee shall be appointed to take charge of any property of or to operate or
wind up the affairs of either party, then the other party may, by written
notice, as specified in Section 7.3, immediately terminate this Agreement.
6.2.6 Action by Texas State Board of Medical Examiners. In the event the
Texas State Board of medical Examiners shall, solely by virtue of this
Agreement, initiate an action to revoke the license to practice medicine in the
State of any physician retained by Physician, then Physician may by written
notice to Manager immediately terminate this Agreement. In the event the Texas
State Board of Medical Examiners shall, on any other grounds, including,
without limitation, improper medical practice or improper conduct by any
physician retained by Physician, initiate an action to restrict, suspend, or
revoke the license of such physician to practice medicine in the State, then
Manager may by written notice to Physician immediately terminate this
Agreement.
6.2.7 Default. In the event either party shall give written notice to the
other that such other party has substantially defaulted in the performance of
any material duty or material obligation imposed upon it by this Agreement, and
such default shall not have been cured within thirty (30) days following the
giving of such written notice, the party giving such written notice shall have
the right to immediately terminate this Agreement unless the defaulting party
shall, within said thirty (30) day period, have made a good faith effort to
initiate corrective action and it is contemplated that such corrective action
will be completed within the following thirty (30) day period.
6.3 Effects of Termination. Upon termination of this Agreement, as
hereinabove provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
and (ii) obligations, promises, or covenants set forth herein that are
expressly made to extend beyond the Term, including, without limitation,
indemnities, payment of accrued management Fees, if any, and the authority and
limited power of attorney granted to manager in Section 3.9 herein which shall
survive until such time as such obligations, promises, or covenants shall be
fully paid and satisfied (all of which provisions shall survive the expiration
or termination of this Agreement). Notwithstanding anything to the contrary,
herein, upon termination of this Agreement for any reason, all accrued
Management Fees, if any, shall become immediately due and payable without
demand or notice.
<PAGE> 10
VII. Miscellaneous
7.1 Independent Relationship. It is mutually understood and agreed that
Physician and Manager, in performing their respective duties and obligations
under this Agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended nor shall be construed to create an employer/employee relationship or
a joint venture relationship, or to allow Manager to exercise control or
direction of any nature, kind, or description over the manner or method by
which Physician performs Healthcare services.
7.2 Representatives
7.2.1 Physician Representative. Except as may be herein more specifically
provided, Physician shall act with respect to all matters hereunder through
Physician.
7.2.2 Manager Representative. Except as may be herein more specifically
provided, Manager shall act with respect to all matters hereunder through the
President of Manager.
7.3 Notices. Any notice, demand, or communication required, permitted,
or desired to be given hereunder shall be deemed effectively given when
personally delivered or mailed by prepaid certified mail, return receipt
requested, addressed as follows:
Physician: Ping S. Chu, M.D.
4301 A Vista
Pasadena, Texas 77504
Manager: Doctors Practice management, Inc.
10304 I-10 East, Suite 369
Houston, Texas 77029
or to such other address, or to the attention of such other person or officer,
as either party may by written notice designate.
7.4 Governing Law. This Agreement has been executed and delivered in,
and shall be governed by, and construed and enforced in accordance with, the
laws of the State of Texas.
7.5 Assignment. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that Physician shall not assign its rights and
obligations under this Agreement without the prior written consent of Manager.
Manager shall have the right to (i) assign its rights and obligations hereunder
to any third party, and (ii) collaterally assign its interest in this Agreement
and its right to collect Management Fees hereunder to any financial institution
or other third party without the consent of Physician.
7.6 Waiver of Breach. the waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or to be construed to
constitute, a waiver of any subsequent
<PAGE> 11
breach of the same or another provision hereof.
7.7 Enforcement. In the event either party resorts to legal action to
enforce or interpret any provision of this Agreement, the prevailing party
shall be entitled to recover costs of such action so incurred, including,
without limitation, reasonable attorney's fees.
7.8 Gender and Number. Whenever the context of this Agreement requires,
the gender of all words herein shall include the masculine, feminine, and
neuter, and the number of all words herein shall include the singular and
plural.
7.9 Additional Assurance. Except as may be herein specifically provided
to the contrary, the provisions of this Agreement shall be self-operative and
shall not require further agreement by the parties; provided, however, at the
request of either party, the other party shall execute such additional
instruments and take such additional acts as are reasonable and as the
requesting party may deem necessary to effectuate this Agreement.
7.10 Consents, Approvals, and Exercise of discretion. Except as may be
herein specifically provided to the contrary, whenever this Agreement requires
any consent or approval to be given by either party, or either party must or
may exercise discretion, the parties agree that such consent or approval shall
not be unreasonably withheld or delayed, and such discretion shall be
reasonably exercised.
7.11 Force Majeure. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party.
7.12 Severability. in the event any provision of this Agreement is held
to be invalid, illegal, or unenforceable for any reason and in any respect,
such invalidity, illegality, or unenforceability shall not affect the remainder
of this agreement, which shall be and remain in full force and effect,
enforceable in accordance with its terms.
7.13 Divisions and Headings. The division of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
7.14 Amendments and Agreement Execution. This Agreement and amendments
hereto shall be in writing and executed in multiple copies by the duly
authorized officers of Physician and Manager. Each multiple copy shall be
deemed an original, but all multiple copies together shall constitute one and
the same instrument.
7.16 Entire Agreement. This Agreement supersedes all previous contracts
and constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement. Neither party shall be entitled to benefits
other than those specified herein. No oral statements
<PAGE> 12
or prior written material not specifically incorporated herein shall be of any
force and effect, and no changes in or additions to this Agreement shall be
recognized unless incorporated herein by amendment as provided herein, such
amendment(s) to become effective on the date stipulated in such amendment(s).
The parties specifically acknowledged that, in entering into and executing this
agreement, the parties rely solely upon the representations and agreements
contained in this Agreement and no others.
IN WITNESS WHEREOF, Physician and Manager have executed this Agreement in
multiple originals this 1st day of March, 1996, but effective as of the date
first above written.
Physician: Ping S. Chu, M.D.
By: /s/ Ping S. Chu
------------------------------
Manager: Doctors Practice management, Inc.
By: /s/ Chiu Chan
------------------------------
Chiu Chan
President
<PAGE> 1
EXHIBIT 10.13
FULL SERVICE MANAGEMENT AGREEMENT
This FULL SERVICE MANAGEMENT AGREEMENT ("Agreement") is entered into
and effective as of the 1st day of May, 1996 (notwithstanding the date of
actual execution) by and between DOCTORS PRACTICE MANAGEMENT, INC., A Texas
business corporation ("Manager"), and William E. Grose, M.D., P.A., a Texas
Professional Association ("Physician").
WITNESSETH:
WHEREAS, Physician is a duly and validly existing Texas Professional
Association that has been organized for the purpose of operating a medical
practice and providing medical and related healthcare services ("Healthcare
Services") to the general public in the Greater Houston, Texas area;
WHEREAS, Manager is experienced in providing management and related
items and services to physicians, professional associations, and other
professional healthcare entities and individuals;
WHEREAS, Physician desires and intends to obtain such management,
administrative, and business services necessary and appropriate for Physician's
business operations and the provision of Healthcare Services by Physician, and
Manager desires to provide, and is capable of providing, all such management,
administrative, and business services; and
WHEREAS, Physician and Manager mutually desire an arrangement that:
(1) ensures consistency of service, quality of care, and safety of
Physician's patients;
(2) facilitates effective utilization of Healthcare services;
(3) ensures consistent and customary patterns for the provision of
Healthcare Services;
(4) facilitates the management and administration of the day-to-day
business operations of the Physician; and
(5) facilitates the establishment and maintenance of a public image of
excellence and high quality for the Physician,
all for the benefit of those persons seeking Healthcare Services as patients of
the Physician.
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby forever acknowledged and confessed, the parties
hereto agree as follows:
I. Definitions
For the purposes of this Agreement, the following terms shall have the
following meanings
<PAGE> 2
described thereto, unless otherwise clearly required by the context in which
such term is used.
1.1 Agreement. The term "Agreement" shall mean this Full Service
Management Agreement between Physician and Manager and any amendments hereto as
may from time to time be adopted as hereinafter provided.
1.2 Annual Budget. The term "Annual Budget" shall mean the operational
budget of the Physician, for a given fiscal year, prepared by Manager in
consultation with Physician.
1.3 Physician. The term "Physician" shall mean William E. Grose, M.D.,
P.A., a Texas Professional Association.
1.4 Manger/Physician Account. The term "Manager/Physician Account" shall
mean the bank account of the Manager established on behalf of the Physician as
described in Section 3.9 hereof.
1.5 Physician Expense or Physician's Expense. The term "Physician Expense"
or "Physician's Expense" shall mean an expense or cost incurred by Physician
or Manager on behalf of Physician and for which Physician is financially
liable, including management fee, regardless of whether the transfer of
Physician's funds to satisfy the Physician's financial liability is performed
by Physician or by Manager on Physician's behalf.
1.6 Facility. The term "Facility" shall mean the physical premises in which
Healthcare Services are furnished to patients by the Physician and shall
include, if applicable, multiple locations.
1.7 Healthcare Services. The term "Healthcare Services" shall mean the
medical and related healthcare services provided by Physician to patients.
1.8 Management Fee. The term "Management Fee" shall mean Manager's
compensation established and described in Article V hereof.
1.9 Manager. The term "Manager" shall mean Doctors Practice Management,
Inc., a Texas business corporation.
1.10 Manager Expense or Manager's Expense. The term "Manager Expense" or
"Manager's Expense" shall mean an expense or cost incurred by Manager on behalf
of Physician and for which Manager is financially liable.
1.11 State. The term "State" shall mean the State of Texas.
1.12 Term. The term "Term" shall mean the initial and any renewal periods of
duration of this Agreement as described in Section 6.1 hereof.
II. Appointment and Authority of Manager
2.1 Appointment. Physician hereby appoints Manager as its sole and
exclusive agent for the
<PAGE> 3
management and administration of the business functions and services related to
Physician's provision of Healthcare Services and Manager hereby accepts such
appointment, subject at all times to the provisions of this Agreement.
2.2 Authority. Consistent with the provisions of this Agreement, Manager
shall have the responsibility and commensurate authority to provide business,
administrative, and full management services for Physician relating to the
provision of Healthcare Services, including, without limitation, management,
administration, billing and collection services, financial consulting,
financial record keeping and reporting, preparation of financial statements,
cash management services, contract negotiation, scheduling of nonphysican
personnel, support services, specified nonphysician personnel, marketing, and
other business office services. Manager is hereby expressly authorized to
provide all such services in whatever reasonable manner Manager deems
appropriate to meet the day-to-day requirements of the business functions of,
or related to, Physician's provision of Healthcare Services at the Facility.
To the extent practicable, Manager, at its discretion, may from time to time
perform some or all of such business office services for Physician at locations
other than the Facility. Except as otherwise provided in this Agreement, all
expenses incurred by Manager in providing management services pursuant to this
Agreement shall be Manager's Expense. The parties acknowledge and agree that
Physician shall be solely responsible for and have sole control over the
provision of Healthcare Services performed for patients at the Facility and
that all diagnoses, treatments, procedures, and other professional healthcare
services shall be provided and performed by Physician or under the supervision
of Physician personnel retained by Physician, as such physician personnel, in
their sole discretion, deem appropriate.
III. Covenants of Manager.
3.1 Facilities and Equipment. Manager shall provide to Physician the space
for the Facility, including all equipment, fixtures, furniture, and furnishings
located therein that Manager deems reasonably necessary for the provision of
Healthcare Services. Manager shall consult with and seek the advice of
Physician in connection with equipping the Facility and in connection with the
purchase of additional or replacement equipment to ensure the necessity and
appropriateness of equipment placed in service at the Facility.
3.1.1 Retention of Title. Physician shall have access to and use of the
space for the clinic, and all equipment, fixtures, furniture, and furnishings
located therein throughout the Term for the sole purpose of providing
Healthcare Services to patients of the Facility; provide, however, that title
to all such equipment, fixtures, furniture, and furnishings therein shall, at
all times, be and remain vested in Manager or Manager's lessor, as the case may
be.
3.1.2 Repair and Maintenance. Manager shall be responsible for the repair
and maintenance of all equipment located in the Facility.
3.1.3 Disclaimer of Warranty. MANAGER MAKES NO REPRESENTATIONS OR
WARRANTIES, EITHER EXPRESSED OR IMPLIED, WITH RESPECT TO ANY EQUIPMENT,
FIXTURES, FURNITURE, FURNISHINGS, OR SUPPLIES PROVIDED BY MANAGER PURSUANT TO
THIS AGREEMENT, AND ALL WARRANTIES,
<PAGE> 4
EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY EXPRESSLY
DISCLAIMED.
3.2 Utilities and Related Services. Manager shall negotiate, enter into,
and retain contracts for, and shall timely pay when due all charges relating to
electricity, gas, water, telephone, sewage, waste disposal, cleaning(interior
and exterior), pest extermination, heating and air-conditioning maintenance,
and similar services reasonably necessary and appropriate for the operation of
the facility and the provision of Healthcare Services therein.
3.3 Supplies. Manager shall obtain and provide all reasonable medical,
office, and other supplies, and shall ensure that the Facility is at all times
adequately stocked with such supplies as are reasonably necessary and
appropriate for the operation of the Facility.
3.4 Support Services. Manager shall provide all laundry, linen, uniform,
stationery, forms, postage, duplication or photocopying services, and other
support services as are reasonably necessary and appropriate for the operation
of the Facility.
3.5 Licenses and Permits. Manager shall coordinate all development and
planning processes, and apply for and use manager's best efforts to obtain and
maintain all federal, State and local licenses and regulatory permits required
for or in connection with the operation of the Facility and the equipment
(existing and future) located therein, other than those relating to the
practice of medicine by physicians retained by Physician.
3.6 Personnel
3.6.1 Management and Clerical Personnel. Manager shall employ or otherwise
retain, and shall be responsible for selecting, training, supervising,
scheduling, and terminating, all management and clerical personnel as Manager
deems reasonably necessary and appropriate for Manager's performance of its
duties and obligations under this Agreement. Manager shall have sole
responsibility for determining the salaries, wages, and fringe benefits of all
such management and clerical personnel, for paying such salaries and wages, and
for providing such fringe benefits, and for withholding, as required by law, any
sums for income tax, unemployment insurance, social security, or any other
withholding required by applicable law or governmental requirement.
3.6.2 Nonexclusivity. In recognition of the fact that the personnel retained
by Manager to provide services pursuant to this Agreement may from time to time
perform services for others, this Agreement shall not prevent Manager from
performing such services for others or restrict Manager from using such
personnel in the performance of services for others.
3.6.3 Contract Negotiations. Upon the request of Physician, Manager shall
advise with respect to and negotiate, either directly or on Physician's behalf,
as appropriate, all contractual arrangements with third parties as are
reasonably necessary and appropriate for Physician's provision of Healthcare
Services.
3.9 Billing and Collection. On behalf of and for the account of Physician,
Manager shall
<PAGE> 5
establish and maintain credit and billing and collection policies and
procedures, and shall be responsible for the billing and collection of all
professional and other fees for billable Healthcare Services provided by
Physician. Manager shall advise and consult with Physician regarding the fees
for Healthcare Services provided by Physician. In connection with the billing
and collection services to be provided hereunder, and throughout the Term,
Physician hereby grants Manager an irrevocable special power of attorney and
appoints Manager as Physician's true and lawful agent and attorney-in-fact, and
Manager hereby accepts such special power of attorney and appointment, for the
following purposes:
3.9.1 To bill Physician's patients, in Physician's name and on Physician's
behalf, for all billable Healthcare Services provided by Physician.
3.9.2 To bill, in Physician's name and on Physician's behalf, all claims for
reimbursement or indemnification from Blue Shield/Blue Cross, insurance
companies, Medicare, Medicaid, and all other third-party payors for all covered
billable Healthcare Services provided by Physician;
3.9.3 To collect and receive, in Physician's name and on Physician's behalf,
all accounts receivable generated by such billings and claims for reimbursement
or indemnification, and to deposit all amounts collected into the
Manager/Physician Account, which account shall be maintained at Manager's
Expense and shall be and at all times remain in Manager's name. Physician
covenants to transfer and deliver to Manager all funds received by Physician
from patients or third-party payors for Healthcare services. Upon receipt by
Manager of any funds from patients or third-party payors or from Physician
pursuant hereto for Healthcare Services, Manager shall immediately deposit same
into the Manager/Physician Account; and
3.9.4 To take possession of, endorse in the name of Physician, and deposit
into the Manager/Physician Account any notes, checks, money orders, insurance
payments, and any other instruments received in payment of accounts receivable
for Healthcare Services, and to make withdrawals from the Manager/Physician
Account for payments of those items designated as Manager or Physician Expense.
3.11 Financial Matters
3.11.1 Annual Budget. Annually and at least thirty (30) days prior to the
commencement of each fiscal year of Physician, Manager shall prepare, in
consultation with Physician, and deliver to Physician an operational budget for
such fiscal year setting forth an estimate of facility revenues and expenses
(including, without limitation, all costs associated with the services provided
by Manager hereunder). Manager shall use its best efforts to perform its
duties and obligations under this Agreement such that the actual revenues,
costs, and expenses associated with Physician's provision of Healthcare Service
in the Facility during any applicable period shall be consistent with the
Annual Budget. Manager shall prepare and submit to Physician, and shall
thereafter adopt, an Annual Budget for the current fiscal year as soon as
practicable.
3.11.2 Accounting and Financial Records. Manager shall establish and
administer accounting procedures, controls, and systems for the development
preparation, and safekeeping of records and books of accounts relating to the
business and financial affairs of Physician at the Facility
<PAGE> 6
all of which shall be prepared and maintained in accordance with generally
accepted accounting principles consistently applied. Manager shall prepare and
deliver to Physician, within (90) days of the end of each fiscal year of
Physician, a balance sheet, a profit and loss statement, and a statement of
cash flow reflecting the financial status of Physician in respect of the
provision of Healthcare Services at the Facility as of the end of such prior
fiscal year, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied. Manager shall also
prepare and deliver to Physician interim monthly financial statements for
management purposes only.
3.12 Reports and Records
3.12.1 Medical Records. Manager shall establish, monitor, and maintain
procedures and policies for the timely creation, preparation, filing and
retrieval of all medical records generated by Physician in connection with
Physician's provision of Healthcare Services. All such medical records shall
be treated in accordance with all applicable State and federal laws relating to
the confidentiality thereof.
3.13 Legal Actions. As requested by Physician, Manager shall, at
Physician's Expense, advise and assist Physician in instituting or defending,
in the name of Physician, all legal actions or proceedings by or against third
parties arising out of Physician's provision of Healthcare Services at the
Facility, including, without limitation, those actions to collect fees for
billable Healthcare Services or other billable services provided to patients by
Physician, and those actions necessary for the protection and continued
operation of Physician.
3.14 Manager Insurance. Throughout the Term, Manager shall, at Manager's
Expense, obtain and maintain with commercial carriers, through captive
insurance companies, through self-insurance, or some combination thereof,
professional, casualty, and comprehensive general liability insurance covering
Manager, Manager personnel, and all of Manager's equipment in such amounts, on
such basis, and upon such terms and conditions as Manager deems appropriate.
IV. Covenants of Physician
4.1 Qualification. Physician shall at times during the Term (i) be and
remain legally qualified to provide Healthcare Services in a manner consistent
with all State and federal laws; (ii) be engaged in the full time practice of
medicine; and (iii) has general authority to act for and bind Physician in all
matters relevant to this Agreement.
4.2 Personnel
4.2.1 Physician Personnel. Physician shall retain physicians, who shall
hold and maintain valid and unlimited licenses to practice medicine in the
State, to provide Healthcare Services in the Facility. With respect to
Physician's Expense for its physician personnel, Physician shall be responsible
for paying the compensation for such physician personnel and for withholding,
as required by law, any sums for income tax, unemployment insurance, social
security, or any other withholding required by applicable law. Manager shall,
on behalf of Physician, administer the
<PAGE> 7
compensation and benefits and make appropriate withholdings with respect to
such physician personnel. All physician personnel shall be under Physician's
control and direction in the performance of Healthcare Services at the
Facility.
4.2.2 Nonphysician Healthcare Personnel. Manager shall employ and be
responsible for the salaries, wages, fringe benefits, and other employment
related expenses with regard to all nonphysician healthcare personnel necessary
for the provision of Healthcare Services to patients at the Facility. Manager
shall determine the salaries, wages, and fringe benefits of all such personnel.
Physician shall be responsible for selecting, scheduling, and terminating all
nurses, laboratory technicians, and other nonphysician healthcare personnel as
Physician deems reasonably necessary and appropriate for the operation of the
Facility; provided, however, that all such nonphysician healthcare personnel
shall be hired and/or terminated by Physician after consultation with Manager.
Manager shall be responsible for training and supervising all nonphysician
healthcare personnel, and all such personnel shall be under Manager's control,
supervision and direction when assisting Physician in the performance of
Healthcare Services in the Facility.
4.3 Standards. As a continuing condition Manager's obligations hereunder,
Physician shall provide Healthcare Services in accordance with applicable
federal, State, and municipal laws, rules, regulations, ordinances, and orders,
and the ethics and standards of care of the medical community wherein the
Facility is located.
4.4 Physician Contracting. Physician shall not, without the prior written
consent of manager, have any right or authority to enter into any agreements
with third parties relating to the Facility, its operation, or any agreements
otherwise binding upon Manager.
4.5 Physician Insurance. Throughout the Term, Physician shall, at
Physician's Expense, obtain and maintain with commercial carriers, acceptable to
Manager, professional and comprehensive general liability insurance covering
Physician and those physician and nonphysician personnel Physician retains to
provide Healthcare Services in the minimum amount ______________________ Dollars
($________________________________) for each occurrence and
_______________________________________Dollars ($________________) in the
aggregate for Physician and each physician and nonphysician personnel Physician
retains to provide Healthcare Services. Such insurance shall name Manager as
an additional named insured to the extent its interest may appear. Physician
shall provide to Manager a certificate of insurance evidencing such coverage.
The insurance policy or policies shall provide for at least thirty (30) day's
advance written notice to Physician from the insurer as to any alteration of
coverage, cancellation, or proposed cancellation for any cause. The
certificate of insurance shall require that such notice also be given to
Manager.
4.6 Indemnification by Physician. Physician shall indemnify and hold
Manager harmless from and against any and all liability losses, damages,
claims, causes of action, and expenses, including, without limitation,
reasonable attorney's fees and associated costs, associated with or resulting,
directly or indirectly, from any act or omission of Physician, its employees,
agents, or independent contractors in or about the Facility during the Term.
To be entitled to such
<PAGE> 8
indemnification, Manager shall give Physician prompt written notice of the
assertion by a third party of any claim with respect to which Manager might
bring a claim for indemnification hereunder, and in all events must provide
such written notice to Physician within the applicable period for defense of
such claim by Physician. Physician shall, at Physician's Expense, have the
right to defend and litigate any such third-party claim.
V. Management Fee and Disbursement of Funds
5.1 Amount of Management Fee. Physician agrees to pay a management Fee of
50% of collection to Manager to cover Manager's Expense. The Management Fee is
not intended and shall not be interpreted or applied as permitting Manager to
share in Physician's fees for Healthcare Services or any other services, but is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the items and services furnished by Manager pursuant to this
Agreement, considering the nature of the services required by Physician and the
risks assumed by Manager.
5.2 Payment of management Fee. The Management Fee shall be due and payable
on or before the tenth (10) calendar day of each month for services provided in
the immediately preceding month.
VI. Term and Termination
6.1 Initial and Renewal Terms. The term of this Agreement will be for a Five
(5) year period commencing as of May 1, 1996, and expiring as of April 30, 2001,
unless and until terminated as provided in Section 6.2 of this Agreement the
("Term").
6.2 Termination
6.2.1 Termination by Manager. Manager may terminate this Agreement upon the
occurrence of any one of the following events:
(a) The revocation, suspension, or cancellation of the license to practice
medicine in the State of any physician retained by Physician to
provide Healthcare services in the Facility;
(b) any physician retained by Physician to provide Healthcare Services in
the Facility is convicted of a felony;
(c) the dissolution of Physician;
(d) the Physician fails to pay Manager the Management Fee as provided for
in Article V of this Agreement within ten (10) days of the date such
amounts are due as provided in Section 5.2 hereof;
(e) upon the expiration of sixty (60) days after Manager has given
Physician written notice of Manager's intent to terminate this
Agreement with or without cause; or
<PAGE> 9
6.2.2 Termination by Physician. Physician may terminate this Agreement upon
the occurrence of the dissolution of Manager.
6.2.3 Termination by Agreement. In the event Physician and Manager shall
mutually agree in writing, this agreement may be terminated on the date
specified in such written agreement.
6.2.4 Damage or Condemnation. In the event the Facility is totally or
substantially destroyed by fire, explosion, flood, windstorm, hail, earthquake,
hurricane, tornado, or other casualty or act of God, or in the event all or a
substantial portion of the Facility and the premises on which it is situated is
taken or to be taken by condemnation or eminent domain proceeding, then either
party may by written notice to the other immediately terminate this Agreement.
6.2.5 Bankruptcy. In the event that either party become insolvent, or if
any petition under federal or state law pertaining to bankruptcy or insolvency
or for a reorganization or arrangement or other relief from creditors shall be
filed by or against either party, or if any assignment, trust, mortgage, or
other transfer shall be made of all or a substantial part of the property of
either party, or if either party shall make or offer a composition in its debts
with its creditors, or if a receiver, trustee, or similar officer or creditor's
committee shall be appointed to take charge of any property of or to operate or
wind up the affairs of either party, then the other party may, by written
notice, as specified in Section 7.3, immediately terminate this Agreement.
6.2.6 Action by Texas State Board of Medical Examiners. In the event the
Texas State Board of medical Examiners shall, solely by virtue of this
Agreement, initiate an acton to revoke the license to practice medicine in the
State of any physician retained by Physician, then Physician may by written
notice to Manager immediately terminate this Agreement. In the event the Texas
State Board of Medical Examiners shall, on any other grounds, including,
without limitation, improper medical practice or improper conduct by any
physician retained by Physician, initiate an action to restrict, suspend, or
revoke the license of such physician to practice medicine in the State, then
Manager may by written notice to Physician immediately terminate this
Agreement.
6.2.7 Default. In the event either party shall give written notice to the
other that such other party has substantially defaulted in the performance of
any material duty or material obligation imposed upon it by this Agreement, and
such default shall not have been cured within thirty (30) days following the
giving of such written notice, the party giving such written notice shall have
the right to immediately terminate this Agreement unless the defaulting party
shall, within said thirty (30) day period, have made a good faith effort to
initiate corrective action and it is contemplated that such corrective action
will be completed within the following thirty (30) day period.
6.3 Effects of Termination. Upon termination of this Agreement, as
hereinabove provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
and (ii) obligations, promises, or covenants set forth herein that are
expressly made to extend beyond the Term, including, without limitation,
indemnities, payment of accrued management Fees, if any, and the authority and
limited power of attorney granted to manager in Section 3.9 herein which shall
survive until such time as such obligations, promises, or covenants shall be
fully paid and satisfied (all of which provisions shall survive the expiration
<PAGE> 10
or termination of this Agreement). Notwithstanding anything to the contrary,
herein, upon termination of this Agreement for any reason, all accrued
Management Fees, if any, shall become immediately due and payable without
demand or notice.
VII. Miscellaneous
7.1 Independent Relationship. It is mutually understood and agreed that
Physician and Manager, in performing their respective duties and obligations
under this Agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended nor shall be construed to create an employer/employee relationship or
a joint venture relationship, or to allow Manager to exercise control or
direction of any nature, kind, or description over the manner or method by
which Physician performs Healthcare services.
7.2 Representatives
7.2.1 Physician Representative. Except as may be herein more specifically
provided, Physician shall act with respect to all matters hereunder through
Physician.
7.2.2 Manager Representative. Except as may be herein more specifically
provided, Manager shall act with respect to all matters hereunder through the
President of Manager.
7.3 Notices. Any notice, demand, or communication required, permitted, or
desired to be given hereunder shall be deemed effectively given when personally
delivered or mailed by prepaid certified mail, return receipt requested,
addressed as follows:
Physician: William E. Grose, M.D., P.A.
4201 Grath Road, Suite 205
Baytown, Texas 77521
Manager: Doctors Practice management, Inc.
10304 I-10 East, Suite 369
Houston, Texas 77029
or to such other address, or to the attention of such other person or officer,
as either party may by written notice designate.
7.4 Governing Law. This Agreement has been executed and delivered in, and
shall be governed by, and construed and enforced in accordance with, the laws
of the State of Texas.
7.5 Assignment. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that Physician shall not assign its rights and
obligations under this Agreement without the prior written consent of Manager.
Manager shall have the right to (i) assign its rights and obligations hereunder
to any third party, and (ii) collaterally assign its interest in this Agreement
and its right to collect Management Fees hereunder to any financial institution
or other third party without the consent of Physician.
<PAGE> 11
7.6 Waiver of Breach. the waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or to be construed to
constitute, a waiver of any subsequent breach of the same or another provision
hereof.
7.7 Enforcement. In the event either party resorts to legal action to
enforce or interpret any provision of this Agreement, the prevailing party
shall be entitled to recover costs of such action so incurred, including,
without limitation, reasonable attorney's fees.
7.8 Gender and Number. Whenever the context of this Agreement requires, the
gender of all words herein shall include the masculine, feminine, and neuter,
and the number of all words herein shall include the singular and plural.
7.9 Additional Assurance. Except as may be herein specifically provided to
the contrary, the provisions of this Agreement shall be self-operative and
shall not require further agreement by the parties; provided, however, at the
request of either party, the other party shall execute such additional
instruments and take such additional acts as are reasonable and as the
requesting party may deem necessary to effectuate this Agreement.
7.10 Consents, Approvals, and Exercise of discretion. Except as may be
herein specifically provided to the contrary, whenever this Agreement requires
any consent or approval to be given by either party, or either party must or
may exercise discretion, the parties agree that such consent or approval shall
not be unreasonably withheld or delayed, and such discretion shall be
reasonably exercised.
7.11 Force Majeure. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party.
7.12 Severability. in the event any provision of this Agreement is held to
be invalid, illegal, or unenforceable for any reason and in any respect, such
invalidity, illegality, or unenforceability shall not affect the remainder of
this agreement, which shall be and remain in full force and effect, enforceable
in accordance with its terms.
7.13 Divisions and Headings. The division of this Agreement into articles,
sections, and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall not affect in any way the
meaning or interpretation of this Agreement.
7.14 Amendments and Agreement Execution. This Agreement and amendments
hereto shall be in writing and executed in multiple copies by the duly
authorized officers of Physician and Manager. Each multiple copy shall be
deemed an original, but all multiple copies together shall constitute one and
the same instrument.
<PAGE> 12
7.16 Entire Agreement. This Agreement supersedes all previous contracts and
constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement. Neither party shall be entitled to benefits
other than those specified herein. No oral statements or prior written
material not specifically incorporated herein shall be of any force and effect,
and no changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to
become effective on the date stipulated in such amendment(s). The parties
specifically acknowledged that, in entering into and executing this agreement,
the parties rely solely upon the representations and agreements contained in
this Agreement and no others.
IN WITNESS WHEREOF, Physician and Manager have executed this Agreement in
multiple originals this 1st day of May 1996, but effective as of the date
first above written.
Physician: William E. Grose, M.D., P.A.
By: /s/ William E. Grose
-------------------------------
Manager: Doctors Practice management, Inc.
By: /s/ Chiu Chan
------------------------------------
Chiu Chan
President
<PAGE> 1
EXHIBIT 10.14
PROMISSORY NOTE
$666,922.22 HOUSTON, TEXAS November 15, 1996
FOR VALUE RECEIVED, the undersigned, J.C.W. MEDICAL ASSOCIATES, P.A.,
("Maker") promises to pay to the order of Dynacq International, Inc., ("Payee")
of Houston, Harris County, Texas in lawful money of the United States of
America, the sum of SIX HUNDRED SIXTY SIX THOUSAND NINE HUNDRED TWENTY TWO AND
22/100----($666,922.22) DOLLARS, together with interest on the unpaid principal
balance hereof from date hereof until maturity at the rate of Eight percent per
annum; provided, however, in no event shall interest hereon ever be charged,
paid, collected or received at a rate in excess of the maximum nonusurious rate
from time to time permitted by applicable Federal or Texas law, whichever shall
permit the higher lawful rate (the "Highest Lawful Rate"). If the interest
rate provided for elsewhere herein at any time would exceed the Highest Lawful
Rate but for the limitation contained herein, the actual rate of interest to
accrue on the unpaid amount of this Note shall be limited to the Highest Lawful
Rate.
At all such times, if any, as Texas law shall establish the Highest Lawful
Rate, the Highest Lawful Rate shall be the "monthly ceiling" (as defined in
Chapter One of the Texas Credit Code) from time to time in effect; but the
Payee may from time to time, as to current and future balances, implement any
other ceiling under such Chapter and/or revise the index, formula or provision
of law used to compute the rate on this Note by notice to the Maker, if and to
the extent permitted by, and the manner provided in, such Chapter.
This Note shall be due and payable as follows:
Principal and interest shall be due and payable in one hundred eighty (180)
equal monthly installments of six thousand three hundred seventy three and
46/100 Dollars ($6,373.46) each, payable on the 15th day of each and every
calendar month, beginning on the 15th day of December, 1996 and continuing
regularly and successively thereafter until fully paid. Each installment shall
be first credited to the discharge of interest accrued on the unpaid principal
balance to the date of the installment payment and the remainder shall be
credited to the reduction of the principal.
All past due principal and interest on this note shall bear interest at the
Highest Lawful Rate, or if applicable law shall not provide for a maximum
nonusurious rate, at a rate per annum equal to rate of interest herein stated
plus five (5%) percent.
It is expressly provided that time is of the essence of this Note and upon
default in the punctual payment of this Note or any part hereof, principal or
interest, as the same shall become due and payable, the entire indebtedness
shall be matured at the option of the Payee; and in the event default is made
in the prompt payment of this Note when due or declared due, the same is placed
in the hands of an attorney for collection, or suit is brought on same, of the
same is collected through bankruptcy or other judicial proceedings, then Maker
agrees and promises to pay the reasonable attorney's fees of Payee incurred
thereby, which shall be not less than ten
<PAGE> 2
(10%) percent of the principal and interest then owing.
If for any reason whatsoever, the interest paid on this Note shall exceed
the Highest Lawful Rate, the owner or Payee of this Note shall refund to the
Maker or, at the option of such Payee, credit on the principal hereof such
portion of said interest as may be necessary to cause the interest paid on this
Note to equal the Highest Lawful Rate. All sums paid or agreed to be paid to
the Payee hereof for the use, forbearance or detention of the indebtedness
evidenced hereby shall, to the extent permitted by applicable law be amortized,
prorated, allocated and spread throughout the full term of this Note.
The Maker may at any time pay to the full amount or any part of this Note
without the payment of any premium or fee.
The Maker waives notice, demand, presentment for payment, notice of intent
to accelerate, protect and the filing of suit hereon for the purpose of fixing
liability and consent that the time of payment hereon may be extended and
reextended from time to time without notice to it.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Executed this 15th day of December, 1996.
J.C.W. Medical Associates, P.A.
/s/ Jerome Wasserstein
-------------------------------
Jerome Wasserstein, D.O.
<PAGE> 1
EXHIBIT 10.15
SECURITY AGREEMENT
This Security Agreement is entered into effective this 1st day of May,
1996, by JCW MEDICAL ASSOCIATES, P.A. a Texas professional association, 4301 A
Vista, Pasadena, Texas 77151 , Harris County, Texas ("Grantor"), to DOCTORS
PRACTICE MANAGEMENT, INC., 4301 Vista, Pasadena, Texas 77027 ("Lender").
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, Grantor grants to Lender the security interest hereinafter set
forth and agrees with Lender as follows:
A. OBLIGATIONS SECURED. The security interest granted hereby is to
secure punctual payment and performance of all obligations of Grantor now or
hereafter existing under (i) the Credit Agreement of even date herewith between
Grantor and the Lender (the "Credit Agreement"), and all Promissory Note(s)
issued thereunder (the Credit Agreement and all such Promissory Notes, together
with this Agreement, being hereafter collectively referred to as the "Loan
Documents"), and (ii) the terms of all other indebtedness now or hereafter
owed by Grantor to Lender, whether for principal, interest, fees, expenses or
otherwise and whether direct or indirect, primary or contingent, (all such
obligations being hereafter referred to as the "Obligations"). Capitalized terms
used but not defined herein which are defined in the Loan Documents shall have
the meaning assigned to such terms in the Loan Documents.
B. USE OF COLLATERAL. Grantor represents, warrants and covenants that
the Collateral will be used by the Grantor primarily for business use.
C. DESCRIPTION OF COLLATERAL. Grantor hereby grants to Lender a security
interest in and agrees that Lender shall continue to have a security interest
in, the following property, to wit:
(a) All Inventory. A security interest in all of Grantor's
inventory, including all goods, merchandise and other tangible personal
property, specifically including. medical supplies, wheresoever located, now
owned or hereafter acquired and held for sale or lease or furnished or to be
furnished under contracts for service or used or consumed in Grantor's business
and all additions and accessions thereto and contracts with respect thereto and
all documents of title evidencing or representing any part thereof, and all
products and proceeds thereof, wherever located and however situated.
(b) All Accounts. A security interest in all accounts now owned
or existing as well as any and all that may hereafter arise or be acquired by
Grantor, and all the proceeds and products thereof, including without
limitation, all notes, drafts, acceptances, instruments and chattel paper arise
there from, and all returned or repossessed goods arising from or relating to
any such accounts, or other proceeds of any sale or other disposition of
inventory.
(c) All Equipment. A security interest in all equipment of every
nature and
1
<PAGE> 2
description whatsoever now owned or hereafter acquired by Grantor including all
appurtenances and additions thereto and substitutions therefor, wheresoever
located, including all tools, parts and accessories used in connection
therewith.
(d) General Intangibles. A security interest in all general
intangibles and other personal property now owned or hereafter acquired by
Grantor other than goods, accounts, chattel paper, documents and instruments.
(e) Chattel Paper. A security interest in all of Grantor's
interest under chattel paper, lease agreements and other instruments or
documents, whether now existing or owned by Grantor or hereafter arising or
acquired by Grantor, evidencing both a debt and security interest in or lease
of specific goods.
(f) Instruments. A pledge and assignment of said security
interest in all of Grantor's now owned or existing as well as hereafter
acquired or arising instruments and documents.
The term "Collateral,, as used in this Agreement shall mean and
include, and the security interest shall cover, all of the foregoing property,
as well as any accessions, additions and attachments thereto and the proceeds
and products thereof or other proceeds of any sale or other disposition of such
property.
D. REPRESENTATIONS, WARRANTIES AND COVENANTS OF Grantor. Grantor
represents and warrants as follows:
1. Ownership; No Encumbrances. Except for the security interest
granted hereby and as permitted under the Loan Documents, the Grantor is the
owner of the Collateral free and clear from all charges, liens, security
interests, adverse claims and encumbrances of any and every nature whatsoever.
2. No Financing Statements. Except as permitted in the Loan
Documents or as disclosed to Lender, there is no financing statement or similar
filing now on file in any public of f ice covering any part of the Collateral,
and Grantor will not execute and there will not be on file in any public office
any financing statement or similar filing except the financing statements filed
or to be filed in favor of Lender.
3. Accuracy Of Information. All information furnished to Lender
concerning Grantor, the Collateral and the Obligations, or otherwise for the
purpose of obtaining or maintaining credit, is or will be at the time the same
is furnished, accurate and complete in all material respects.
4. Authority. Grantor has full right and authority to execute
and perform this Agreement and to create the security interest created by this
Agreement. The making and performance by Grantor of this Agreement will not
violate any articles of incorporation, bylaws or similar document respecting
Grantor, any provision of law, any order of court or governmental agency, or
any indenture or other agreement to which Grantor is a party, or by which
Grantor or any of Grantor's property is bound, or be in conflict with, result
in a breach of or constitute
2
<PAGE> 3
(with due notice and/or lapse of time) a default under any such indenture or
other agreement, or result in the creation or imposition of any charge, lien,
security interest, claim or encumbrance of any and every nature whatsoever upon
the Collateral, except as contemplated by this Agreement.
5. Addresses. The address of Grantor designated at the beginning
of this Agreement is Grantor's place of business if Grantor has only one place
of business or Grantor's chief executive office if Grantor has more than one
place of business. Grantor agrees not to change such address without advance
written notice to Lender.
E. GENERAL COVENANTS. Grantor covenants and agrees as follows:
1. Operation of the Collateral. Grantor agrees to maintain and
use the Collateral solely in the conduct of its own business, in a careful and
proper manner, and in conformity with all applicable permits or licenses.
Grantor shall comply in all material respects with all applicable statutes,
laws, ordinances and regulations. Grantor shall not use the Collateral in any
unlawful manner or for any unlawful purposes, or in any manner or for any
purpose that would expose the Collateral to unusual risk, or to penalty,
forfeiture or capture, or that would render inoperative any insurance in
connection with the Collateral.
2. Condition. Grantor shall maintain, service and repair that
portion of the Collateral constituting equipment (referred to in Paragraph C
(a) above) so as to keep it in good operating condition in accordance with good
business practices. Grantor shall replace within a reasonable time all parts
that may be worn out, lost, destroyed or otherwise rendered unfit for use, with
appropriate replacement parts. Grantor shall obtain and maintain in good
standing at all times all applicable permits, licenses, registrations and
certificates respecting the Collateral.
3. Assessments. Grantor shall promptly pay when due all taxes,
assessments, license fees, registration fees, and governmental charges levied
or assessed against Grantor or with respect to the Collateral or any part
thereof, except for any such item contested in good faith by Grantor f or which
adequate reserves have been established.
4. No Encumbrances. Except as permitted in the Loan Agreement,
Grantor agrees not to suffer or permit any charge, lien security interest,
adverse claim or encumbrance of any and every nature whatsoever against the
Collateral or any part thereof.
5. No Removal. Except as otherwise provided in this Agreement,
Grantor shall not remove the Collateral from the county or counties designated
at the beginning of this Agreement without Lender's prior written consent.
6. No Transfer. Except in the ordinary course of business,
Grantor shall not, without the prior written consent of Lender, sell, assign,
transfer, lease, encumber, hypothecate or dispose of the Collateral, or any
part thereof, or interest therein, or offer to do any of the foregoing.
7. Notices and Reports. Grantor shall promptly notify Lender in
writing of any change in the name, identity or structure of Grantor, any
charge, lien, security interest, claim or
3
<PAGE> 4
encumbrance asserted against the Collateral, any litigation against Grantor or
the Collateral not fully covered by insurance, any theft, loss, injury or
similar incident involving the Collateral, and any other material matter
adversely affecting Grantor or the Collateral. Grantor shall furnish such
other reports, information and data regarding Grantor's financial condition and
operations ' the Collateral and such other matters as Lender may request from
time to time.
8. Landlord's Waivers. Grantor shall furnish to Lender, if
requested, a landlord's waiver of all liens with respect to any Collateral
covered by this Agreement that is or may be located upon leased premises, such
landlord' s waivers to be in such form and upon such terms as are acceptable to
Lender.
9. Additional Filings. Grantor agrees to execute and deliver
such financing statement or statements, or amendments thereof or supplements
thereto, or other documents as Lender may from time to time require in order to
comply with the Texas Uniform Commercial Code (or other applicable state law of
the jurisdiction where any of the Collateral is located) and to preserve and
protect the Lender's rights to the Collateral.
10. Protection of Collateral. Lender, at its option, whether
before or after default, but without any obligation whatsoever to do so, may
upon notice to Borrower (to the extent practicable) (a) discharge taxes,
claims, charges, liens, security interests, assessments or other encumbrances
of any and every nature whatsoever at any time levied, placed upon or asserted
against the Collateral, (b) place and pay for insurance on the Collateral,
including insurance that only protects Lender's interest, to the extent
insurance is required to be maintained hereunder or in any other Loan Document,
(c) pay the actual, necessary and reasonable costs of the repair, improvement,
testing, maintenance and preservation of the Collateral, (d) pay any filing,
recording, registration, licensing or certification fees or other fees and
charges related to the Collateral, or (e) take any other action to preserve and
protect the Collateral and Lender's rights and remedies under this Agreement as
Lender may reasonably deem necessary or appropriate. Grantor agrees that
Lender shall have no duty or obligation whatsoever to take any of the foregoing
action. Grantor agrees to promptly reimburse Lender upon demand for any
payment made or any expense incurred by the Lender pursuant to this
authorization. These payments and expenditures, together with interest thereon
from date incurred until paid by Grantor at the maximum contract rate allowed
under applicable laws, which Grantor agrees to pay, shall constitute additional
Obligations and shall be secured by and entitled to the benefits of this
Agreement.
11. Inspection. Grantor shall at all reasonable times allow
Lender by or through any of its officers, agents, attorneys or accountants, to
examine the Collateral, wherever located, and to examine and make extracts from
Grantor's books and records.
12. Further Assurances. Grantor shall do, make, procure, execute
and deliver all such additional and further acts, things, deeds, interests and
assurances as Lender may reasonably require from time to time to protect,
assure and enforce Lender's rights and remedies.
13. Insurance. Grantor shall have and maintain insurance at all
time with respect to all tangible Collateral insuring against risks of fire
(including so-called extended coverage), theft
4
<PAGE> 5
and other risks as Lender may reasonably require, containing such terms, in
such form and amounts and written by such companies as may be reasonably
satisfactory to Lender, all of such insurance to contain, if requested by
Lender, loss payable clauses in favor of Lender as its interest may appear.
All policies of insurance shall provide for fifteen (15) days, written minimum
cancellation notice to Lender and at the request of Lender shall be delivered
to and held by it. Lender is hereby authorized to act as attorney for Grantor
in obtaining, adjusting, settling and canceling such insurance and endorsing
any drafts or instruments. Lender shall be authorized to apply the proceeds
from any insurance to the Obligations secured hereby whether or not such
obligations are then due and payable. Grantor specifically authorizes Lender
to disclose information from the policies of insurance to prospective insurers
regarding the Collateral. In lieu of the foregoing Grantor may self-insure to
the extent permitted under the Loan Documents.
F. EVENTS OF DEFAULT. The occurrence or continuance of an "Event of
Default" within the meaning of the Loan Agreement shall constitute an "Event of
Default" under this Agreement.
G. REMEDIES. Upon the occurrence of an Event of Default, Lender, at its
option, shall be entitled to exercise any one or more of the following remedies
(all of which are cumulative):
1. Declare Obligations Due. Lender, at its option, may declare
the obligations or any part thereof immediately due and payable, without
demand, notice of intention to accelerate, notice of acceleration, notice of
nonpayment, presentment, protest, notice of dishonor, or any other notice
whatsoever, all of which are hereby waived by Grantor and any maker, endorser,
guarantor, surety or other party liable in any capacity for any of the
obligations.
2. Remedies. Lender shall have all of the rights and remedies
provided for in this Agreement and in any other agreements executed by Grantor,
the rights and remedies in the Uniform Commercial Code of Texas, and any and
all of the rights and remedies at law and equity, all of which shall be deemed
cumulative. Without limiting the foregoing, Grantor agrees that Lender shall
have the right to (a) require Grantor to assemble the Collateral and make it
available to Lender at a place designated by Lender that is reasonably
convenient to both parties, which Grantor agrees to do; (b) take possession of
the Collateral, with or without process of law, and, in this connection, enter
any premises where the Collateral is located to remove same, to render it
unusable, or to dispose of same on such premises; (c) sell, lease or otherwise
dispose of the Collateral, by public or private proceedings, for cash or
credit, without assumption of credit risk; and/or (d) whether before of after
default, collect and receipt for, compound, compromise, and settle, and give
releases, discharges and acquaintances with respect to, any and all amounts
owned by any person or entity with respect to the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will send Grantor
reasonable notice of the time and place of any public sale or of the time after
which any private sale or other disposition will be made. Any requirement of
reasonable notice to Grantor shall be met if such notice is mailed, postage
prepaid, to Grantor at the address of Grantor designated at the beginning of
this Agreement, at least five (5) days before the day of any public sale or at
least five (5) days before the time after which any private sale or other
disposition will be made.
3. Expenses. Grantor shall be liable for and agrees to pay the
reasonable expenses
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incurred by Lender in enforcing its rights and remedies, in retaking, holding,
testing, repairing, improving, selling, leasing or disposing of the Collateral,
or like expenses, including, without limitation, attorneys' fees and legal
expenses incurred by Lender. These expenses, together with interest thereon
from the date incurred until paid by Grantor at the maximum contract rate
allowed under applicable laws, which Grantor agrees to pay, shall constitute
additional Obligations and shall be secured by and entitled to the benefits of
this Agreement.
4. Proceeds; Surplus; Deficiencies. Proceeds received by Lender
from disposition of the Collateral shall be applied toward Lender's expenses
and other Obligations in such order or manner as Lender may elect. Grantor
shall be entitled to any surplus if one results after lawful application of the
proceeds. Grantor shall remain liable for any deficiency.
5. Remedies Cumulative. The rights and remedies of Lender are
cumulative and the exercise of any one or more of the rights or remedies shall
not be deemed an election of rights or remedies or a waiver of any other right
or remedy. Lender may remedy any default and may waive any default without
waiving the default remedied or without waiving any other prior or subsequent
default.
H. OTHER AGREEMENTS.
1. Savings Clause. Notwithstanding any provision to the contrary
herein, or in any of the documents evidencing the Obligations or otherwise
relating thereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable usury
laws. If any such excessive interest is so provided for, then in such event
(i) the provisions of this paragraph shall govern and control, (ii) neither the
Grantor nor its successors or assigns or any other party liable for the payment
thereof, shall be obligated to pay the amount of such interest to the extent
that is in excess of the maximum amount permitted by law, (iii) any such excess
interest that may have been collected shall be, at the option of the holder of
the instrument evidencing the Obligations, either applied as a credit against
the then unpaid principal amount thereof or refunded to the maker thereof, and
(iv) the effective rate of interest shall be automatically reduced to the
maximum lawful rate under applicable usury laws as now or hereafter construed
by the courts having jurisdiction.
2. Waivers. Grantor and any maker, endorser, guarantor, surety
or other party liable in any capacity respecting the Obligations hereby waive
demand, notice of intention to accelerate, notice of acceleration, notice of
nonpayment, presentment, protest, notice of dishonor and any other similar
notice whatsoever, subject to Grantor's rights to notice and cure expressly
provided for in the Loan Agreement.
3. Severability. Any provision hereof found to be invalid by
courts having jurisdiction shall be invalid only with respect to such provision
(and then only to the extent necessary to avoid such invalidity). The
offending provision shall be modified to the maximum extent possible to confer
upon Lender the benefits intended thereby. Such provision as modified and the
remaining provisions hereof shall be construed and enforced to the same effect
as if such offending provision (or portion thereof) had not been contained
herein, to the maximum extent possible.
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4. Use of Copies. Any carbon, photographic or other reproduction
of any financing statement signed by Grantor is sufficient as a financing
statement for all purposes, including without limitation, filing in any state
as may be permitted by the provisions of the Uniform Commercial Code of such
state.
5. Relationship to Other Agreements. This Security Agreement and
the security interests (and pledges and assignments as applicable) herein
granted are in addition to (and not in substitution, notation or discharge of)
any and all prior or contemporaneous security agreements, security interests,
pledges, assignments, liens, rights, titles or other interests in favor of
Lender or assigned to Lender by others in connection with the Obligations. All
rights and remedies of Lender in all such agreements are cumulative, but in the
event of actual conflict in terms and conditions, the terms and conditions of
the latest security-, agreement shall govern and control. Grantor acknowledges
that it has had full opportunity to consult with an attorney of its own choice
regarding the nature, obligations and consequences of entering into each of the
Loan Documents and that it is not relying upon counsel for the Lender in this
regard. Grantor and the Lender have also entered into certain management
arrangements under which the Lender is providing certain management,
administrative and accounting services for the Grantor. The existence of such
management arrangements, including the exercise by Lender of rights and
remedies in that regard, may be deemed to constitute or give rise to certain
conflicts of interest. Grantor hereby irrevocably, knowingly and willingly
waives all such conflicts.
6. Notices. Any notice or demand given by Lender to Grantor in
connection with this Agreement, the Collateral or the Obligations shall be
deemed given and effective two days after deposited in the United States mail,
postage prepaid, addressed to Grantor at the address of Grantor designated at
the beginning of this Agreement. Actual notice to Grantor shall always be
effective no matter how given or received.
7. Headings and Gender. Paragraph headings in this Agreement are
for convenience only and shall be given no meaning or significance in
interpreting this Agreement. All words used herein shall be construed to be of
such gender or number as the circumstances require.
8. Amendments. Neither this Agreement nor any of its provisions
may be changed, amended, modified, waived or discharged orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, amendment, modification waiver or discharge is sought.
9. Continuing Agreement. The security interest (and pledges and
assignments as applicable) hereby granted and all of the terms and provisions
in this Agreement shall be deemed a continuing agreement, until such time as
all Obligations have been paid in full and all commitments of Lender to make
Advances under the Loan Agreement have been terminated, whereupon this
Agreement will terminate.
10. Binding Effect. The provisions of this Security Agreement
shall be binding upon the successors and assigns of Grantor and the rights,
powers and remedies of Lender hereunder shall inure to the benefit of the
successors and assigns of Lender.
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11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A J-JURISDICTION OTHER THAN THE STATE OF TEXAS.
EXECUTED this 1st day of April, 1996.
-----
JCW MEDICAL ASSOCIATES, P.A.
By: /s/ Jerome C. Wasserstein
----------------------------------
Jerome C. Wasserstein, President
- GRANTOR -
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AMENDMENT ONE TO THE SECURITY AGREEMENT BY AND BETWEEN JCW MEDICAL ASSOCIATES,
P.A. AND DOCTORS PRACTICE MANAGEMENT, INC.
This Amendment One to the Security Agreement dated May 1, 1996 is agreed to by
JCW Medical Associates, P.A., referred to herein as ("Grantor") and Doctors
Practice Management, Inc. referred to herein as ("Lender").
In consideration of the mutual promises between Grantor and Lender, Article C
included in the Security Agreement dated May 1, 1996 between Grantor and Lender
is hereby amended and replaced in its entirety as follows:
Article C All Accounts.
A security interest in all accounts include all bank accounts all accounts
receivable and trade receivables now owned or existing as well as any and all
that may hereafter arise or be acquired by Grantor, and all the proceeds and
products thereof, including without limitation, all notes, drafts, acceptances,
instruments and chattel paper arise there from, and all returned or repossessed
goods arising from or relating to any such accounts, or other proceeds of any
sale or other disposition of inventory.
In consideration of the mutual promises between Grantor and Lender, the
following sentence is added to Article H as item 12 in the Security Agreement
dated May 1, 1996 between Grantor and Lender is hereby added.
Article H.12 Personal Guarantee
Grantor is personally liable for the $675,000 loan advanced under the REVOLVING
CREDIT NOTE dated April 1, 1996 between JCW Medical Associates, P.A. ("Maker")
and Doctors Practice Management, Inc. ("Payee") and all monies advanced under
the CREDIT AGREEMENT dated May 1, 1996 between JCW Medical Associates, P.A.
("Borrower") and Doctors Practice Management, Inc. ("Lender")
Such Amendment One to the Security Agreement shall be effective as of May 1,
1996.
DOCTOR:
JCW MEDICAL ASSOCIATES, P.A.
By: /s/ Jerome Wasserstein
------------------------------
Dr. Jerome Wasserstein
COMPANY:
DOCTORS PRACTICE MANAGEMENT, INC.
By: /s/ Philip Chan
-------------------------------
Philip Chan, Vice President
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EXHIBIT 10.16
CREDIT AGREEMENT
THIS AGREEMENT, dated effective May 1, 1996, between JCW MEDICAL
ASSOCIATES, P.A., a Texas professional association (the "Borrower"), and
DOCTORS PRACTICE MANAGEMENT INC., a Texas corporation (the "Lender"), and the
parties agree as follows:
ARTICLE 1
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 1.1 Advances. From time to time during the term of this
Agreement, Lender may, in its sole discretion and subject to the terms and
conditions hereinafter set forth, make advances (the "Advances") to the
Borrower from time to time on any Business Day (as hereinafter defined) during
the period from the date hereof until April 30, 2011 (the "term of this
Agreement") in an aggregate amount not to exceed at any time outstanding Six
Hundred Seventy Five Thousand Dollars ($675,000).Each Advance shall be in an
amount not less than Ten Thousand Dollars ($ 10,000.) or an integral multiple
of $1,000 in excess thereof, Borrower may borrow, prepay pursuant to Section
1.4 and re-borrow under this Section 1.1, subject to Lender's right of absolute
discretion in making any Advance. Without in any way limiting Lender's
absolute discretion in making any Advance, in no event may the outstanding
principal balance of the Advances (including any new Advances requested by
Borrower) exceed an amount equal to Borrower's Eligible Accounts (which, for
purposes hereof, means those accounts receivable of Borrower (i) on which
Lender has a first and prior perfected security interest, (ii) which are not
more than 120 days past due, and (iii) which are otherwise satisfactory to
Lender in its sole and absolute discretion). The amount of the initial Advance
shall be Six Hundred Sixty Six Thousand Dollars ($666,000) and shall be
funded on the date of this Agreement.
SECTION 1.2 Making the Advances. Advances shall be made on a Business
Day. Each Advance shall be made on written notice, signed by the President of
the Borrower and delivered to Lender not later than 5:00 p.m. (Houston time) at
least two Business Days before the day on which the Advance is to be made.
Each notice from the Borrower to the Lender requesting an Advance shall be
irrevocable and binding on the Borrower.
SECTION 1.3 Interest and Repayment. All outstanding principal on all
Advances made by
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Lender to Borrower hereunder shall bear interest at Eight Percent (8.0%) per
annum. The principal portion of the initial Advance shall be payable in equal
monthly installments, commencing on or before the 15th day of the month
following the date of this Agreement and continuing monthly thereafter until
paid in full. The principal portion of all other Advances shall be payable in
full on or before the such termination of the FULL SERVICE MANAGEMENT
AGREEMENT entered into effective July 1, 1996 between both parties and
thereafter ON DEMAND by the Lender. On the date of this Agreement, the Borrower
shall execute and deliver to the Lender a Revolving Credit Note in the form of
Exhibit A hereto (the "Note"), evidencing the indebtedness resulting from such
Advances and delivered to the Lender pursuant to Article II.
SECTION 1.4 Optional Prepayments. The Borrower may, upon at least two
Business Days, notice to the Lender stating the proposed date and principal
amount of the prepayment, without penalty or premium, prepay the outstanding
principal amounts of the Advances in whole or in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid.
SECTION 1.5 Payments and Computations. The Borrower shall make each
payment hereunder and under the Note on the date when due in U.S. dollars to
the Lender at its address referred to in Section 6.2 in same day funds. The
Borrower hereby authorizes the Lender, if and to the extent payment is not made
when due hereunder or under the Note, to charge from time to time against any
or all of the Borrower's accounts maintained by the Lender on Borrower's behalf
any amount so due. All computations of interest shall be made by the Lender on
the basis of a year of 365 or 366 days, as the Case may be, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
SECTION 1.6 Payment on Non-Business Days. Whenever any payment
hereunder or under the Note shall be stated to be due on a day other than a day
of the year on which banks are not required or authorized to close in Houston,
Texas (any such other day being a "Business Day"), such payment shall be Made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest.
SECTION 1.7 Maximum Rate. This Agreement and all of the Loan
Documents (as hereafter defined) are intended to be performed in accordance
with, and only to the extent permitted, by all
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applicable law governing the maximum rate or amount of interest payable on or
in connection with the Note and the indebtedness evidenced thereby of Any
jurisdiction and law of which is found by a court of competent jurisdiction to
be applicable to the Loan Documents notwithstanding the jurisdiction chosen by
the parties ("Applicable Law"). It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with the Applicable
Law governing the maximum rate or amount of interest payable on or in
connection with the Loan Documents (or applicable United States federal law to
the extent that it permits the Lender to contract for, charge, take, reserve or
receive a greater amount of interest than under applicable Law). If the
Applicable Law is ever judicially interpreted to as to render usurious any
amount called for under the Loan Documents or contracted for, charged,taken,
reserved, or received with respect to the indebtedness under the Loan
Documents, or if the acceleration of the maturity of the indebtedness under the
Loan Documents or any prepayment by the Borrower results in the Borrower having
paid any interest in excess of that permitted by Applicable Law, then it is the
Borrower's and the Lender's express intent that all excess amounts therefore
collected by the Lender be credited on the principal balance of the Note (or,
if the Note and all other indebtedness have been or would thereby be paid in
full, refunded to the Borrower), and the provisions of the Loan Documents
immediately be deemed reformed and the amount thereafter collectible thereunder
reduced, without the necessity of the execution of any new documents, So as to
comply with the Applicable Law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder. The right to accelerate
the maturity of the indebtedness under the Loan Documents does not include the
right to accelerate any interest which has not otherwise accrued on the date of
such acceleration, and the Lender does not intend to collect any unearned
interest in the event of acceleration. All, sums paid or agreed to be paid to
the Lender for the use, forbearance or detention of the indebtedness under the
Loan Documents shall, 'to the extent permitted by Applicable Law, be amortized,
prorated:, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed any applicable usury ceiling. "Maximum Rate"
means the maximum non-usurious rate of interest which may be lawfully
contracted for, charged, taken, reserved or received by the Lender from the
Borrower in connection with the indebtedness under Applicable Law (or
applicable United States federal law to the extent that it permits the Lender
to contract for, charge, take, reserve or receive a greater amount of interest
than under Applicable Law.)
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ARTICLE 2 CONDITIONS OF LENDING
SECTION 2.1 Condition Precedent to Initial Advance. The obligation of
the Lender to make its initial Advance is subject to the conditions precedent
that Lender shall have received on or before the day of such Advance the
following, each dated such date, in form and substance satisfactory to the
Lender:
(I) The Note; and
(ii) A Security Agreement, duly executed by the Borrower, in the form of
Exhibit B (the "Security Agreement").
This Agreement, the Note, the Security Agreement and all financing statements
and other documents and instruments executed or delivered pursuant hereto or
thereto are herein collectively referred to as the "Loan Documents."
SECTION 2.2 Conditions Precedent to All Advances. The obligation of
the Lender to make each Advance (including the initial Advance) shall be
subject to the further conditions precedent that on the date of such Advance
(a) the following statements shall be true (and each of the giving of the
applicable notice requesting such Advance and the acceptance by the Borrower of
the proceeds of such Advance shall constitute a representation and warranty by
the Borrower that on the date of such Advance such statements are true):
(i) The representations and warranties contained in Section 3.1 of
this Agreement, and as set forth in the Security Agreement are correct and
complete on and as of the date of such Advance, before and after giving effect
to such Advance and to the application of the proceeds therefrom, as though
made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such Advance or from the application of the proceeds therefrom, which
constitutes an Event of Default (as defined in Section 5.1 hereof) or would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both; and
(b) The Lender shall have received such other approvals, opinions
or documents as the Lender may reasonably request.
(c) SECTION 2.3 Lender's Absolute Discretion. The existence or
satisfaction of any or all of the conditions set forth in Sections 2.1 or 2.2
above shall in no way impair or modify the
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Lender's right of absolute discretion in deciding to make or not make any
Advance, or to determine the amount of any Advance which the Lender is willing
to make.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Borrower. The
Borrower represents and warrants to the Lender as follows:
(a) The Borrower is a professional association, duly formed,
validly existing and in good standing under the laws of Texas.
(b) The execution, delivery and performance by the Borrower of the
Loan Documents to which it is a party are within the Borrower's corporate
powers, have been duly authorized by all necessary action on its part and do not
contravene (i) the Articles of Association or Bylaws of Borrower or (ii) any law
or contractual restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of the Loan
Documents.
(d) This Agreement and the other Loan Documents to which the
Borrower is a party are legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms,
subject to the limitations of bankruptcy and general principles of equity,
provided that the unavailability of remedies due to Equitable limitations will
not substantially impair the rights of Lender under any of the Loan Documents.
(e) There is no pending or, to the best of the Borrower's
knowledge, threatened, action - or proceeding affecting the Borrower before any
court, governmental agency or arbitrator, which may materially adversely affect
the financial condition or business of the Borrower or which purports to affect
the legality, validity or enforceability of any of the Loan Documents.
(f) The Borrower is not engaged in the business of extending credit
for the purpose of buying or carrying margin stock (within the meaning of
Regulation G issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Advance will be used to buy or carry any margin Stock or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
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ARTICLE 4
COVENANTS OF THE BORROWER
SECTION 4.1 Affirmative Covenants. So long as the Note shall remain
unpaid or- otherwise during the term of this Agreement, the Borrower will,
unless the Lender shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent contested in good faith.
(b) Maintenance. Maintain its existence as a professional
association, not institute any proceedings for the dissolution, liquidation or
winding up of Borrower, and maintain, and cause each of its employees (where
applicable) to maintain, all professional licenses and permits in good standing
to the extent necessary for Borrower to operate in the ordinary course of
business.
SECTION 4.2 Negative Covenants. So long as the Note shall remain
unpaid or otherwise during the term of this Agreement, the Borrower will not,
without the written consent of the Lender:
(a) Liens, Etc. Except as permitted by the Loan Documents, create
or suffer to exist, any lien, security interest or other charge or encumbrance,
or any other type of preferential arrangement, upon or with respect to any of
its properties, whether now owned or hereafter acquired, or assign any right to
receive income, in each case to secure or provide for the payment of any person
or, entity, other than (i) purchase money liens or purchase money security
interests upon or in any property acquired or held by the Borrower or any
subsidiary in the ordinary course of business to secure the purchase price of
such property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property, and (ii) liens on assets not
constituting part of the Collateral (as defined in the Security Agreement).
(b) Mergers Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any person or entity.
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ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES; SPECIAL REMEDY
SECTION 5.1 Events of Default and Remedies. If any of the following events:
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of, or interest
on, the Note when the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower under or
in connection with any Loan Document shall prove to have been incorrect in any
material respect when made; or
(c) The Borrower shall fail to perform observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed and such failure shall remain unremedied for 10 days after
written notice thereof shall have been given to the Borrower by the Lender; or
(d) The Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 30 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any substantial
part of its property) shall occur and shall not be stayed pending timely appeal
(provided that the lifting of such stay shall constitute an Event of Default);
or the partner shall take any corporate or partnership action to authorize any
of the actions set forth above in this subsection (d); or
(e) Any final judgment or order for the payment of money in excess
of $100,000, or any two or more final judgments or orders for the payment of
money in excess of $250,000 in the aggregate, shall be rendered against the
Borrower or any of its subsidiaries and the same shall not be
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discharged within a period of 30 days after such judgment becomes final and
non-appealable; or
(f) The termination, cancellation, expiration without renewal or
replacement, or material breach by Borrower of the Management Agreement of even
date herewith between Borrower and Lender (the "Management Agreement"), or
(g) Jerome C. Wasserstein, D.O. ceases at any time (i) to be a
full-time employee of Borrower or (ii) to own at least 50% of the outstanding
voting securities of Borrower; or
(h) Any material breach by Jerome C. Wasserstein, D.O.. of the
Non-Competition Agreement of even date herewith between Dr. Wasserstein and
Lender;
then, and in any such event, the Lender may, by notice to the Borrower, declare
the Note, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Note, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrower; provided, however, that in
the event of an actual or deemed entry of an order for relief under the Federal
Bankruptcy Code with respect to the Borrower the Note, all such interest and
all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 5.2 Offset. In addition to any other remedies available at law
or in equity, upon the occurrence or continuance of any Event of Default the
Lender shall have the right to offset against any assets (including sums in bank
accounts) then in Lender's possession or control, in payment and satisfaction of
obligations then due.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Amendment, Etc. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by the Borrower therefrom,
shall in any event be effective
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unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 6.2 Notice, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address at 4301 Vista A,
Pasadena, Texas 77054, Attention: Jerome Wasserstein, D.O.; and if to the
Lender, at its address at 4301 A Vista Pasadena, Texas 77504, -Attention: Chiu
Chan, President; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party. All such
notices and - communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback or delivered
to the cable company, respectively except that notices to the Lender pursuant
to the provisions of Article 1 shall not be effective until received by the
Lender.
SECTION 6.3 No Waiver; Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right under the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 6.4 Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, recording, administration, modification and amendment of the
Loan Documents and the other documents to be delivered, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Lender with respect thereto and with respect to advising the Lender as to its
rights and responsibilities under the Loan Documents. The Borrower further
agrees to pay on demand all costs and expenses, if any (including reasonable
counsel fees and expenses), in connection with the enforcement (whether
through negotiations, legal proceedings or otherwise) of the Loan Documents and
the other documents to be delivered under the Loan Documents, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 6.5. In addition the Borrower shall
pay any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of the Loan Documents, and agrees to
save the Lender
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harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes.
SECTION 6.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lender.
SECTION 6.6 Certain Potential Conflicts. The Borrower acknowledges
that it has had full opportunity to consult with an attorney of its own choice
regarding the nature, obligations and consequences of this Agreement and that
it is not relying on counsel for the Lender in that regard. The parties have
also entered into the Management Agreement and certain other arrangements
relating to the management and control of the Borrower. The existence of such
other relationships may be deemed to be, or give rise to, certain conflicts of
interest. The Borrower, recognizing. such conflicts of interest, hereby
irrevocably, knowingly and willingly waives all such conflicts.
SECTION 6.7 GOVERNING LAW. THIS AGREEMENT AND THE NOTE, AND, UNLESS
OTHERWISE THEREIN PROVIDED, EACH OTHER LOAN DOCUMENT, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER: LENDER:
- --------- -------
JCW MEDICAL ASSOCIATES, P.A. DOCTORS PRACTICE MANAGEMENT,INC.
By: /s/ Jerome C. Wasserstein By: /s/ Chiu Chan
----------------------------- -------------------------------
JEROME C. WASSERSTEIN, D.O. CHIU CHAN
PRESIDENT PRESIDENT
10
<PAGE> 1
EXHIBIT 10.17
REVOLVING CREDIT NOTE
$675,000 APRIL 1, 1996
FOR VALUE RECEIVED, the undersigned (herein called "Maker"), promises
to pay to the order of DOCTORS PRACTICE MANAGEMENT, INC. (herein called
"Payee," which term herein in every instance shall refer to any owner or
holder of this note) , the sum of Six Hundred Seventy Five Thousand AND 00/100
DOLLARS ($675,000), or so much thereof as is advanced to Borrower under the
Credit Agreement referred to below, together with interest on the principal
hereof from time to time outstanding from the date of advancement until
maturity, at the per annum rate hereinafter stated, said principal and interest
being payable in lawful money of the United States of America as provided in
the Credit Agreement (defined below).
This note has been issued pursuant to and entitled to the benefits of
the Credit Agreement dated as of April 1, 1996, by and between the Maker and
Payee (as the same may be amended, modified or restated from time to time, the
"Credit Agreement"), and is the "Note" referred to therein. Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the Maturity hereof.
The principal balance hereof advanced and from time to time remaining
unpaid shall bear interest during each day of the loan evidenced hereby from
the date advanced until the date paid at the rates set forth in the Credit
Agreement.
The principal and interest of this note hereon shall be due and
payable in accordance with the provisions of the Credit Agreement.
If there shall occur or be continuing an Event of Default (within the
meaning of the Credit Agreement), then Payee shall have the option, to the
extent permitted by applicable law, to declare this note due and payable,
whereupon the entire unpaid principal balance of this note and all accrued
unpaid interest hereon thereupon at once shall mature and become due and
payable without presentment, demand, protest or notice of any kind (including,
but not limited to, notice of intention to accelerate or notice of
acceleration), all of which hereby are expressly waived by Maker. The time of
payment-of-this note also is subject to acceleration in the same manner
provided in this paragraph in the event Maker
Page 1 of a 4 Page Revolving Credit Note
<PAGE> 2
defaults or otherwise fails to discharge its obligations under any of the
instruments securing payment hereof or relating hereto.
Maker and any and all sureties, guarantors and endorsers of this note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment protest, notice of any kind (including, but
not limited to, notice of dishonor, notice of protest, notice of intention to
accelerate and notice of acceleration) and diligence in collecting and bringing
suit against any party hereto, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange loss, impairment or release of any security now or
hereafter given for this note, (c) to the release of any party primarily or
secondarily liable hereon, and (d) that it will not be necessary for Payee, in
order to enforce payment of this note, to first institute or exhaust Payee's
remedies against Maker or any other party liable therefor or against any
security for this note.
In the event of default hereunder or under any of the instruments
securing payment hereof and this note is placed in the hands of an attorney
for- collection (whether or not suit is filed) , or if this note is collected
by suit or legal proceedings or through the probate court or bankruptcy
proceeding, maker agrees to pay all reasonable attorneys, fees and all
expenses of collection and costs of court.
It is the intention of the parties hereto to conform strictly to
applicable usury laws. Accordingly, notwithstanding any provision to the
contrary in this note or in any of the documents securing or guaranteeing
payment hereof or otherwise relating hereto, or in any communication or
writing by Payee or any other person relating to this loan, whether now or
hereafter arising, in no event or contingency shall this note or such
documents, communications or writings permit or require the payment of any sums
which constitute interest under applicable law, or permit or require the
charging, taking, reserving, or receiving by Payee or any other person of any
sums which constitute interest under applicable law, in excess of the maximum
amount permitted by such law. If any excess interest otherwise would be deemed
to be contracted for, charged, taken, reserved or received under this note or
such documents, communications or writings by Payee or any other person, or in
the event the maturity of the indebtedness evidenced by this note is
accelerated in whole or in part, or in the event all or part of the principal
or interest of this note shall be prepaid, then it is agreed as follows: (i)
any excess or unearned interest contracted for, charged, taken, reserved, or
received, shall be deemed a mistake and canceled automatically, without the
necessity of any other communication or writing by Payee or any other person,
Page 2 of a 4 Page Revolving Credit Note
<PAGE> 3
(ii) any excess or unearned interest which is paid shall be credited to the
unpaid principal amount hereof or, to the extent the unpaid principal amount
hereof shall have been or would be paid in full, refunded to Maker or other
obligor as the case may be, and (iii) the note, documents, communication or
writing, as the case may be, shall be reformed automatically to permit only the
payment, charging, taking, reserving, or receiving of accrued unpaid interest
at the maximum lawful rate. Without limiting the foregoing, in determining the
maximum amount of lawful interest under this loan, all interest at any time
contracted for, charged, taken, reserved or received shall be amortized,
prorated, allocated, and spread, to the full extent permitted by applicable
law, in equal parts during the period of the full term of the loan evidenced
hereby, taking into account all renewal and extension periods.
The provisions set forth in the preceding paragraph shall be deemed to
be incorporated into each of the documents executed in connection with this note
and loan and in every communication and writing relating to this note and loan,
now or hereafter arising, whether or not the same expressly references the
preceding paragraph, and any and all figures set forth therein shall, for the
purpose of determining the extent of the indebtedness set forth or asserted
therein, or otherwise contracted for, charged, taken, reserved, or received, as
applicable, be recomputed automatically by Maker or other obligor, or by any
court with proper jurisdiction considering the same, or both, as necessary to
give effect to the adjustments and credits required and agreed upon therein and
the other agreements set forth therein, without the necessity of any other
communication or writing by Payee.
If the applicable state or federal usury law is amended after the date
hereof to permit a greater rate of interest to be contracted for, charged,
taken, reserved, or received under this note and the loan than is permitted
under applicable state or federal law as of the date hereof, then the maximum
lawful rate of interest applicable to this note and loan shall be increased to
the maximum rate of interest allowed by such subsequent law or amendment, to be
effective as of the effective date of such law or amendment, and such additional
charges that may become owing by reason of such increase shall be payable on
demand.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE APPLICABLE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA.
Any check, draft, money order or other instrument given in payment of all or
any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment-hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Page 3 of a 4 Page Revolving Credit Note
<PAGE> 4
Maker represents and warrants to Payee and to all other owners and
holders of any indebtedness evidenced hereby that all loans evidenced by this
note are for business, commercial,. investment or other similar purpose and not
primarily for personal, family, household or agricultural use.
This note is secured as provided in the Credit Agreement and is
entitled to all of the benefits of the Credit Agreement.
- MAKER -
JCW MEDICAL ASSOCIATES, P.A.
By: /s/ Jerome C. Wasserstein
-----------------------------------
Jerome C. Wasserstein, D.O.
President
Page 4 of a 4 Page Revolving Credit Note
<PAGE> 1
EXHIBIT 10.18
CREDIT AGREEMENT
THIS AGREEMENT, dated effective April 1, 1996, between R. S. ARORA,
M.D., a sole proprietor (the "Borrower"), and DOCTORS PRACTICE MANAGEMENT
INC., a Texas corporation (the "Lender"), and the parties agree as follows:
ARTICLE 1
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 1.1 Advances. From time to time during the term of this
Agreement, Lender may, in its sole discretion and subject to the terms and
conditions hereinafter set forth, make advances (the "Advances") to the
Borrower from time to time on any Business Day (as hereinafter defined) during
the period from the date hereof until March 31, 2011 (the "term of this
Agreement") in an aggregate amount not to exceed at any time outstanding One
Hundred Thousand Dollars ($100,000).Each Advance shall be in an amount not
less than Ten Thousand Dollars ($ 10,000.) or an integral multiple of $1,000 in
excess thereof, Borrower may borrow, prepay pursuant to Section 1.4 and
re-borrow under this Section 1.1, subject to Lender's right of absolute
discretion in making any Advance. Without in any way limiting Lender's
absolute discretion in making any Advance, in no event may the outstanding
principal balance of the Advances (including any new Advances requested by
Borrower) exceed an amount equal to Borrower's Eligible Accounts (which, for
purposes hereof, means those accounts receivable of Borrower (i) on which
Lender has a first and prior perfected security interest, (ii) which are not
more than 120 days past due, and (iii) which are otherwise satisfactory to
Lender in its sole and absolute discretion).
SECTION 1.2 Making the Advances. Advances shall be made on a Business Day.
Each Advance shall be made on written notice, signed by the President of the
Borrower and delivered to Lender not later than 5:00 p.m. (Houston time) at
least two Business Days before the day on which the Advance is to be made.
Each notice from the Borrower to the Lender requesting an Advance shall be
irrevocable and binding on the Borrower.
SECTION 1.3 Interest and Repayment. All outstanding principal on all Advances
made by Lender to Borrower hereunder shall bear interest at Eight Percent
(8.0%) per annum. The principal portion of the initial Advance shall be
payable in equal monthly installments, commencing on or before the 15th day of
the month following the date of this Agreement and continuing monthly
thereafter until paid in full. The principal portion of all other Advances
shall be payable in full on or before the such termination of the
<PAGE> 2
FULL SERVICE MANAGEMENT AGREEMENT entered into effective April 1, 1996 between
both parties and thereafter ON DEMAND by the Lender. On the date of this
Agreement, the Borrower shall execute and deliver to the Lender a Revolving
Credit Note in the form of Exhibit A hereto (the "Note"), evidencing the
indebtedness resulting from such Advances and delivered to the Lender pursuant
to Article II.
SECTION 1.4 Optional Prepayments. The Borrower may, upon at least two
Business Days, notice to the Lender stating the proposed date and principal
amount of the prepayment, without penalty or premium, prepay the outstanding
principal amounts of the Advances in whole or in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid.
SECTION 1.5 Payments and Computations. The Borrower shall make each
payment hereunder and under the Note on the date when due in U.S. dollars to
the Lender at its address referred to in Section 6.2 in same day funds. The
Borrower hereby authorizes the Lender, if and to the extent payment is not made
when due hereunder or under the Note, to charge from time to time against any
or all of the Borrower's accounts maintained by the Lender on Borrower's behalf
any amount so due. All computations of interest shall be made by the Lender on
the basis of a year of 365 or 366 days, as the
Case may be, in each case for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable.
SECTION 1.6 Payment on Non-Business Days. Whenever any payment hereunder or
under the Note shall be stated to be due on a day other than a day of the year
on which banks are not required or authorized to close in Houston, Texas (any
such other day being a "Business Day"), such payment shall be Made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.
SECTION 1.7 Maximum Rate. This Agreement and all of the Loan Documents (as
hereafter defined) are intended to be performed in accordance with, and only to
the extent permitted, by all applicable law governing the maximum rate or
amount of interest payable on or in connection with the Note and the
indebtedness evidenced thereby of Any jurisdiction and law of which is found by
a court of competent jurisdiction to be applicable to the Loan Documents
notwithstanding the jurisdiction chosen by the parties ("Applicable Law"). It
is expressly stipulated and agreed to be the intent of Borrower and Lender at
all
<PAGE> 3
times to comply with the Applicable Law governing the maximum rate or amount of
interest payable on or in connection with the Loan Documents (or applicable
United States federal law to the extent that it permits the Lender to contract
for, charge, take, reserve or receive a greater amount of interest than under
applicable Law). If the Applicable Law is ever judicially interpreted to as to
render usurious any amount called for under the Loan Documents or contracted
for, charged, taken, reserved, or received with respect to the indebtedness
under the Loan Documents, or if the acceleration of the maturity of the
indebtedness under the Loan Documents or any prepayment by the Borrower results
in the Borrower having paid any interest in excess of that permitted by
Applicable Law, then it is the Borrower's and the Lender's express intent that
all excess amounts therefore collected by the Lender be credited on the
principal balance of the Note (or, if the Note and all other indebtedness have
been or would thereby be paid in full, refunded to the Borrower), and the
provisions of the Loan Documents immediately be deemed reformed and the amount
thereafter collectible thereunder reduced, without the necessity of the
execution of any new documents, So as to comply with the Applicable Law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
and thereunder. The right to accelerate the maturity of the indebtedness under
the Loan Documents does not include the right to accelerate any interest which
has not otherwise accrued on the date of such acceleration, and the Lender does
not intend to collect any unearned interest in the event of acceleration. All,
sums paid or agreed to be paid to the Lender for the use, forbearance or
detention of the indebtedness under the Loan Documents shall, 'to the extent
permitted by Applicable Law, be amortized, prorated:, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed any
applicable usury ceiling. "Maximum Rate" means the maximum non-usurious rate
of interest which may be lawfully contracted for, charged, taken, reserved or
received by the Lender from the Borrower in connection with the indebtedness
under Applicable Law (or applicable United States federal law to the extent
that it permits the Lender to contract for, charge, take, reserve or receive a
greater amount of interest than under Applicable Law.)
ARTICLE 2 CONDITIONS OF LENDING
SECTION 2.1 Condition Precedent to Initial Advance. The obligation of the
Lender to make its initial Advance is subject to the conditions precedent that
Lender shall have received on or before the day of such Advance the following,
each dated such date, in form and substance satisfactory to the Lender:
(I) The Note; and
(ii) A Security Agreement, duly executed by the Borrower, in the form
of Exhibit B (the "Security
<PAGE> 4
Agreement").
This Agreement, the Note, the Security Agreement and all financing statements
and other documents and instruments executed or delivered pursuant hereto or
thereto are herein collectively referred to as the "Loan Documents."
SECTION 2.2 Conditions Precedent to All Advances. The obligation of the Lender
to make each Advance (including the initial Advance) shall be subject to the
further conditions precedent that on the date of such Advance (a) the following
statements shall be true (and each of the giving of the applicable notice
requesting such Advance and the acceptance by the Borrower of the proceeds of
such Advance shall constitute a representation and warranty by the Borrower
that on the date of such Advance such statements are true):
(i) The representations and warranties contained in Section 3.1 of
this Agreement, and as set forth in the Security Agreement are correct and
complete on and as of the date of such Advance, before and after giving effect
to such Advance and to the application of the proceeds therefrom, as though
made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such Advance or from the application of the proceeds therefrom, which
constitutes an Event of Default (as defined in Section 5.1 hereof) or would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both; and
(b) The Lender shall have received such other approvals, opinions
or documents as the Lender may reasonably request.
(c) SECTION 2.3 Lender's Absolute Discretion. The existence or
satisfaction of any or all of the conditions set forth in
Sections 2.1 or 2.2 above shall in no way impair or modify the
Lender's right of absolute discretion in deciding to make or
not make any Advance, or to determine the amount of any
Advance which the Lender is willing to make.
<PAGE> 5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Borrower. The
Borrower represents and warrants to the Lender as follows:
(a) The Borrower is a sole proprietor, duly formed, validly
existing and in good standing under the laws of Texas.
(b) The execution, delivery and performance by the Borrower of the
Loan Documents to which it is a party are within the Borrower's sole proprietor
powers, have been duly authorized by all necessary action on its part and do
not contravene (i) any law or contractual restriction binding on or affecting
the Borrower.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the
Borrower of the Loan Documents.
(d) This Agreement and the other Loan Documents to which the
Borrower is a party are legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their
respective terms, subject to the limitations of bankruptcy and general
principles of equity, provided that the unavailability of remedies due
to Equitable limitations will not substantially impair the rights of
Lender under any of the Loan Documents.
(e) There is no pending or, to the best of the Borrower's
knowledge, threatened, action - or proceeding affecting the Borrower
before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or business of the
Borrower or which purports to affect the legality, validity or
enforceability of any of the Loan Documents.
(f) The Borrower is not engaged in the business of extending
credit for the purpose of buying or carrying margin stock (within the meaning
of Regulation G issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used to buy or carry any margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
<PAGE> 6
ARTICLE 4
COVENANTS OF THE BORROWER
SECTION 4.1. Affirmative Covenants. So long as the Note shall remain
unpaid or otherwise during the term of this Agreement, the Borrower will,
unless the Lender shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent contested in good faith.
(b) Maintenance. Maintain its existence as a professional
association, not institute any proceedings for the dissolution, liquidation or
winding up of Borrower, and maintain, and cause each of its employees (where
applicable) to maintain, all professional licenses and permits in good standing
to the extent necessary for Borrower to operate in the ordinary course of
business.
SECTION 4.2 Negative Covenants. So long as the Note shall remain
unpaid or otherwise during the term of this Agreement, the Borrower will not,
without the written consent of the Lender:
(a) Liens, Etc. Except as permitted by the Loan Documents, create
or suffer to exist, any lien, security interest or other charge or encumbrance,
or any other type of preferential arrangement, upon or with respect to any of
its properties, whether now owned or hereafter acquired, or assign any right to
receive income, in each case to secure or provide for the payment of any person
or, entity, other than (i) purchase money liens or purchase money security
interests upon or in any property acquired or held by the Borrower or any
subsidiary in the ordinary course of business to secure the purchase price of
such property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property, and (ii) liens on assets not
constituting part of the Collateral (as defined in the Security Agreement)
(b) Mergers Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all of
the assets of, any person or entity.
ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES; SPECIAL REMEDY
SECTION 5.1 Events of Default and Remedies. If any of the following events:
("Events of Default") shall occur and be continuing:
<PAGE> 7
(a) The Borrower shall fail to pay any principal of, or interest
on, the Note when the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower under or
in connection with any Loan Document shall prove to have been incorrect in any
material respect when made; or
(c) The Borrower shall fail to perform observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed and such failure shall remain unremedied for 10 days
after written notice thereof shall have been given to the Borrower by the
Lender; or
(d) The Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 30 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any substantial
part of its property) shall occur and shall not be stayed pending timely appeal
(provided that the lifting of such stay shall constitute an Event of Default);
or the partner shall take any corporate or partnership action to authorize any
of the actions set forth above in this subsection (d); or
(e) Any final judgment or order for the payment of money in excess
of $100,000, or any two or more final judgments or orders for the payment of
money in excess of $250,000 in the aggregate, shall be rendered against the
Borrower or any of its subsidiaries and the same shall not be discharged within
a period of 30 days after such judgment becomes final and non-appealable; or
(f) The termination, cancellation, expiration without renewal or
replacement, or material breach by Borrower of the Management Agreement of even
date herewith between Borrower and Lender (the "Management Agreement"), or
<PAGE> 8
(g) R.S. Arora M.D. ceases at any time to devote his full-time
and energies or
(h) Any material breach by R.S. Arora of the Non-Competition
Agreement of even date herewith between Dr. Arora and Lender;
then, and in any such event, the Lender may, by notice to the Borrower, declare
the Note, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Note, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrower; provided, however, that in
the event of an actual or deemed entry of an order for relief under the Federal
Bankruptcy Code with respect to the Borrower the Note, all such interest and
all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 5.2 Offset. In addition to any other remedies available at law
or in equity, upon the occurrence or continuance of any Event of Default the
Lender shall have the right to offset against any assets (including sums in bank
accounts) then in Lender's possession or control, in payment and satisfaction of
obligations then due.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Amendment, Etc. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 6.2 Notice, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address at 4301 Vista A,
Pasadena, Texas 77054, Attention: R.S. Arora, M.D.; and if to the Lender, at
its address at 4301 A Vista Pasadena, Texas 77504, Attention: Chiu Chan,
President; or, as to each party, at such other address as shall be designated
by such party in a written notice to the other party. All such notices and -
communications
<PAGE> 9
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answer back or delivered to the cable company, respectively
except that notices to the Lender pursuant to the provisions of Article 1 shall
not be effective until received by the Lender.
SECTION 6.3 No Waiver; Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right under the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 6.4 Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, recording, administration, modification and amendment of the
Loan Documents and the other documents to be delivered, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Lender with respect thereto and with respect to advising the Lender as to its
rights and responsibilities under the Loan Documents. The Borrower further
agrees to pay on demand all costs and expenses, if any (including reasonable
counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of the Loan Documents and the
other documents to be delivered under the Loan Documents, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 6.5. In addition the Borrower shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of the Loan Documents, and agrees to
save the Lender harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes
SECTION 6.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lender.
SECTION 6.6 Certain Potential Conflicts. The Borrower acknowledges
that it has had full opportunity to consult with an attorney of its own choice
regarding the nature, obligations and consequences of this Agreement and that
it is not relying on counsel for the Lender in that regard. The
<PAGE> 10
parties have also entered into the Management Agreement and certain other
arrangements relating to the management and control of the Borrower. The
existence of such other relationships may be deemed to be, or give rise to,
certain conflicts of interest. The Borrower, recognizing. such conflicts of
interest, hereby irrevocably, knowingly and willingly waives all such
conflicts.
SECTION 6.7 GOVERNING LAW. THIS AGREEMENT AND THE NOTE,AND, UNLESS OTHERWISE
THEREIN PROVIDED, EACH OTHER LOAN DOCUMENT,SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER: LENDER:
- --------- -------
R. S. ARORA,. M.D. DOCTORS PRACTICE MANAGEMENT, INC.
By: /S/ R. S. ARORA, M.D. By: /S/ CHIU CHAN
--------------------------- ---------------------------------
CHIU CHAN, PRESIDENT
<PAGE> 1
EXHIBIT 10.19
SECURITY AGREEMENT
This Security Agreement is entered into effective this 1st
day of April, 1996, by R.S. ARORA, M.D., sole proprietor, 4301 A Vista,
Pasadena, Texas 77151, Harris County, Texas ("Grantor"), to DOCTORS PRACTICE
MANAGEMENT, INC., 4301 Vista, Pasadena, Texas 77027 ("Lender").
FOR VALUE RECEIVED, the receipt and sufficiency of which is
hereby acknowledged, Grantor grants to Lender the security interest hereinafter
set forth and agrees with Lender as follows:
A. OBLIGATIONS SECURED. The security interest granted hereby
is to secure punctual payment and performance of all obligations of Grantor now
or hereafter existing under (i) the Credit Agreement of even date herewith
between Grantor and the Lender (the "Credit Agreement"), and all Promissory
Note(s) issued thereunder (the Credit Agreement and all such Promissory Notes,
together with this Agreement, being hereafter collectively referred to as the
"Loan Documents"), and (ii) the terms of all other indebtedness now or
hereafter owed by Grantor to Lender, whether for principal, interest, fees,
expenses or otherwise and whether direct or indirect, primary or contingent,
(all such obligations being hereafter referred to as the "Obligations").
Capitalized terms used but not defined herein which are defined in the Loan
Documents shall have the meaning assigned to such terms in the Loan Documents.
B. USE OF COLLATERAL. Grantor represents, warrants and
covenants that the Collateral will be used by the Grantor primarily for
business use.
C. DESCRIPTION OF COLLATERAL. Grantor hereby grants to Lender
a security interest in and agrees that Lender shall continue to have a security
interest in, the following property, to wit:
(a) All Inventory. A security interest in all of Grantor's
inventory, including all goods, merchandise and other tangible personal
property, specifically including medical supplies, wheresoever located, now
owned or hereafter acquired and held for sale or lease or furnished or to be
furnished under contracts for service or used or consumed in Grantor's business
and all additions and accessions thereto and contracts with respect thereto and
all documents of title evidencing or representing any part thereof, and all
products and proceeds thereof, wherever located and however situated.
(b) All Accounts. A security interest in all accounts now owned
or existing as well as any and all that may hereafter arise or be
acquired by Grantor, and all the proceeds and products thereof,
including without limitation, all notes, drafts, acceptances,
instruments and chattel paper arise there from, and all returned or
repossessed goods arising from or relating to any such accounts, or
other proceeds of any sale or other disposition of inventory.
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<PAGE> 2
(c) All Equipment. A security interest in all equipment of every
nature and description whatsoever now owned or hereafter acquired by Grantor
including all appurtenances and additions thereto and substitutions therefor,
wheresoever located, including all tools, parts and accessories used in
connection therewith.
(d) General Intangibles. A security interest in all general
intangibles and other personal property now owned or hereafter acquired by
Grantor other than goods, accounts, chattel paper, documents and instruments.
(e) Chattel Paper. A security interest in all of Grantor's
interest under chattel paper, lease agreements and other instruments or
documents, whether now existing or owned by Grantor or hereafter arising or
acquired by Grantor, evidencing both a debt and security interest in or lease
of specific goods.
(f) Instruments. A pledge and assignment of said security
interest in all of Grantor's now owned or existing as well as hereafter
acquired or arising instruments and documents.
The term "Collateral" as used in this Agreement shall mean
and include, and the security interest shall cover, all of the foregoing
property, as well as any accessions, additions and attachments thereto and the
proceeds and products thereof or other proceeds of any sale or other
disposition of such property.
D. REPRESENTATIONS, WARRANTIES AND COVENANTS OF Grantor. Grantor
represents and warrants as follows:
1. Ownership; No Encumbrances. Except for the security
interest granted hereby and as permitted under the Loan Documents, the Grantor
is the owner of the Collateral free and clear from all charges, liens, security
interests, adverse claims and encumbrances of any and every nature whatsoever.
2. No Financing Statements. Except as permitted in the
Loan Documents or as disclosed to Lender, there is no financing statement or
similar filing now on file in any public office covering any part of the
Collateral, and Grantor will not execute and there will not be on file in any
public office any financing statement or similar filing except the financing
statements filed or to be filed in favor of Lender.
3. Accuracy Of Information. All information furnished
to Lender concerning Grantor, the Collateral and the Obligations, or otherwise
for the purpose of obtaining or maintaining credit, is or will be at the time
the same is furnished, accurate and complete in all material respects.
4. Authority. Grantor has full right and authority to
execute and perform this
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<PAGE> 3
Agreement and to create the security interest created by this Agreement. The
making and performance by Grantor of this Agreement will not violate any
articles of incorporation, bylaws or similar document respecting Grantor, any
provision of law, any order of court or governmental agency, or any indenture
or other agreement to which Grantor is a party, or by which Grantor or any of
Grantor's property is bound, or be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such
indenture or other agreement, or result in the creation or imposition of any
charge, lien, security interest, claim or encumbrance of any and every nature
whatsoever upon the Collateral, except as contemplated by this Agreement.
5. Addresses. The address of Grantor designated at the
beginning of this Agreement is Grantor's place of business if Grantor has only
one place of business or Grantor's chief executive office if Grantor has more
than one place of business. Grantor agrees not to change such address without
advance written notice to Lender.
E. GENERAL COVENANTS. Grantor covenants and agrees as follows:
1. Operation of the Collateral. Grantor agrees to
maintain and use the Collateral solely in the conduct of its own business, in a
careful and proper manner, and in conformity with all applicable permits or
licenses. Grantor shall comply in all material respects with all applicable
statutes, laws, ordinances and regulations. Grantor shall not use the
Collateral in any unlawful manner or for any unlawful purposes, or in any
manner or for any purpose that would expose the Collateral to unusual risk, or
to penalty, forfeiture or capture, or that would render inoperative any
insurance in connection with the Collateral.
2. Condition. Grantor shall maintain, service and
repair that portion of the Collateral constituting equipment (referred to in
Paragraph C (a) above) so as to keep it in good operating condition in
accordance with good business practices. Grantor shall replace within a
reasonable time all parts that may be worn out, lost, destroyed or otherwise
rendered unfit for use, with appropriate replacement parts. Grantor shall
obtain and maintain in good standing at all times all applicable permits,
licenses, registrations and certificates respecting the Collateral.
3. Assessments. Grantor shall promptly pay when due all
taxes, assessments, license fees, registration fees, and governmental charges
levied or assessed against Grantor or with respect to the Collateral or any
part thereof, except for any such item contested in good faith by Grantor f or
which adequate reserves have been established.
4. No Encumbrances. Except as permitted in the Loan
Agreement, Grantor agrees not to suffer or permit any charge, lien security
interest, adverse claim or encumbrance of any and every nature whatsoever
against the Collateral or any part thereof.
5. No Removal. Except as otherwise provided in this
Agreement, Grantor shall not remove the Collateral from the county or counties
designated at the beginning of this
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<PAGE> 4
Agreement without Lender's prior written consent.
6. No Transfer. Except in the ordinary course of
business, Grantor shall not, without the prior written consent of Lender, sell,
assign, transfer, lease, encumber, hypothecate or dispose of the Collateral, or
any part thereof, or interest therein, or offer to do any of the foregoing.
7. Notices and Reports. Grantor shall promptly notify
Lender in writing of any change in the name, identity or structure of Grantor,
any charge, lien, security interest, claim or encumbrance asserted against the
Collateral, any litigation against Grantor or the Collateral not fully covered
by insurance, any theft, loss, injury or similar incident involving the
Collateral, and any other material matter adversely affecting Grantor or the
Collateral. Grantor shall furnish such other reports, information and data
regarding Grantor's financial condition and operations' the Collateral and
such other matters as Lender may request from time to time.
8. Landlord's Waivers. Grantor shall furnish to Lender,
if requested, a landlord's waiver of all liens with respect to any Collateral
covered by this Agreement that is or may be located upon leased premises, such
landlord' s waivers to be in such form and upon such terms as are acceptable to
Lender.
9. Additional Filings. Grantor agrees to execute and
deliver such financing statement or statements, or amendments thereof or
supplements thereto, or other documents as Lender may from time to time require
in order to comply with the Texas Uniform Commercial Code (or other applicable
state law of the jurisdiction where any of the Collateral is located) and to
preserve and protect the Lender's rights to the Collateral.
10. Protection of Collateral. Lender, at its option,
whether before or after default, but without any obligation whatsoever to do
so, may upon notice to Borrower (to the extent practicable) (a) discharge
taxes, claims, charges, liens, security interests, assessments or other
encumbrances of any and every nature whatsoever at any time levied, placed upon
or asserted against the Collateral, (b) place and pay for insurance on the
Collateral, including insurance that only protects Lender's interest, to the
extent insurance is required to be maintained hereunder or in any other Loan
Document, (c) pay the actual, necessary and reasonable costs of the repair,
improvement, testing, maintenance and preservation of the Collateral, (d) pay
any filing, recording, registration, licensing or certification fees or other
fees and charges related to the Collateral, or (e) take any other action to
preserve and protect the Collateral and Lender's rights and remedies under this
Agreement as Lender may reasonably deem necessary or appropriate. Grantor
agrees that Lender shall have no duty or obligation whatsoever to take any of
the foregoing action. Grantor agrees to promptly reimburse Lender upon demand
for any payment made or any expense incurred by the Lender pursuant to this
authorization. These payments and expenditures, together with interest thereon
from date incurred until paid by Grantor at the maximum contract rate allowed
under applicable laws, which Grantor agrees to pay, shall constitute additional
Obligations and shall be secured by and entitled to the benefits of this
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<PAGE> 5
Agreement.
11. Inspection. Grantor shall at all reasonable times
allow Lender by or through any of its officers, agents, attorneys or
accountants, to examine the Collateral, wherever located, and to examine and
make extracts from Grantor's books and records.
12. Further Assurances. Grantor shall do, make, procure,
execute and deliver all such additional and further acts, things, deeds,
interests and assurances as Lender may reasonably require from time to time to
protect, assure and enforce Lender' s rights and remedies.
13. Insurance. Grantor shall have and maintain insurance
at all time with respect to all tangible Collateral insuring against risks of
fire (including so-called extended coverage), theft and other risks as Lender
may reasonably require, containing such terms, in such form and amounts and
written by such companies as may be reasonably satisfactory to Lender, all of
such insurance to contain, if requested by Lender, loss payable clauses in
favor of Lender as its interest may appear. All policies of insurance shall
provide for fifteen (15) days, written minimum cancellation notice to Lender
and at the request of Lender shall be delivered to and held by it. Lender is
hereby authorized to act as attorney for Grantor in obtaining, adjusting,
settling and canceling such insurance and endorsing any drafts or instruments.
Lender shall be authorized to apply the proceeds from any insurance to the
Obligations secured hereby whether or not such obligations are then due and
payable. Grantor specifically authorizes Lender to disclose information from
the policies of insurance to prospective insurers regarding the Collateral. In
lieu of the foregoing Grantor may self-insure to the extent permitted under
the Loan Documents.
F. EVENTS OF DEFAULT. The occurrence or continuance of an "Event
of Default" within the meaning of the Loan Agreement shall constitute an "Event
of Default" under this Agreement.
G. REMEDIES. Upon the occurrence of an Event of Default, Lender,
at its option, shall be entitled to exercise any one or more of the following
remedies (all of which are cumulative):
1. Declare Obligations Due. Lender, at its option, may
declare the obligations or any part thereof immediately due and payable,
without demand, notice of intention to accelerate, notice of acceleration,
notice of nonpayment, presentment, protest, notice of dishonor, or any other
notice whatsoever, all of which are hereby waived by Grantor and any maker,
endorser, guarantor, surety or other party liable in any capacity for any of
the obligations.
2. Remedies. Lender shall have all of the rights and
remedies provided for in this Agreement and in any other agreements executed by
Grantor, the rights and remedies in
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<PAGE> 6
the Uniform Commercial Code of Texas, and any and all of the rights and
remedies at law and equity, all of which shall be deemed cumulative. Without
limiting the foregoing, Grantor agrees that Lender shall have the right to (a)
require Grantor to assemble the Collateral and make it available to Lender at a
place designated by Lender that is reasonably convenient to both parties, which
Grantor agrees to do; (b) take possession of the Collateral, with or without
process of law, and, in this connection, enter any premises where the
Collateral is located to remove same, to render it unusable, or to dispose of
same on such premises; (c) sell, lease or otherwise dispose of the Collateral,
by public or private proceedings, for cash or credit, without assumption of
credit risk; and/or (d) whether before of after default, collect and receipt
for, compound, compromise, and settle, and give releases, discharges and
acquaintances with respect to, any and all amounts owned by any person or
entity with respect to the Collateral. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Lender will send Grantor reasonable notice of the time and
place of any public sale or of the time after which any private sale or other
disposition will be made. Any requirement of reasonable notice to Grantor shall
be met if such notice is mailed, postage prepaid, to Grantor at the address of
Grantor designated at the beginning of this Agreement, at least five (5) days
before the day of any public sale or at least five (5) days before the time
after which any private sale or other disposition will be made.
3. Expenses. Grantor shall be liable for and agrees to
pay the reasonable expenses incurred by Lender in enforcing its rights and
remedies, in retaking, holding, testing, repairing, improving, selling, leasing
or disposing of the Collateral, or like expenses, including, without
limitation, attorneys' fees and legal expenses incurred by Lender. These
expenses, together with interest thereon from the date incurred until paid by
Grantor at the maximum contract rate allowed under applicable laws, which
Grantor agrees to pay, shall constitute additional Obligations and shall be
secured by and entitled to the benefits of this Agreement.
4. Proceeds; Surplus; Deficiencies. Proceeds received
by Lender from disposition of the Collateral shall be applied toward Lender's
expenses and other Obligations in such order or manner as Lender may elect.
Grantor shall be entitled to any surplus if one results after lawful
application of the proceeds. Grantor shall remain liable for any deficiency.
5. Remedies Cumulative. The rights and remedies of
Lender are cumulative and the exercise of any one or more of the rights or
remedies shall not be deemed an election of rights or remedies or a waiver of
any other right or remedy. Lender may remedy any default and may waive any
default without waiving the default remedied or without waiving any other prior
or subsequent default.
H. OTHER AGREEMENTS.
1. Savings Clause. Notwithstanding any provision to the
contrary herein, or in any of the documents evidencing the Obligations or
otherwise relating thereto, no such provision shall require the payment or
permit the collection of interest in excess of the maximum permitted by
applicable usury laws. If any such excessive interest is so provided for, then
in
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<PAGE> 7
such event (i) the provisions of this paragraph shall govern and control, (ii)
neither the Grantor nor its successors or assigns or any other party liable for
the payment thereof, shall be obligated to pay the amount of such interest to
the extent that is in excess of the maximum amount permitted by law, (iii) any
such excess interest that may have been collected shall be, at the option of
the holder of the instrument evidencing the Obligations, either applied as a
credit against the then unpaid principal amount thereof or refunded to the
maker thereof, and (iv) the effective rate of interest shall be automatically
reduced to the maximum lawful rate under applicable usury laws as now or
hereafter construed by the courts having jurisdiction.
2. Waivers. Grantor and any maker, endorser, guarantor,
surety or other party liable in any capacity respecting the Obligations hereby
waive demand, notice of intention to accelerate, notice of acceleration, notice
of nonpayment, presentment, protest, notice of dishonor and any other similar
notice whatsoever, subject to Grantor's rights to notice and cure expressly
provided for in the Loan Agreement.
3. Severability. Any provision hereof found to be
invalid by courts having jurisdiction shall be invalid only with respect to
such provision (and then only to the extent necessary to avoid such invalidity)
. The offending provision shall be modified to the maximum extent possible to
confer upon Lender the benefits intended thereby. Such provision as modified
and the remaining provisions hereof shall be construed and enforced to the same
effect as if such offending provision (or portion thereof) had not been
contained herein, to the maximum extent possible.
4. Use of Copies. Any carbon, photographic or other
reproduction of any financing statement signed by Grantor is sufficient as a
financing statement for all purposes, including without limitation, filing in
any state as may be permitted by the provisions of the Uniform Commercial Code
of such state.
5. Relationship to Other Agreements. This Security
Agreement and the security interests (and pledges and assignments as
applicable) herein granted are in addition to (and not in substitution,
notation or discharge of) any and all prior or contemporaneous security
agreements, security interests, pledges, assignments, liens, rights, titles or
other interests in favor of Lender or assigned to Lender by others in
connection with the Obligations. All rights and remedies of Lender in all such
agreements are cumulative, but in the event of actual conflict in terms and
conditions, the terms and conditions of the latest security-, agreement shall
govern and control. Grantor acknowledges that it has had full opportunity to
consult with an attorney of its own choice regarding the nature, obligations
and consequences of entering into each of the Loan Documents and that it is not
relying upon counsel for the Lender in this regard. Grantor and the Lender
have also entered into certain management arrangements under which the Lender
is providing certain management, administrative and accounting services for the
Grantor. The existence of such management arrangements, including the exercise
by Lender of rights and remedies in that regard, may be deemed to constitute or
give rise to certain conflicts of interest. Grantor hereby irrevocably,
knowingly and willingly waives all such conflicts.
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<PAGE> 8
6. Notices. Any notice or demand given by Lender to
Grantor in connection with this Agreement, the Collateral or the Obligations
shall be deemed given and effective two days after deposited in the United
States mail, postage prepaid, addressed to Grantor at the address of Grantor
designated at the beginning of this Agreement. Actual notice to Grantor shall
always be effective no matter how given or received.
7. Headings and Gender. Paragraph headings in this
Agreement are for convenience only and shall be given no meaning or
significance in interpreting this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require.
8. Amendments. Neither this Agreement nor any of its
provisions may be changed, amended, modified, waived or discharged orally, but
only by an instrument in writing signed by the party against whom enforcement
of the change, amendment, modification waiver or discharge is sought.
9. Continuing Agreement. The security interest (and
pledges and assignments as applicable) hereby granted and all of the terms and
provisions in this Agreement shall be deemed a continuing agreement, until such
time as all Obligations have been paid in full and all commitments of Lender to
make Advances under the Loan Agreement have been terminated, whereupon this
Agreement will terminate.
10. Binding Effect. The provisions of this Security
Agreement shall be binding upon the successors and assigns of Grantor and the
rights, powers and remedies of Lender hereunder shall inure to the benefit of
the successors and assigns of Lender.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A J-JURISDICTION OTHER THAN THE STATE OF TEXAS.
EXECUTED this 1st day of April 1, 1996.
--------
R.S. ARORA, M.D.
/s/ R.S. Arora
---------------------------------------
8
<PAGE> 1
EXHIBIT 10.20
REVOLVING CREDIT NOTE
$100,000 April 1, 1996
FOR VALUE RECEIVED, the undersigned (herein called "Maker"), promises
to pay to the order of DOCTORS PRACTICE MANAGEMENT, INC. (herein called
"Payee," which term herein in every instance shall refer to any owner or
holder of this note), the sum of One Hundred Thousand AND 00/100 DOLLARS
($100,000), or so much thereof as is advanced to Borrower under the Credit
Agreement referred to below, together with interest on the principal hereof
from time to time outstanding from the date of advancement until maturity, at
the per annum rate hereinafter stated, said principal and interest being
payable in lawful money of the United States of America as provided in the
Credit Agreement (defined below).
This note has been issued pursuant to and entitled to the benefits of
the Credit Agreement dated as of May 1, 1996, by and between the Maker and
Payee (as the same may be amended, modified or restated from time to time, the
"Credit Agreement"), and is the "Note" referred to therein. Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the Maturity hereof.
The principal balance hereof advanced and from time to time remaining
unpaid shall bear interest during each day of the loan evidenced hereby from
the date advanced until the date paid at the rates set forth in the Credit
Agreement.
The principal and interest of this note hereon shall be due and
payable in accordance with the provisions of the Credit Agreement.
If there shall occur or be continuing an Event of Default (within the
meaning of the Credit Agreement), then Payee shall have the option, to the
extent permitted by applicable law, to declare this note due and payable,
whereupon the entire unpaid principal balance of this note and all accrued
unpaid interest hereon thereupon at once shall mature and become due and
payable without presentment, demand, protest or notice of any kind (including,
but not limited to, notice of intention to accelerate or notice of
acceleration), all of which hereby are expressly waived by
Page 1 of a 4 Page Revolving Credit Note
<PAGE> 2
Maker. The time of payment-of-this note also is subject to acceleration in
the same manner provided in this paragraph in the event Maker defaults or
otherwise fails to discharge its obligations under any of the instruments
securing payment hereof or relating hereto.
Maker and any and all sureties, guarantors and endorsers of this note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment protest, notice of any kind (including, but
not limited to, notice of dishonor, notice of protest, notice of intention to
accelerate and notice of acceleration) and diligence in collecting and bringing
suit against any party hereto, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange loss, impairment or release of any security now or
hereafter given for this note, (c) to the release of any party primarily or
secondarily liable hereon, and (d) that it will not be necessary for Payee, in
order to enforce payment of this note, to first institute or exhaust Payee's
remedies against Maker or any other party liable therefor or against any
security for this note.
In the event of default hereunder or under any of the instruments
securing payment hereof and this note is placed in the hands of an attorney
for- collection (whether or not suit is filed), or if this note is collected
by suit or legal proceedings or through the probate court or bankruptcy
proceeding, maker agrees to pay all reasonable attorneys, fees and all
expenses of collection and costs of court.
It is the intention of the parties hereto to conform strictly to
applicable usury laws. Accordingly, notwithstanding any provision to the
contrary in this note or in any of the documents securing or guaranteeing
payment hereof or otherwise relating hereto, or in any communication or
writing by Payee or any other person relating to this loan, whether now or
hereafter arising, in no event or contingency shall this note or such
documents, communications or writings permit or require the payment of any sums
which constitute interest under applicable law, or permit or require the
charging, taking, reserving, or receiving by Payee or any other person of any
sums which constitute interest under applicable law, in excess of the maximum
amount permitted by such law. If any excess interest otherwise would be deemed
to be contracted for, charged, taken, reserved or received under this note or
such documents,
Page 2 of a 4 Page Revolving Credit Note
<PAGE> 3
communications or writings by Payee or any other person, or in the event the
maturity of the indebtedness evidenced by this note is accelerated in whole or
in part, or in the event all or part of the principal or interest of this note
shall be prepaid, then it is agreed as follows: (i) any excess or unearned
interest contracted for, charged, taken, reserved, or received, shall be deemed
a mistake and canceled automatically, without the necessity of any other
communication or writing by Payee or any other person, (ii) any excess or
unearned interest which is paid shall be credited to the unpaid principal
amount hereof or, to the extent the unpaid principal amount hereof shall have
been or would be paid in full, refunded to Maker or other obligor as the case
may be, and (iii) the note, documents, communication or writing, as the case
may be, shall be reformed automatically to permit only the payment, charging,
taking, reserving, or receiving of accrued unpaid interest at the maximum
lawful rate. Without limiting the foregoing, in determining the maximum amount
of lawful interest under this loan, all interest at any time contracted for,
charged, taken, reserved or received shall be amortized, prorated, allocated,
and spread, to the full extent permitted by applicable law, in equal parts
during the period of the full term of the loan evidenced hereby, taking into
account all renewal and extension periods.
The provisions set forth in the preceding paragraph shall be deemed to
be incorporated into each of the documents executed in connection with this
note and loan and in every communication and writing relating to this note and
loan, now or hereafter arising, whether or not the same expressly references
the preceding paragraph, and any and all figures set forth therein shall, for
the purpose of determining the extent of the indebtedness set forth or asserted
therein, or otherwise contracted for, charged, taken, reserved, or received, as
applicable, be recomputed automatically by Maker or other obligor, or by any
court with proper jurisdiction considering the same, or both, as necessary to
give effect to the adjustments and credits required and agreed upon therein and
the other agreements set forth therein, without the necessity of any other
communication or writing by Payee.
If the applicable state or federal usury law is amended after the date
hereof to permit a greater rate of interest to be contracted for, charged,
taken, reserved, or received under this note and the loan than is permitted
under applicable state or federal law as of the date hereof, then the maximum
lawful rate of interest applicable to this note and loan shall be increased to
the
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<PAGE> 4
maximum rate of interest allowed by such subsequent law or amendment, to be
effective as of the effective date of such law or amendment, and such
additional charges that may become owing by reason of such increase shall be
payable on demand.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE APPLICABLE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA.
Any check, draft, money order or other instrument given in payment of all or
any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment-hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Maker represents and warrants to Payee and to all other owners and
holders of any indebtedness evidenced hereby that all loans evidenced by this
note are for business, commercial, investment or other similar purpose and not
primarily for personal, family, household or agricultural use.
This note is secured as provided in the Credit Agreement and is
entitled to all of the benefits of the Credit Agreement.
- MAKER -
R. S. ARORA, M.D.
/s/ R.S. Arora
----------------------
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<PAGE> 1
EXHIBIT 10.21
<TABLE>
<S> <C>
DYNACQ INTERNATIONAL, INC. CAPITAL BANK Loan Number 168
----------------------------------- --------------------
10304 I-10 EAST #369 10304 I-10 EAST (P.O. BOX 24337) Date APRIL 4, 1995
----------------------------------- ---------------------------
HOUSTON, TX 77029 HOUSTON, TX 77029 Maturity Date APRIL 4, 1998
----------------------------------- -----------------
Loan Amount $ 125,849.40
----------------------------------- -------------------
Renewal of MRS/NLM
----------------------------------- ---------------------
-----------------------------------
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS
"I" includes each borrower above, "You" means the lender, its
joint and severally. successors and assigns.
</TABLE>
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of ONE HUNDRED TWENTY FIVE THOUSAND EIGHT
HUNDRED FORTY NINE AND 40/100 * * * * * * * * * * * * * Dollars $125,849.40
[x] Single Advance: I will receive all of this principal sum on APRIL 4,
1995. No additional advances are contemplated under this note.
[ ] Multiple Advance: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On ______________________________
_____________ I will receive the amount of $____________________ and future
principal advances are contemplated.
Conditions: The conditions for future advances are ________________________
____________________________________________________________________________
____________________________________________________________________________
[ ] Open End Credit: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all
other conditions and expires on _____________________________.
[ ] Closed End Credit: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
APR. 4, 1995 at the rate of 9.000% per year until FIRST CHANGE DATE.
[x] Variable Rate: This rate may then change as stated below.
[x] Index Rate: The future rate will be EQUAL TO the following index rate:
TEXAS COMMERCE BANK PRIME
________________________________________________________________________
________________________________________________________________________
[x] Ceiling Rate: The interest rate ceiling for this note is the QUARTERLY
ceiling rate announced by the Credit Commissioner from time to time.
[x] Frequency and Timings: The rate on this note may change as often as
DAILY
A change in the interest rate will take effect ON THE SAME DAY
[x] Limitations: During the term of this loan, the applicable annual
interest rate will not be more than 18.000
Less than _______________ %.
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments:
[x] The amount of each scheduled payment will change. [ ] The
amount of the final payment will change.
[ ]________________________________________________________________________
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/365 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of
this note owing after maturity, and until paid in full, as stated below:
[ ] on the same fixed or variable rate basis in effect before maturity (as
indicated above).
[x] at a rate equal to HIGHEST RATE PERMITTED BY LAW.
[ ] LATE CHARGE: If a payment is made more than ________ days after it is due,
I agree to pay a late charge of____________________________________________
___________________________________________________________________________.
[ ] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which [ ] are [ ] are not included in the principal amount above:
___________________________________________________________________________.
PAYMENTS: I agree to pay this note as follows:
[x] Interest: I agree to pay accrued interest WITH PRINCIPAL ___________________
____________________________________________________________________________
[x] Principal: I agree to pay the principal ON DEMAND, BUT IF NO DEMAND IS
MADE:______________________________________________________________________
[x] Installments: I agree to pay this note in 36 payments. The first payment
will be in the amount of $4,003.10 and will be due May 4, 1995. A
payment of $4,003.10 will be due EACH MONTH thereafter. The final payment
of the entire unpaid balance of principal and interest will be due
APRIL 4, 1998.
ADDITIONAL TERMS:
SEE ATTACHED SECURITY AGREEMENT FOR COLLATERAL DESCRIPTION.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
X /S/ Milton R. Smith
- ------------------------------
MILTON R. SMITH, PRESIDENT
PURPOSE: The purpose of this loan is BUSINESS: PURCHASE ULTRASOUND MACHINE
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2).
I have received a copy on today's date.
DYNACQ INTERNATIONAL, INC.
- -----------------------------
BY: /S/ Chiu Moon Chan
- -----------------------------
CHIU MOON CHAN, PRESIDENT
<PAGE> 2
<TABLE>
<S> <C> <C>
DYNACQ INTERNATIONAL, INC. CAPITAL BANK EXTENSION OF SECURITY
-----------------------------------
10304 I-10 EAST #369 10304 I-10 EAST (P.O. BOX 24337) AGREEMENT DATED:
-----------------------------------
HOUSTON, TX 77029 HOUSTON, TX 77029
-----------------------------------
APRIL 4, 1995
----------------------------------- ----------------------------------
-----------------------------------
-----------------------------------
DEBTOR'S NAME AND ADDRESS SECURED PARTY'S NAME AND ADDRESS
</TABLE>
For value received, the Debtor hereby grants the Secured Party a security
interest in the following additional collateral:
EXHIBIT 'A'
ACUSON 128XP COLOR DOPPLER IMAGING SYSTEM, 128XP/10 MAINFRAME PKG. #15872,
128XP/10 COLOR DOPPLER PKG., 128XP/10 MAINFRAME WITH 12" MONITOR, 128XP
OPERATING SYSTEM SOFTWARE LICENSE, PW DOPPLER OPTION, B-COLOR OPTION SOFTWARE,
SOFTWARE SUPPORT FOR SPECIFIED TRANSDUCERS, TRANSDUCER SWITCH OPTION, 128XP/10
COLOR DOPPLER PACKAGE, COLOR DOPPLER IMAGING HARDWARE, IMAGING CINE, C3 66MM
HIGH PERFORMANCE CURVED ARRAY TRANSDUCER #4310-5273, L7 38MM LINEAR ARRAY
TRANSDUCER #4310-3053, EC7 - 19MM CURVED-LINEAR ArRAY TRANSDUCER, ACOUSTIC
RESPONSE TECHNOLOGY (ART), NEEDLE GUIDE SOFTWARE OPTION, L5/L7 NEEDLE GUIDE
HARDWARE PACKAGE, OB CALCULATIONS APPLICATIONS SOFTWARE, COLOR DOPPLER ENERGY
OPTION, FETAL M-MODE APPLICATIONS SOFTWARE, IIE MP4000 SERIES II - MULTI-IMAGE
CAMERA #2503, SONY UP-5250MD COLOR PAGE PRINTER (NTSC) #13558-8 AND/OR PROCEEDS
THEREOF.
By signing below, Debtor acknowledges that this document describes additional
collateral which is subject to all terms and conditions of the Security
Agreement referred to above.
DYNACQ INTERNATIONAL, INC.
Authorized Signature(s) of
Secured Party - sign below only
if filing this document.
Debtor By: /s/ Chiu Moon Chan
- --------------------------------- ---------------------------
CHIU MOON CHAN, PRESIDENT (title)
Debtor
- --------------------------------- ---------------------------
(title)
Debtor
- --------------------------------- ---------------------------
(title)
<PAGE> 1
EXHIBIT 10.22
REVOLVING CREDIT NOTE
$100,000 July 1, 1996
FOR VALUE RECEIVED, the undersigned (herein called "Maker"), promises
to pay to the order of DOCTORS PRACTICE MANAGEMENT, INC. (herein called
"Payee," which term herein in every instance shall refer any owner or holder of
this note), the sum of One Hundred Thousand DOLLARS ($100,000), or so much
thereof as is advanced to Borrower under the Credit Agreement referred to
below, together with interest on the principal hereof from time to time
outstanding from the date of advancement until maturity, at the per annum rate
hereinafter stated, said principal and interest being payable in lawful money
of the United States of America as provided in the Credit Agreement (defined
below).
This note has been issued pursuant to and entitled to the benefits its
of the Credit Agreement dated as of July 1,1996, by and between the Maker and
Payee (as the same may be amended, modified or restated from time to time, the
"Credit Agreement"), and is the "Note" referred to therein. Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the ,Maturity hereof.
The principal balance hereof advanced and from time to time remaining
unpaid shall bear interest during each day of the loan evidenced hereby from
the date advanced until the date paid at the rates set forth in the Credit
Agreement.
The principal and interest of this note hereon shall be due and
payable in accordance with the provisions of the Credit Agreement.
If there shall occur or be continuing an Event of Default (within the
meaning of the Credit Agreement), then Payee shall have the option, to the
extent permitted by applicable law, to declare this note due and payable, where
upon the entire unpaid principal balance of this note and all accrued unpaid
interest hereon thereupon I at once shall mature and become due and payable
without presentment, demand, protest or notice of any kind (including, but not
limited to, notice of intention to accelerate or notice of acceleration), all
of which hereby are expressly waived by Maker. The time of payment-of-this
note also is subject to acceleration in the same manner provided in this
paragraph in the event Maker defaults or otherwise fails to discharge its
obligations under any of the instruments securing payment hereof or relating
hereto.
Maker and any and all sureties, guarantors and endorsers of this note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment ' protest, notice of any kind (including, but
not limited to, notice of dishonor, notice of protest, notice of intention to
accelerate and notice of acceleration) and diligence in collecting and bringing
suit against any party hereto, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange loss, impairment or release of any security now or
hereafter given for this note, (c) to the release of any party primarily or
secondarily liable hereon, and (d) that it will not be necessary for Payee, in
order to enforce payment of this note, to first institute or exhaust Payee's
remedies against Maker or any other party liable therefor or against any
security for this note.
In the event of default hereunder or under any of the instruments
securing payment hereof and this note is placed in the hands of an attorney for
collection (whether or not suit is filed), or if this note is collected by suit
or legal proceedings or through the probate court or bankruptcy proceeding,
maker agrees to pay all reasonable attorneys, fees and -all expenses of
collection and costs of court.
<PAGE> 2
It is the intention of the parties hereto to conform strictly to
applicable usury laws. Accordingly, notwithstanding any provision to the
contrary in this note or in any of the documents securing or quarantining
payment hereof or otherwise relating hereto, or in any communication or writing
by Payee or any other person relating to this loan, whether now or hereafter
arising, in no event or contingency shall this note or such documents,
communications or writings permit or require the payment of any sums which
constitute interest under applicable law, or permit or require the charging,
taking, reserving, or receiving by Payee or any other person of any sums which
constitute interest under applicable law, in excess of the maximum amount
permitted by such law. If any excess interest otherwise would be deemed to be
contracted for, charged, taken, reserved or received under this note or such
documents, communications or writings by Payee or any other person, or in the
event the maturity of the indebtedness evidenced by this note is accelerated in
whole or in part, or in the event all or part of the principal or interest of
this note shall be prepaid, then it is agreed as follows: (i) any excess or
unearned interest contracted for, charged, taken, reserved, or received, shall
be deemed a mistake and canceled automatically, without the necessity of any
other communication or writing by Payee or any other person, (ii) any excess or
unearned interest which is paid shall be credited to the unpaid principal
amount hereof or, to the extent the unpaid principal amount hereof shall have
been or would be paid in full, refunded to Maker or other obligor as the case
may be, and (iii) the note, documents, communication or writing, as the case
may be, shall be reformed automatically to permit only the payment, charging,
taking, reserving, or receiving of accrued unpaid interest at the maximum
lawful rate. Without limiting the foregoing, in determining the maximum amount
of lawful interest under this loan, all interest at any time contracted for,
charged, taken, reserved or received shall be amortized, prorated, allocated,
and spread, to the full extent permitted by applicable law, in equal parts
during the period of the full term of the loan evidenced hereby, taking into
account all renewal and extension periods.
The provisions set forth in the preceding paragraph shall be deemed to
be incorporated into each of the documents executed in connection with this
note and loan and in every communication and writing relating to this note and
loan, now or hereafter arising, whether or not the same expressly references
the preceding paragraph, and any and all figures set forth therein shall, for
the purpose of determining the extent of the indebtedness set forth or asserted
therein, or otherwise contracted for, charged, taken, reserved, or received, as
applicable, be recomputed automatically by Maker or other obligor, or by any
court with proper jurisdiction considering the same, or both, as necessary to
give effect to the adjustments and credits required and agreed upon therein and
the other agreements set forth therein, without the necessity of any other
communication or writing by Payee.
If the applicable state or federal usury law is amended after the date
hereof to permit a greater rate of interest to be contracted for, charged,
taken, reserved, or received under this note and the loan than is permitted
under applicable state or federal law as of the date hereof, then the maximum
lawful rate of interest applicable to this note and loan shall be increased to
the maximum rate of interest allowed by such subsequent law or amendment, to be
effective as of the effective date of such law or amendment, and such
additional charges that may become owing by reason of such increase shall be
payable on demand.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE APPLICABLE LAWS
OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA.
Any check, draft, money order or other instrument given in payment of
all or any portion hereof may be accepted by Payee and handled in collection in
the customary manner, but the same shall not constitute payment-hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
<PAGE> 3
Maker represents and warrants to Payee and to all other owners and
holders of any indebtedness evidenced hereby that all loans evidenced by this
note are for business, commercial,. investment or other similar purpose and not
primarily for personal, family, household or agricultural use.
This note is secured as provided in the Credit Agreement and is
entitled to all of the benefits of the Credit Agreement.
-MAKER-
HOUSTON PHYSICAL MEDICINE ASSOCIATES, M.D., P.A.
D/B/A TEXAS MEDICAL REHABILITATION
BY: /s/ Anjali Jain
--------------------------------------------
ANJALI JAIN, M.D.
President
<PAGE> 1
EXHIBIT 10.23
CREDIT AGREEMENT
THIS AGREEMENT, dated effective July 1, 1996, between HOUSTON PHYSICAL
MEDICINE ASSOCIATES, P.A., a Texas professional association (the "Borrower"),
and DOCTORS PRACTICE MANAGEMENT INC., a Texas corporation (the "Lender"), and
the parties agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 1.1 Advances. From time to time during the term of this
Agreement, Lender may, in its sole discretion and subject to the terms and
conditions hereinafter set forth, make advances (the "Advances") to the
Borrower from time to time on any Business Day (as hereinafter defined) during
the period from the date hereof until June 30, 1997 (the "term of this
Agreement") in an aggregate amount not to exceed at any time outstanding One
Hundred Thousand Dollars ($100,000).Each Advance shall be in an amount not less
than Ten Thousand Dollars ($10,000.) or an integral multiple of $1,000 in
excess thereof, Borrower may borrow, prepay pursuant to Section 1.4 and
re-borrow under this Section 1.1, subject to Lender's right of absolute
discretion in making any Advance. Without in any way limiting Lender's absolute
discretion in making any Advance, in no event may the outstanding principal
balance of the Advances (including any new Advances requested by Borrower)
exceed an amount - equal to forty percent (40%) of Borrower's Eligible Accounts
(which, for purposes hereof, means those accounts receivable of Borrower (i) on
which Lender has a first and prior perfected security interest, (ii) which are
not more than 120 days past due, and (iii) which are otherwise satisfactory to
Lender in its sole and absolute discretion). The amount of the initial Advance
shall be Thirty Six Thousand Dollars ($36,000.00) and shall be funded on the
date of this Agreement.
SECTION 1.2 Making the Advances. Advances shall be made on a
Business Day. Each Advance shall be made on written notice, signed by the
President of the Borrower and delivered to Lender not later than 5:00 p.m.
(Houston time) at least two Business Days before the day on which the Advance
is to be made. Each notice from the Borrower to the Lender requesting an
Advance shall be irrevocable and binding on the Borrower.
1
<PAGE> 2
SECTION 1.3 Interest and Repayment. All outstanding principal on all
Advances made by Lender to Borrower hereunder shall bear interest at a variable
rate per annum equal to the lesser of (i) the Prime Rate (as hereafter defined)
from time in effect, plus two percent (the rate charged under this clause (i)
adjusted with each adjustment announced in the Prime Rate), or (ii) the highest
rate permitted under Applicable Law (as hereafter defined). For purposes
hereof, "Prime Rate" shall mean the prime lending rate from time to time
announced by Texas Commerce Bank National Association, Houston, Texas, and if
for any reason such bank shall discontinue announcing a prime rate, then the
Prime Rate shall be as announced from time to time in the Money Rates Table in
the Wall Street Journal. Accrued interest on the unpaid portion of Advances
made hereunder shall be payable monthly on or before the fifth day of each
month. The principal portion of the initial Advance shall be payable in equal
monthly installments, commencing on or before the first day of the month
following the date of this Agreement and continuing monthly thereafter until
paid in full. The principal portion of all other Advances shall be payable in
full on or before the such termination of the FULL SERVICE MANAGEMENT AGREEMENT
entered into effective July 1, 1996 between both parties and thereafter ON
DEMAND by the Lender. On the date of this Agreement, the Borrower shall execute
and deliver to the Lender a Revolving Credit Note in the form of Exhibit A
hereto (the "Note"), evidencing the indebtedness resulting from such Advances
and delivered to the Lender pursuant to Article II.
SECTION 1.4 Optional Prepayments. The Borrower may, upon at least
two Business Days, notice to the Lender stating the proposed date and principal
amount of the prepayment, without penalty or premium, prepay the outstanding
principal amounts of the Advances in whole or in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid.
SECTION 1.5 Payments and Computations. The Borrower shall make each
payment hereunder and under the Note on the date when due in U.S. dollars to
the Lender at its address referred to in Section 6.2 in same day funds. The
Borrower hereby authorizes the Lender, if and to the extent payment is not made
when due hereunder or under the Note, to charge from time to time against any
or all of the Borrower's accounts maintained by the Lender on Borrower's behalf
any amount so due. All computations of interest shall be made by the Lender on
the basis of a year of 365 or 366 days, as the case may be, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
2
<PAGE> 3
SECTION 1.6 Payment on Non-Business Days. Whenever any payment
hereunder or under the Note shall be stated to be due on a day other than a day
of the year on which banks are not required or authorized to close in Houston,
Texas (any such other day being a "Business Day"), such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest.
SECTION 1.7 Maximum Rate. This Agreement and all of the
Loan-Documents (as hereafter defined) are intended to be performed in
accordance with, and only to the extent permitted, by all applicable law
governing the maximum rate or amount of interest payable on or in connection
with the Note and the indebtedness evidenced thereby of any jurisdiction and
law of which is found by a court of competent jurisdiction to be applicable to
the Loan Documents notwithstanding the jurisdiction chosen by the parties
("Applicable Law"). It is expressly stipulated and agreed to be the intent of
Borrower and Lender at all times to comply with the Applicable Law governing
the maximum rate or amount of interest payable on or in connection with the
Loan Documents (or applicable united States federal law to the extent that it
permits the Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under applicable Law). If the Applicable Law is ever
judicially interpreted to as to render usurious any amount called for under the
Loan Documents or contracted for, charged, taken, reserved, or received with
respect to the indebtedness under the Loan Documents, or if the acceleration of
the maturity of the indebtedness under the Loan Documents or any prepayment by
the Borrower results in the Borrower having paid any interest in excess of that
permitted by Applicable Law, then it is the Borrower's and the Lender's express
intent that all excess amounts therefore collected by the Lender be credited on
the principal balance of the Note (or, if the Note and all other indebtedness
have been or would thereby be paid in full, refunded to the Borrower), and the
provisions of the Loan Documents immediately be deemed reformed and the amount
thereafter collectible thereunder reduced, without the necessity of the
execution of any new documents, so as to comply with the Applicable Law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
and thereunder. The right to accelerate the maturity of the indebtedness
under the Loan Documents does not include the right to accelerate any interest
which has not otherwise accrued on the date of such acceleration, and the
Lender does not intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to the Lender for the use,
forbearance or detention of the indebtedness under the Loan Documents shall,
'to the extent permitted by Applicable Law, be amortized, prorated:, allocated
and spread throughout the full term of such
3
<PAGE> 4
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed any applicable usury ceiling.
"Maximum Rate" means the maximum non-usurious rate of interest which may be
lawfully contracted for, charged, taken, reserved or received by the Lender
from the Borrower in connection with the indebtedness under Applicable Law (or
applicable United States federal law to the extent that it permits the Lender
to contract for, charge, take, reserve or receive a greater amount of interest
than under Applicable Law.)
ARTICLE 2
CONDITIONS OF LENDING
SECTION 2.1 Condition Precedent to Initial Advance. The obligation
of the Lender to make its initial Advance is subject to the conditions
precedent that Lender shall have received on or before the day of such Advance
the following, each dated such date, in form and substance satisfactory to the
Lender:
(I) The Note, and
(ii) A Security Agreement, duly executed by the Borrower, in the
form of Exhibit B (the "Security Agreement").
This Agreement, the Note, the Security Agreement and all financing statements
and other documents and instruments executed or delivered pursuant hereto or
thereto are herein collectively referred to as the "Loan Documents."
SECTION 2.2 Conditions Precedent to All Advances. The obligation of
the Lender to make each Advance (including the initial Advance) shall be
subject to the further conditions precedent that on the date of such Advance
(a) the following statements shall be true (and each of the giving of the
applicable notice requesting such Advance and the acceptance by the Borrower of
the proceeds of such Advance shall constitute a representation and warranty by
the Borrower that on the date of such Advance such statements are true):
(i) The representations and warranties contained in Section 3.1 of
this Agreement, and as set forth in the Security Agreement are correct and
complete on and as of the date of such Advance, before and after giving effect
to such Advance and to the application of the proceeds therefrom, as
4
<PAGE> 5
though made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such Advance or from the, application of the proceeds therefrom, which
constitutes an Event of Default (as defined in Section 5.1 hereof) or would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both; and
(b) the Lender shall have received such other approvals, opinions
or documents as the Lender may reasonably request.
SECTION 2.3 Lender's Absolute Discretion. The existence or
satisfaction of any or all of the conditions set forth in Sections 2.1 or 2.2
above shall in no way impair or modify the Lender's right of absolute
discretion in deciding to make or not make any Advance, or to determined the
amount of any Advance which the Lender is willing to make.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Borrower. The
Borrower represents and warrants to the Lender as follows:
(a) The Borrower is a professional association, duly formed,
validly existing and in good standing under the laws of Texas.
(b) The execution, delivery and performance by the Borrower of the
Loan Documents to which it is a party are within the Borrower's associational
powers, have been duly authorized by all necessary action on its part and do not
contravene (i) the Articles of Association or Bylaws of Borrower or (ii) any law
or contractual restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of the Loan
Documents.
(d) This Agreement and the other Loan Documents to which the
Borrower is a party are legal, valid and binding obligations of the Borrower
enforceable against the Borrower in
5
<PAGE> 6
accordance with their respective terms, subject to the limitations of bankruptcy
and general principles of equity, provided that the unavailability of remedies
due to equitable limitations will not substantially impair the rights of Lender
under any of the Loan Documents.
(e) There is no pending or, to the best of the Borrower's
knowledge, threatened, action - or proceeding affecting the Borrower before any
court, governmental agency or arbitrator, which may materially adversely affect
the financial condition or business of the Borrower or which purports to affect.
the legality, validity or enforceability of any of the Loan Documents.
(f) The Borrower is not engaged in the business of extending credit
for the purpose of buying or carrying margin stock (within the meaning of
Regulation G issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Advance will be used to buy or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
ARTICLE 4
COVENANTS OF THE BORROWER
SECTION 4.1. Affirmative Covenants. So long as the Note shall remain
unpaid or otherwise during the term of this Agreement, the Borrower will,
unless the Lender shall otherwise consent in writing:
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property except to the extent
contested in good faith.
(b) Maintenance. Maintain its existence as a professional
association, not institute any proceedings for the dissolution, liquidation or
winding up of Borrower, and maintain, and cause each of its employees (where
applicable) to maintain, all professional licenses and permits in good standing
to the extent necessary, for Borrower to operate in the ordinary course of
business.
SECTION 4.2 Negative Covenants. So long as the Note shall remain
unpaid or otherwise during the term of this Agreement, me Borrower will not,
without me written consent of the Lender:
6
<PAGE> 7
(a) Liens, Etc. Except as permitted by the Loan Documents,
create or suffer to exist, any lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement, upon or with
respect to any of its properties, whether now owned or hereafter acquired, or
assign any right to receive income, in each case to secure or provide for the
payment of any person or, entity, other than (i) purchase money liens or
purchase ' e money security interests upon or in any properly acquired or held
by the' & Borrower or any subsidiary in the ordinary course of business to
secure me purchase price of such property or to secure indebtedness incurred
solely for me purpose of financing the acquisition of such property, and (ii)
liens on assets not constituting part of the Collateral (as defined in the
Security Agreement).
(b) Mergers Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any person or entity.
ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES; SPECIAL REMEDY
SECTION 5.1 Events of Default and Remedies. If any of the following
events.
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of, or interest
on, the Note when the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower under or
in connection with any Loan Document shall prove to have been incorrect in any
material respect when made; or
(c) The Borrower shall fail to perform observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed and such failure shall remain unremedied for lOays after
written notice thereof shall have been given to the Borrower by the Lender; or
7
<PAGE> 8
d) The Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or y proceeding
shall be instituted by or against the Borrower seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 30 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian ]pr other similar official for, it or for any substantial part of its
property) shall occur and shall not be stayed pending timely appeal (provided
that the lifting of such stay shall constitute an Event of Default); or the
partner shall take any corporate or partnership action to authorize any of the
actions set forth above in this subsection (d); or
(e) Any final judgment or order for the payment of money in excess
of $100,000, or any two or more final judgments or orders for the payment of
money in excess of $250,000 in the aggregate, shall be rendered against the
Borrower or any of its subsidiaries and the same shall not be discharged within
a period of 30 days after such judgment becomes final and non-appealable, or
(f) The termination, cancellation, expiration without renewal or
replacement, or material breach by Borrower of the Management Agreement of even
date herewith between Borrower and Lender (the "Management Agreement"), or
(g) Anjali Jain, M.D. ceases at any time (i) to be a full-time
employee of Borrower or (ii) to own at least 50% of the outstanding voting
securities of Borrower; or
(h) Any material breach by Anjali Jain, M.D. of the
Non-Competition Agreement of even date herewith between Dr. Jain and Lender;
then, and in any such event, the Lender may, by notice to the Borrower, declare
the Note, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable,
8
<PAGE> 9
whereupon the Note, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any land, all of which are hereby expressly waived by the Borrower;
provided, however, that in the event of an actual or deemed entry of an order
for relief under the Federal Bankruptcy Code with respect to the Borrower the
Note, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrower.
SECTION 5.2 Offset. In addition to any other remedies available at
law or in equity, upon the occurrence or continuance of any Event of Default
the Lender shall have the right to offset against any assets (including sums in
bank accounts) then in Lender's possession or control, in payment and
satisfaction of obligations then due.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Amendment. Etc. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 6.2 Notice. Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address at 6300 Hillcroft,
Suite 304, Houston, Texas 77081, Attention: Anjali Jain, M.D., and if to the
Lender, at its address at 4151 Vista Pasadena, Texas 77504, -Attention: Chiu
Chan, President; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party. An such
notices and - communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answer back or delivered
to the cable company, respectively except that notices to the Lender pursuant
to the provisions of Article 1 shall not be effective until received by the
Lender.
9
<PAGE> 10
SECTION 6.3 No Waiver: Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 6.4 Costs. Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, recording, administration, modification and amendment of the
Loan Documents and the other documents to be delivered, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Lender with respect thereto and with respect to advising the Lender as to its
rights and responsibilities under the Loan Documents. The Borrower further
agrees to pay on demand all costs and expenses, if any (including reasonable
counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of the Loan Documents and the
other documents to be delivered under the Loan Documents, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 6.5. In addition the Borrower shall
pay any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of the Loan Documents, and agrees to
save the Lender harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes.
SECTION 6.5 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lender.
SECTION 6.6 Certain Potential Conflicts. The Borrower acknowledges
that it has had full opportunity to consult with an attorney of its own choice
regarding the nature, obligations and consequences of this Agreement and that
it is not relying on counsel for the Lender in that regard. The parties have
also entered into the Management Agreement and certain other arrangements
relating to the management and control of the Borrower. The existence of such
other relationships may be deemed to be, or give rise to, certain conflicts of
interest. The Borrower, recognizing such conflicts of interest hereby
irrevocably, knowingly and willingly waives all such conflicts.
10
<PAGE> 11
SECTION 6.7 GOVERNING LAW. THIS AGREEMENT AND THE NOTE, AND, UNLESS
OTHERWISE THEREIN PROVIDED, EACH OTHER LOAN DOCUMENT, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
HOUSTON PHYSICAL MEDICINE ASSOCIATES, M.D., P.A.
BY: /s/ Anjali Jain
-------------------------------
ANJALI JAIN, M.D.,
President
LENDER:
DOCTORS PRACTICE MANAGEMENT, INC.
BY: /s/ Chiu Chan
------------------------------
CHIU CHAN
President
11
<PAGE> 1
EXHIBIT 10.24
FULL SERVICE MANAGEMENT AGREEMENT
This FULL SERVICE MANAGEMENT AGREEMENT ("Agreement") is entered into
and effective as of the 1st day of January, 1996 (notwithstanding the date of
actual execution) by and between DOCTORS PRACTICE MANAGEMENT, INC., A Texas
business corporation ("Manager"), and Vista Healthcare Inc., a Texas business
corporation ("Vista").
WITNESSETH:
WHEREAS, Vista is a duly and validly existing Texas business
corporation that has been organized for the purpose of operating a outpatient
surgical and diagnostic clinic and providing medical and related healthcare
services ("Healthcare Services") to the general public in the Greater Houston,
Texas area;
WHEREAS, Manager is experienced in providing management and related
items and services to physicians, professional associations, and other
professional healthcare entities and individuals;
WHEREAS, Vista desires and intends to obtain such management,
administrative, and business services necessary and appropriate for Physician's
business operations and the provision of Healthcare Services by Physician, and
Manager desires to provide, and is capable of providing, all such management,
administrative, and business services; and
WHEREAS, Physician and Manager mutually desire an arrangement that:
(1) ensures consistency of service, quality of care, and safety of Vista's
patients;
(2) facilitates effective utilization of Healthcare services;
(3) ensures consistent and customary patterns for the provision of
Healthcare Services;
(4) facilitates the management and administration of the day-to-day
business operations of Vista; and
(5) facilitates the establishment and maintenance of a public image of
excellence and high quality for Vista,
all for the benefit of those persons seeking Healthcare Services as patients of
the Vista.
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby forever acknowledged and confessed, the parties
hereto agree as follows:
I. Definitions
For the purposes of this Agreement, the following terms shall have the
following meanings described thereto, unless otherwise clearly required by the
context in which such term is used.
<PAGE> 2
1.1 Agreement. The term "Agreement" shall mean this Full Service
Management Agreement between Vista and Manager and any amendments hereto as may
from time to time be adopted as hereinafter provided.
1.2 Annual Budget. The term "Annual Budget" shall mean the
operational budget of Vista, for a given fiscal year, prepared by Manager in
consultation with Vista.
1.3 Vista. The term "Vista" shall mean Vista Healthcare Inc., a
Texas business corporation.
1.4 Manager/Vista Account. The term "Manager/Vista Account" shall
mean the bank account of the Manager established on behalf of Vista as
described in Section 3.9 hereof.
1.5 Vista Expense or Vista's Expense. The term "Vista Expense" or "
Vista's Expense" shall mean an expense or cost incurred by Vista or Manager on
behalf of Vista and for which Vista is financially liable, including management
fee, regardless of whether the transfer of Vista's funds to satisfy the Vista's
financial liability is performed by Vista or by Manager on Vista's behalf.
1.6 Facility. The term "Facility" shall mean the physical premises
in which Healthcare Services are furnished to patients by Vista and shall
include, if applicable, multiple locations.
1.7 Healthcare Services. The term "Healthcare Services" shall mean
the medical and related healthcare services provided by Vista to patients.
1.8 Management Fee. The term "Management Fee" shall mean Manager's
compensation established and described in Article V hereof.
1.9 Manager. The term "Manager" shall mean Doctors Practice
Management, Inc., a Texas business corporation.
1.10 Manager Expense or Manager's Expense. The term "Manager Expense"
or "Manager's Expense" shall mean an expense or cost incurred by Manager on
behalf of Vista and for which Manager is financially liable.
1.11 State. The term "State" shall mean the State of Texas.
1.12 Term. The term "Term" shall mean the initial and any renewal
periods of duration of this Agreement as described in Section 6.1 hereof.
II. Appointment and Authority of Manager
2.1 Appointment. Vista hereby appoints Manager as its sole and
exclusive agent for the management and administration of the business functions
and services related to Vista's provision
<PAGE> 3
of Healthcare Services and Manager hereby accepts such appointment, subject at
all times to the provisions of this Agreement.
2.2 Authority. Consistent with the provisions of this Agreement,
Manager shall have the responsibility and commensurate authority to provide
business, administrative, and full management services for Vista relating to
the provision of Healthcare Services, including, without limitation,
management, administration, billing and collection services, financial
consulting, financial record keeping and reporting, preparation of financial
statements, cash management services, contract negotiation, scheduling of
nonphysican personnel, support services, specified nonphysician personnel,
marketing, and other business office services. Manager is hereby expressly
authorized to provide all such services in whatever reasonable manner Manager
deems appropriate to meet the day-to-day requirements of the business functions
of, or related to, Vista's provision of Healthcare Services at the Facility.
To the extent practicable, Manager, at its discretion, may from time to time
perform some or all of such business office services for Vista at locations
other than the Facility. Except as otherwise provided in this Agreement, all
expenses incurred by Manager in providing management services pursuant to this
Agreement shall be Manager's Expense. The parties acknowledge and agree that
Vista shall be solely responsible for and have sole control over the provision
of Healthcare Services performed for patients at the Facility and that all
diagnoses, treatments, procedures, and other professional healthcare services
shall be provided and performed by Vista or under the supervision of Vista
personnel retained by Vista, as such physician personnel, in their sole
discretion, deem appropriate.
III. Covenants of Manager.
3.1 Facilities and Equipment. Manager shall provide to Vista the
space for the Facility, including all equipment, fixtures, furniture, and
furnishings located therein that Manager deems reasonably necessary for the
provision of Healthcare Services. Manager shall consult with and seek the
advice of Vista in connection with equipping the Facility and in connection
with the purchase of additional or replacement equipment to ensure the
necessity and appropriateness of equipment placed in service at the Facility.
3.1.1 Retention of Title. Vista shall have access to and use of the
space for the clinic, and all equipment, fixtures, furniture, and furnishings
located therein throughout the Term for the sole purpose of providing
Healthcare Services to patients of the Facility; provide, however, that title
to all such equipment, fixtures, furniture, and furnishings therein shall, at
all times, be and remain vested in Manager or Manager's lessor, as the case may
be.
3.1.2 Repair and Maintenance. Manager shall be responsible for the
repair and maintenance of all equipment located in the Facility.
3.1.3 Disclaimer of Warranty. MANAGER MAKES NO REPRESENTATIONS OR
WARRANTIES, EITHER EXPRESSED OR IMPLIED, WITH RESPECT TO ANY EQUIPMENT,
FIXTURES, FURNITURE, FURNISHINGS, OR SUPPLIES PROVIDED BY MANAGER PURSUANT TO
THIS AGREEMENT, AND ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ARE HEREBY EXPRESSLY DISCLAIMED.
<PAGE> 4
3.2 Utilities and Related Services. Manager shall negotiate, enter
into, and retain contracts for, and shall timely pay when due all charges
relating to electricity, gas, water, telephone, sewage, waste disposal,
cleaning(interior and exterior), pest extermination, heating and
air-conditioning maintenance, and similar services reasonably necessary and
appropriate for the operation of the facility and the provision of Healthcare
Services therein.
3.3 Supplies. Manager shall obtain and provide all reasonable
medical, office, and other supplies, and shall ensure that the Facility is at
all times adequately stocked with such supplies as are reasonably necessary and
appropriate for the operation of the Facility.
3.4 Support Services. Manager shall provide all laundry, linen,
uniform, stationery, forms, postage, duplication or photocopying services, and
other support services as are reasonably necessary and appropriate for the
operation of the Facility.
3.5 Licenses and Permits. Manager shall coordinate all development
and planning processes, and apply for and use manager's best efforts to obtain
and maintain all federal, State and local licenses and regulatory permits
required for or in connection with the operation of the Facility and the
equipment (existing and future) located therein, other than those relating to
the practice of medicine by physicians retained by Vista.
3.6 Personnel
3.6.1 Management and Clerical Personnel. Manager shall employ or
otherwise retain, and shall be responsible for selecting, training,
supervising, scheduling, and terminating, all management and clerical personnel
as Manager deems reasonably necessary and appropriate for Manager's performance
of its duties and obligations under this Agreement. Manager shall have sole
responsibility for determining the salaries, wages, and fringe benefits of all
such management and clerical personnel, for paying such salaries and wages, and
for providing such fringe benefits, and for withholding, as required by law, any
sums for income tax, unemployment insurance, social security, or any other
withholding required by applicable law or governmental requirement.
3.6.2 Nonexclusivity. In recognition of the fact that the personnel
retained by Manager to provide services pursuant to this Agreement may from time
to time perform services for others, this Agreement shall not prevent Manager
from performing such services for others or restrict Manager from using such
personnel in the performance of services for others.
3.6.3 Contract Negotiations. Upon the request of Vista, Manager
shall advise with respect to and negotiate, either directly or on Physician's
behalf, as appropriate, all contractual arrangements with third parties as are
reasonably necessary and appropriate for Vista's provision of Healthcare
Services.
3.9 Billing and Collection. On behalf of and for the account of
Vista, Manager shall establish and maintain credit and billing and collection
policies and procedures, and shall be responsible for the billing and
collection of all professional and other fees for billable Healthcare
<PAGE> 5
Services provided by Vista. Manager shall advise and consult with Vista
regarding the fees for Healthcare Services provided by Vista. In connection
with the billing and collection services to be provided hereunder, and
throughout the Term, Vista hereby grants Manager an irrevocable special power
of attorney and appoints Manager as Vista's true and lawful agent and
attorney-in-fact, and Manager hereby accepts such special power of attorney
and appointment, for the following purposes:
3.9.1 To bill Vista's patients, in Vista's name and on Vista's
behalf, for all billable Healthcare Services provided by Vista.
3.9.2 To bill, in Vista's name and on Vista's behalf, all claims for
reimbursement or indemnification from Blue Shield/Blue Cross, insurance
companies, Medicare, Medicaid, and all other third-party payors for all covered
billable Healthcare Services provided by Vista;
3.9.3 To collect and receive, in Vista's name and on Vista's behalf,
all accounts receivable generated by such billings and claims for reimbursement
or indemnification, and to deposit all amounts collected into the Manager/Vista
Account, which account shall be maintained at Manager's Expense and shall be
and at all times remain in Manager's name. Vista covenants to transfer and
deliver to Manager all funds received by Vista from patients or third-party
payors for Healthcare services. Upon receipt by Manager of any funds from
patients or third-party payors or from Vista pursuant hereto for Healthcare
Services, Manager shall immediately deposit same into the Manager/Vista
Account; and
3.9.4 To take possession of, endorse in the name of Vista, and
deposit into the Manager/Vista Account any notes, checks, money orders,
insurance payments, and any other instruments received in payment of accounts
receivable for Healthcare Services, and to make withdrawals from the
Manager/Vista Account for payments of those items designated as Manager or
Vista Expense.
3.11 Financial Matters
3.11.1 Annual Budget. Annually and at least thirty (30) days prior
to the commencement of each fiscal year of Vista, Manager shall prepare, in
consultation with Vista, and deliver to Vista an operational budget for such
fiscal year setting forth an estimate of facility revenues and expenses
(including, without limitation, all costs associated with the services provided
by Manager hereunder). Manager shall use its best efforts to perform its
duties and obligations under this Agreement such that the actual revenues,
costs, and expenses associated with Vista's provision of Healthcare Service in
the Facility during any applicable period shall be consistent with the Annual
Budget. Manager shall prepare and submit to Physician, and shall thereafter
adopt, an Annual Budget for the current fiscal year as soon as practicable.
3.11.2 Accounting and Financial Records. Manager shall establish and
administer accounting procedures, controls, and systems for the development
preparation, and safekeeping of records and books of accounts relating to the
business and financial affairs of Vista at the Facility all of which shall be
prepared and maintained in accordance with generally accepted accounting
principles consistently applied. Manager shall prepare and deliver to Vista,
within
<PAGE> 6
(90) days of the end of each fiscal year of Vista, a balance sheet, a profit
and loss statement, and a statement of cash flow reflecting the financial
status of Vista in respect of the provision of Healthcare Services at the
Facility as of the end of such prior fiscal year, all of which shall be
prepared in accordance with generally accepted accounting principles
consistently applied. Manager shall also prepare and deliver to Vista interim
monthly financial statements for management purposes only.
3.12 Reports and Records
3.12.1 Medical Records. Manager shall establish, monitor, and
maintain procedures and policies for the timely creation, preparation, filing
and retrieval of all medical records generated by Vista in connection with
Physician's provision of Healthcare Services. All such medical records shall
be treated in accordance with all applicable State and federal laws relating to
the confidentiality thereof.
3.13 Legal Actions. As requested by Vista, Manager shall, at Vista's
Expense, advise and assist Vista in instituting or defending, in the name of
Vista, all legal actions or proceedings by or against third parties arising out
of Vista's provision of Healthcare Services at the Facility, including, without
limitation, those actions to collect fees for billable Healthcare Services or
other billable services provided to patients by Vista, and those actions
necessary for the protection and continued operation of Vista.
3.14 Manager Insurance. Throughout the Term, Manager shall, at
Manager's Expense, obtain and maintain with commercial carriers, through
captive insurance companies, through self-insurance, or some combination
thereof, professional, casualty, and comprehensive general liability insurance
covering Manager, Manager personnel, and all of Manager's equipment in such
amounts, on such basis, and upon such terms and conditions as Manager deems
appropriate.
IV. Covenants of Vista.
4.1 Qualification. Vista shall at times during the Term (i) be and
remain legally qualified to provide Healthcare Services in a manner consistent
with all State and federal laws; (ii) be engaged in the full time practice of
medicine; and (iii) has general authority to act for and bind Vista in all
matters relevant to this Agreement.
4.2 Personnel
4.2.1 Physician Personnel. Vista shall retain physicians, who shall
hold and maintain valid and unlimited licenses to practice medicine in the
State, to provide Healthcare Services in the Facility. With respect to Vista's
Expense for its physician personnel, Vista shall be responsible for paying the
compensation for such physician personnel and for withholding, as required by
law, any sums for income tax, unemployment insurance, social security, or any
other withholding required by applicable law. Manager shall, on behalf of
Vista, administer the compensation and benefits and make appropriate
withholdings with respect to such physician personnel. All physician personnel
shall be under Vista's control and direction in the performance of Healthcare
Services at the Facility.
<PAGE> 7
4.2.2 Nonphysician Healthcare Personnel. Manager shall employ and be
responsible for the salaries, wages, fringe benefits, and other employment
related expenses with regard to all nonphysician healthcare personnel necessary
for the provision of Healthcare Services to patients at the Facility. Manager
shall determine the salaries, wages, and fringe benefits of all such personnel.
Vista shall be responsible for selecting, scheduling, and terminating all
nurses, laboratory technicians, and other nonphysician healthcare personnel as
Vista deems reasonably necessary and appropriate for the operation of the
Facility; provided, however, that all such nonphysician healthcare personnel
shall be hired and/or terminated by Vista after consultation with Manager.
Manager shall be responsible for training and supervising all nonphysician
healthcare personnel, and all such personnel shall be under Manager's control,
supervision and direction when assisting Vista in the performance of Healthcare
Services in the Facility.
4.3 Standards. As a continuing condition Manager's obligations
hereunder, Vista shall provide Healthcare Services in accordance with
applicable federal, State, and municipal laws, rules, regulations, ordinances,
and orders, and the ethics and standards of care of the medical community
wherein the Facility is located.
4.4 Vista Contracting. Vista shall not, without the prior written
consent of manager, have any right or authority to enter into any agreements
with third parties relating to the Facility, its operation, or any agreements
otherwise binding upon Manager.
4.5 Vista Insurance. Throughout the Term, Vista shall, at Vista's
Expense, obtain and maintain with commercial carriers, acceptable to Manager,
professional and comprehensive general liability insurance covering Vista and
those physician and nonphysician personnel Vista retains to provide Healthcare
Services in the minimum amount Six hundred thousand Dollars ($600,000)
for each occurrence and Two Hundred thousand Dollars ($200,000) in the
aggregate for Vista and each physician and nonphysician personnel Vista retains
to provide Healthcare Services. Such insurance shall name Manager as an
additional named insured to the extent its interest may appear. Vista shall
provide to Manager a certificate of insurance evidencing such coverage. The
insurance policy or policies shall provide for at least thirty (30) day's
advance written notice to Vista from the insurer as to any alteration of
coverage, cancellation, or proposed cancellation for any cause. The
certificate of insurance shall require that such notice also be given to
Manager.
4.6 Indemnification by Vista. Vista shall indemnify and hold Manager
harmless from and against any and all liability losses, damages, claims, causes
of action, and expenses, including, without limitation, reasonable attorney's
fees and associated costs, associated with or resulting, directly or
indirectly, from any act or omission of Vista, its employees, agents, or
independent contractors in or about the Facility during the Term. To be
entitled to such indemnification, Manager shall give Vista prompt written
notice of the assertion by a third party of any claim with respect to which
Manager might bring a claim for indemnification hereunder, and in all events
must provide such written notice to Vista within the applicable period for
defense of such claim by Vista. Vista shall, at Vista's Expense, have the
right to defend and litigate any such third-party claim.
<PAGE> 8
V. Management Fee and Disbursement of Funds
5.1 Amount of Management Fee. Vista agrees to pay a management Fee
of 28% of collection to Manager to cover Manager's Expense. The Management Fee
is not intended and shall not be interpreted or applied as permitting Manager
to share in Vista's fees for Healthcare Services or any other services, but is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the items and services furnished by Manager pursuant to this
Agreement, considering the nature of the services required by Vista and the
risks assumed by Manager.
5.2 Payment of management Fee. The Management Fee shall be due and
payable on or before the tenth (10) calendar day of each month for services
provided in the immediately preceding month.
VI. Term and Termination
6.1 Initial and Renewal Terms. The term of this Agreement will be
for a Five (5) year period commencing as of January 1, 1996, and expiring
as of December 31, 2001, unless and until terminated as provided in Section
6.2 of this Agreement the ("Term").
6.2 Termination
6.2.1 Termination by Manager. Manager may terminate this Agreement
upon the occurrence of any one of the following events:
(a) The revocation, suspension, or cancellation of the license to practice
medicine in the State of any Vista retained by Vista to provide
Healthcare services in the Facility;
(b) any Vista retained by Vista to provide Healthcare Services in the
Facility is convicted of a felony;
(c) the dissolution of Vista;
(d) the Vista fails to pay Manager the Management Fee as provided for in
Article V of this Agreement within ten (10)days of the date such
amounts are due as provided in Section 5.2 hereof;
(e) upon the expiration of sixty (60) days after Manager has given Vista
written notice of Manager's intent to terminate this Agreement with or
without cause; or
6.2.2 Termination by Vista. Vista may terminate this Agreement
upon the occurrence of the dissolution of Manager.
6.2.3 Termination by Agreement. In the event Vista and Manager shall
mutually agree in writing, this agreement may be terminated on the date
specified in such written agreement.
6.2.4 Damage or Condemnation. In the event the Facility is totally
or substantially destroyed by fire, explosion, flood, windstorm, hail,
earthquake, hurricane, tornado, or other
<PAGE> 9
casualty or act of God, or in the event all or a substantial portion of the
Facility and the premises on which it is situated is taken or to be taken by
condemnation or eminent domain proceeding, then either party may by written
notice to the other immediately terminate this Agreement.
6.2.5 Bankruptcy. In the event that either party become insolvent,
or if any petition under federal or state law pertaining to bankruptcy or
insolvency or for a reorganization or arrangement or other relief from
creditors shall be filed by or against either party, or if any assignment,
trust, mortgage, or other transfer shall be made of all or a substantial part
of the property of either party, or if either party shall make or offer a
composition in its debts with its creditors, or if a receiver, trustee, or
similar officer or creditor's committee shall be appointed to take charge of any
property of or to operate or wind up the affairs of either party, then the
other party may, by written notice, as specified in Section 7.3, immediately
terminate this Agreement.
6.2.6 Action by Texas State Board of Medical Examiners. In the event
the Texas State Board of medical Examiners shall, solely by virtue of this
Agreement, initiate an acton to revoke the license to practice medicine in the
State of any Vista retained by Vista, then Vista may by written notice to
Manager immediately terminate this Agreement. In the event the Texas State
Board of Medical Examiners shall, on any other grounds, including, without
limitation, improper medical practice or improper conduct by any Vista retained
by Vista, initiate an action to restrict, suspend, or revoke the license of
such Vista to practice medicine in the State, then Manager may by written
notice to Vista immediately terminate this Agreement.
6.2.7 Default. In the event either party shall give written notice
to the other that such other party has substantially defaulted in the
performance of any material duty or material obligation imposed upon it by this
Agreement, and such default shall not have been cured within thirty (30) days
following the giving of such written notice, the party giving such written
notice shall have the right to immediately terminate this Agreement unless the
defaulting party shall, within said thirty (30) day period, have made a good
faith effort to initiate corrective action and it is contemplated that such
corrective action will be completed within the following thirty (30) day
period.
6.3 Effects of Termination. Upon termination of this Agreement, as
hereinabove provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
and (ii) obligations, promises, or covenants set forth herein that are
expressly made to extend beyond the Term, including, without limitation,
indemnities, payment of accrued management Fees, if any, and the authority and
limited power of attorney granted to manager in Section 3.9 herein which shall
survive until such time as such obligations, promises, or covenants shall be
fully paid and satisfied (all of which provisions shall survive the expiration
or termination of this Agreement). Notwithstanding anything to the contrary,
herein, upon termination of this Agreement for any reason, all accrued
Management Fees, if any, shall become immediately due and payable without
demand or notice.
VII. Miscellaneous
7.1 Independent Relationship. It is mutually understood and agreed
that Physician and Manager, in performing their respective duties and
obligations under this Agreement, are at all
<PAGE> 10
times acting and performing as independent contractors with respect to each
other, and nothing in this Agreement is intended nor shall be construed to
create an employer/employee relationship or a joint venture relationship, or to
allow Manager to exercise control or direction of any nature, kind, or
description over the manner or method by which Vista performs Healthcare
services.
7.2 Representatives
7.2.1 Vista Representative. Except as may be herein more
specifically provided, Vista shall act with respect to all matters hereunder
through Vista.
7.2.2 Manager Representative. Except as may be herein more
specifically provided, Manager shall act with respect to all matters hereunder
through the President of Manager.
7.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be deemed effectively given
when personally delivered or mailed by prepaid certified mail, return receipt
requested, addressed as follows:
Vista: Vista Healthcare, Inc.
4301 Vista
Pasadena, Texas 77504
Manager: Doctors Practice management, Inc.
10304 I-10 East, Suite 369
Houston, Texas 77029
or to such other address, or to the attention of such other person or officer,
as either party may by written notice designate.
7.4 Governing Law. This Agreement has been executed and delivered
in, and shall be governed by, and construed and enforced in accordance with,
the laws of the State of Texas.
7.5 Assignment. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that Physician shall not assign its rights and
obligations under this Agreement without the prior written consent of Manager.
Manager shall have the right to (i) assign its rights and obligations hereunder
to any third party, and (ii) collaterally assign its interest in this Agreement
and its right to collect Management Fees hereunder to any financial institution
or other third party without the consent of Vista.
7.6 Waiver of Breach. the waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or to be
construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
7.7 Enforcement. In the event either party resorts to legal action
to enforce or interpret
<PAGE> 11
any provision of this Agreement, the prevailing party shall be entitled to
recover costs of such action so incurred, including, without limitation,
reasonable attorney's fees.
7.8 Gender and Number. Whenever the context of this Agreement
requires, the gender of all words herein shall include the masculine, feminine,
and neuter, and the number of all words herein shall include the singular and
plural.
7.9 Additional Assurance. Except as may be herein specifically
provided to the contrary, the provisions of this Agreement shall be
self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall
execute such additional instruments and take such additional acts as are
reasonable and as the requesting party may deem necessary to effectuate this
Agreement.
7.10 Consents, Approvals, and Exercise of discretion. Except as may
be herein specifically provided to the contrary, whenever this Agreement
requires any consent or approval to be given by either party, or either party
must or may exercise discretion, the parties agree that such consent or
approval shall not be unreasonably withheld or delayed, and such discretion
shall be reasonably exercised.
7.11 Force Majeure. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party.
7.12 Severability. in the event any provision of this Agreement is
held to be invalid, illegal, or unenforceable for any reason and in any
respect, such invalidity, illegality, or unenforceability shall not affect the
remainder of this agreement, which shall be and remain in full force and
effect, enforceable in accordance with its terms.
7.13 Divisions and Headings. The division of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
7.14 Amendments and Agreement Execution. This Agreement and
amendments hereto shall be in writing and executed in multiple copies by the
duly authorized officers of Vista and Manager. Each multiple copy shall be
deemed an original, but all multiple copies together shall constitute one and
the same instrument.
7.16 Entire Agreement. This Agreement supersedes all previous
contracts and constitutes the entire agreement between the parties with respect
to the subject matter of this Agreement. Neither party shall be entitled to
benefits other than those specified herein. No oral statements or prior
written material not specifically incorporated herein shall be of any force and
effect, and no changes in or additions to this Agreement shall be recognized
unless incorporated herein by amendment as provided herein, such amendment(s)
to become effective on the date stipulated in
<PAGE> 12
such amendment(s). The parties specifically acknowledged that, in entering
into and executing this agreement, the parties rely solely upon the
representations and agreements contained in this Agreement and no others.
IN WITNESS WHEREOF, Physician and Manager have executed this Agreement
in multiple originals this 1st day of January 1996, but effective as of
the date first above written.
Vista: Vista Healthcare, Inc.
By: /s/ Mildred Morrison
-------------------------------
Mildred Morrison
Vice President
Manager: Doctors Practice management, Inc.
By: /s/ Philip Chan
------------------------------
Philip Chan
Vice President
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0
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