-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M1sSVMXPygjGc0LlvxJwzQyMxWCfnpQwJel3mKdpOOCizqzIA/a6UyCpcAQC4Xur 9qsMHmqNTeAg8uLCK+Z45g== 0000885988-99-000019.txt : 19990517 0000885988-99-000019.hdr.sgml : 19990517 ACCESSION NUMBER: 0000885988-99-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRAMED AMERICA INC CENTRAL INDEX KEY: 0000885988 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-OFFICES & CLINICS OF DOCTORS OF MEDICINE [8011] IRS NUMBER: 061150326 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20260 FILM NUMBER: 99623942 BUSINESS ADDRESS: STREET 1: ONE MANHATTANVILLE RD CITY: PURCHASE STATE: NY ZIP: 10577-2100 BUSINESS PHONE: 9142538000 MAIL ADDRESS: STREET 1: 1 MANHATTANVILLE RD CITY: PURCHASE STATE: NY ZIP: 10577-2100 FORMER COMPANY: FORMER CONFORMED NAME: IVF AMERICA INC DATE OF NAME CHANGE: 19950720 10-Q 1 INTEGRAMED AMERICA, INC. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-20260 Commission File No. 1-11440 INTEGRAMED AMERICA, INC. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) One Manhattanville Road Purchase, New York (Address of principal executive offices) 06-1150326 (I.R.S. employer identification no.) 10577 (Zip code) (914) 253-8000 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The aggregate number of shares of the Registrant's Common Stock, $.01 par value, outstanding on May 3, 1999 was 4,918,460. ================================================================================ INTEGRAMED AMERICA, INC. FORM 10-Q TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet at March 31, 1999 (unaudited) and December 31, 1998......................................... 3 Consolidated Statement of Operations for the three-month periods ended March 31, 1999 and 1998 (unaudited)......... 4 Consolidated Statement of Cash Flows for the three-month periods ended March 31, 1999 and 1998 (unaudited)......... 5 Notes to Consolidated Financial Statements (unaudited).....6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 9-12 Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings.............................................. 13 Item 2. Changes in Securities.......................................... 13 Item 3. Defaults upon Senior Securities................................ 13 Item 4. Submission of Matters to a Vote of Security Holders............ 14 Item 5. Other Information.............................................. 14 Item 6. Exhibits and Reports on Form 8-K............................... 14 SIGNATURES ................................................................15 INDEX TO EXHIBITS.............................................................16 2 PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements INTEGRAMED AMERICA, INC. CONSOLIDATED BALANCE SHEET (all dollars in thousands)
ASSETS March 31, December 31, -------- ------------ 1999 1998 -------- ------------ (unaudited) Current assets: Cash and cash equivalents ..................................................... $ 2,280 $ 4,241 Patient accounts receivable, less allowance for doubtful accounts of $789 and $526 in 1999 and 1998, respectively..................... 10,106 10,749 Management fees receivable, less allowance for doubtful accounts of $358 and $305 in 1999 and 1998, respectively..................... 2,113 1,963 Other current assets .......................................................... 991 1,736 ------- ------- Total current assets....................................................... 15,490 18,689 ------- ------- Fixed assets, net ............................................................. 6,036 5,116 Intangible assets, net......................................................... 19,060 19,269 Other assets................................................................... 608 619 ------- ------- Total assets............................................................... $41,194 $43,693 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............................................................... $ 229 $ 684 Accrued liabilities............................................................ 2,570 3,480 Due to Medical Practices....................................................... 2,068 1,877 Current portion of long-term notes payable and other obligations............... 1,011 2,099 Patient deposits .............................................................. 2,193 2,888 ------- ------- Total current liabilities.................................................. 8,071 11,028 ------- ------- Long-term notes payable and other obligations.................................... 5,203 5,282 Commitments and Contingencies.................................................... -- -- Shareholders' equity: Preferred Stock, $1.00 par value - 3,165,644 shares authorized in 1999 and 1998, 2,500,000 undesignated; 665,644 shares designated as Series A Cumulative Convertible of which 165,644 shares were issued and outstanding in 1999 and 1998, respectively................... 166 166 Common Stock, $.01 par value - 50,000,000 shares authorized in 1999 and 1998; and 5,368,960 and 5,343,092 shares issued in 1999 and 1998, respectively..... 53 53 Capital in excess of par ...................................................... 54,240 53,712 Accumulated deficit ........................................................... (25,030) (25,548) Treasury Stock, at cost - 450,500 and 340,500 shares in 1999 and 1998, respectively........................................................... (1,509) (1,000) ------- ------- Total shareholders' equity ................................................ 27,920 27,383 ------- ------- Total liabilities and shareholders' equity................................. $41,194 $43,693 ======= ======= See accompanying notes to the consolidated financial statements.
3 INTEGRAMED AMERICA, INC. CONSOLIDATED STATEMENT OF OPERATIONS (all amounts in thousands, except per share amounts) For the three-month period ended March 31, ----------------- 1999 1998 ---- ---- (unaudited) Revenues, net ........................................... $10,532 $8,341 Cost of services incurred on behalf of Network Sites: Employee compensation and related expenses............ 4,068 3,563 Direct materials...................................... 1,095 753 Occupancy costs....................................... 675 672 Depreciation.......................................... 309 285 Other expenses........................................ 2,051 1,167 ------- ------- Total cost of services rendered..................... 8,198 6,440 ------- ------ Network Sites' contribution.............................. 2,334 1,901 General and administrative expenses...................... 1,380 1,113 Amortization of intangible assets........................ 244 181 Interest income.......................................... (23) (12) Interest expense......................................... 135 72 ------- ------ Total other expenses.................................. 1,736 1,354 ------- ------ Income from continuing operations before income taxes.... 598 547 Provision for income taxes............................... 80 49 ------- ------ Income from continuing operations........................ 518 498 Loss from operations of discontinued AWM Division (less applicable income taxes of $0).................. -- 288 Net income............................................... $ 518 $ 210 Less: Dividends paid and/or accrued on Preferred Stock... (33) (33) ------- ------ Net income applicable to Common Stock.................... $ 485 $ 177 ======= ====== Basic and diluted earnings per share of Common Stock: Continuing operations............................... $ 0.10 $ 0.09 Discontinued operations............................. -- (0.06) ------- ------ Net earnings........................................ $ 0.10 $ 0.03 ======= ====== Weighted average shares - basic.......................... 4,976 5,006 ======= ====== Weighted average shares - diluted........................ 5,077 5,100 ======= ====== See accompanying notes to the consolidated financial statements. 4 INTEGRAMED AMERICA, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (all amounts in thousands)
For the three-month period ended March 31, --------------------- 1999 1998 -------- ------ (unaudited) Cash flows from operating activities: Net income .............................................................................. $ 518 $ 210 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization....................................................... 618 581 Writeoff of fixed and other assets ................................................. -- 37 Changes in assets and liabilities net of effects from acquired businesses -- Decrease (increase) in assets: Patient accounts receivable......................................................... 643 (2,384) Management fees receivable.......................................................... (150) (449) Other current assets................................................................ 745 (701) Other assets........................................................................ (2) 8 (Decrease) increase in liabilities: Accounts payable................................................................... (455) (1,435) Accrued liabilities................................................................ (546) 86 Due to Medical Practices........................................................... 191 455 Patient deposits................................................................... (695) (78) ------- ------ Net cash provided by (used in) operating activities......................................... 867 (3,670) ------- ------ Cash flows (used in) provided by investing activities: Payment for exclusive management rights and acquired physician practices............... -- (3,109) Purchase of net liabilities of acquired businesses..................................... -- 487 Purchase of fixed assets and leasehold improvements.................................... (1,295) (438) ------- ------ Net cash used in investing activities....................................................... (1,295) (3,060) ------- ------ Cash flows (used in) provided by financing activities: Proceeds from issuance of Common Stock................................................. -- 5,500 Used for stock issue costs............................................................. -- (61) Proceeds from bank under Credit Facility............................................... -- 2,000 Principal repayments on debt........................................................... (990) (286) Principal repayments under capital lease obligations................................... (1) (36) Repurchase of Common Stock............................................................. (509) -- Dividends paid on Convertible Preferred Stock.......................................... (33) -- Proceeds from exercise of Common Stock options......................................... -- 62 ------- ------ Net cash (used in) provided by financing activities......................................... (1,533) 7,179 ------- ------ Net (decrease) increase in cash............................................................. $(1,961) $ 449 Cash at beginning of period................................................................. 4,241 1,930 ------- ------ Cash at end of period....................................................................... $ 2,280 $2,379 ======= ====== See accompanying notes to the consolidated financial statements.
5 INTEGRAMED AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 -- INTERIM RESULTS: The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position at March 31, 1999, and the results of operations and cash flows for the interim period presented. Operating results for the interim period are not necessarily indicative of results that may be expected for the year ending December 31, 1999. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. NOTE 2 -- SIGNIFICANT MANAGEMENT CONTRACTS: For the three months ended March 31, 1999 and 1998, the Boston, FCI, New Jersey, and Shady Grove (acquired in mid-March 1998) Network Sites provided greater than 10% of the Company's Revenues, net and Network Sites' contribution as follows: Percent of Company Percent of Network Revenues, net Sites' contribution for the three-month for the three-month period ended March 31, period ended March 31, ---------------------- ---------------------- 1999 1998 1999 1998 ----- ----- ----- ------ Boston.......... 16.7 17.6 26.6 23.4 FCI............. 26.7 30.1 24.0 32.7 New Jersey...... 12.4 12.0 25.1 29.1 Shady Grove..... 17.8 4.0 13.1 2.5 NOTE 3 -- NOTES PAYABLE AND OTHER OBLIGATIONS: The amount owed by the Company to acquire the balance of the capital stock of Shady Grove Fertility Centers, Inc. was paid on January 5, 1999 as follows: (i) $951,800 in cash, (ii) $175,900 in stock, or 25,868 shares of Common Stock, and (iii) a $402,750 promissory note. The promissory note for $402,750 is payable in two equal annual installments, due on July 1, 1999 and April 1, 2000 and bears interest at a rate of 10.17%. per annum. 6 INTEGRAMED AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 -- EARNINGS PER SHARE: The reconciliation of the numerators and denominators of the basic and diluted EPS from continuing operations computations for the three-month periods ended March 31, 1999 and 1998 is as follows (000's omitted, except for per share amounts):
1999 1998 ----------------------------------- ------------------------------------ Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount --------- ----------- --------- ---------- ----------- -------- Income from continuing operations...... $518 $498 Less: Preferred stock dividends paid or accrued........... (33) (33) ---- ---- Basic EPS Income from continuing operations available to Common stockholders................. $485 4,976 $0.10 $465 5,006 $0.09 ==== ===== ===== ==== ===== ===== Effect of Dilutive Securities Options................................ 37 42 Warrants............................... 64 52 ------ ----- Diluted EPS Income from continuing operations available to Common stockholders................. $485 5,077 $0.10 $465 5,100 $0.09 ==== ====== ===== ==== ===== =====
For the three-month period ended March 31, 1999, the effect of the assumed exercise of options to purchase approximately 39,000 shares of Common Stock at exercise prices of $5.00 per share and warrants to purchase approximately 75,000 shares of Common Stock at exercise prices ranging from $4.94 to $8.54 per share were excluded in computing the diluted per share amount because the exercise prices of the options and warrants were greater than the average market price of the shares of Common Stock, therefore causing these options and warrants to be antidilutive. For the three-month period ended March 31, 1998, the effect of the assumed exercise of options to purchase approximately 253,000 shares of Common Stock and warrants to purchase approximately 92,000 shares of Common Stock at exercise prices ranging from $8.12 to $15.00 per share and from $36.08 to $41.36 per share, respectively, were excluded in computing the diluted per share amount because the exercise prices of the options and warrants were greater than the average market price of the shares of Common Stock, therefore causing these options and warrants to be antidilutive. For the three-month periods ended March 31, 1999 and 1998, approximately 133,000 and 127,000 shares of Common Stock, respectively, from the assumed conversion of Preferred Stock were excluded in computing the diluted per share amount as they were anti-dilutive. 7 INTEGRAMED AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 -- SUBSEQUENT EVENTS: In April 1999, the Company formed a new wholly owned subsidiary, IntegraMed Pharmaceutical Services, Inc. ("IPS"). IPS is based in Carrollton, Texas and will be licensed to distribute pharmaceutical products directly to patients in most of the United States and in all states where the Company's managed Reproductive Science Centers are currently located. IPS will be engaged in the retail distribution of drugs, pharmaceuticals and products related to the treatment of human fertility ("Pharmaceutical Products") to customers of the Reproductive Science Centers. IPS was formed in conjunction with IVP Pharmaceutical Care, Inc., a licensed pharmacy specializing in dispensing Pharmaceutical Products, which will provide certain management services to IPS. Effective April 1, 1999, the Company entered into a sale-leaseback transaction with Fleet Capital Corporation ("FCC") related to new computer equipment and billing software acquired by the Company primarily during the first quarter of 1999. Pursuant to this transaction, the Company sold approximately $532,000 of equipment and software to FCC and contemporaneously entered into a four-year capital lease of this equipment with FCC for the same amount. The Company did not recognize a gain on the sale of the equipment or software. Under the lease, rental payments of approximately $12,900 are due monthly for forty-eight months commencing on April 1, 1999. Effective May 1, 1999, the Company entered into a new management agreement (the "New Agreement") with the Medical Practice at the Reproductive Science Associates Network Site (the "RSA Medical Practice") located in Kansas City, Missouri. The New Agreement contemplates that the Company will offer other medical practices, via separate management agreements, use of the medical offices and clinical space which are currently provided by the Company and utilized by the RSA Medical Practice. The New Agreement also provides for certain changes in the financial arrangements between the Company and the RSA Medical Practice. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included in this quarterly report and with the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Results of Operations The following table shows the percentage of revenues represented by various expense and other income items reflected in the Company's Consolidated Statement of Operations.
For the three-month period ended March 31, ------------------- 1999 1998 ---- ---- (unaudited) Revenues, net............................................ 100% 100% Costs of services incurred on behalf of Network Sites: Employee compensation and related expenses.......... 38.6% 42.7% Direct materials.................................... 10.4% 9.0% Occupancy costs..................................... 6.4% 8.1% Depreciation........................................ 2.9% 3.4% Other expenses...................................... 19.5% 14.0% ---- ---- Total costs of services............................. 77.8% 77.2% Network Sites' contribution.............................. 22.2% 22.8% General and administrative expenses...................... 13.1% 13.3% Amortization of intangible assets........................ 2.3% 2.2% Interest income.......................................... (0.2%) (0.1%) Interest expense......................................... 1.3% 0.8% ---- ---- Total other expenses................................ 16.5% 16.2% ---- ---- Income from continuing operations before income taxes.... 5.7% 6.6% Provision for income taxes............................... 0.8% 0.6% ---- ---- Income from continuing operations........................ 4.9% 6.0% Loss from discontinued operations........................ -- (3.5%) Net income............................................... 4.9% 2.5% ==== ====
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 Revenues for the three months ended March 31, 1999 (the "first quarter of 1999") were approximately $10.5 million as compared to approximately $8.3 million for the three months ended March 31, 1998 (the "first quarter of 1998"), an increase of 26.3%. The increase in revenues was attributable to same market growth and to there being a full quarter of revenues from the Shady Grove Network Site which was acquired in mid-March 1998. Same market growth in revenues was principally attributable to increases in patient volume. The aggregate increase in revenues was comprised of the following: (i) an approximate $1.8 million increase in reimbursed costs of services; and (ii) an approximate $433,000 increase in the Company's management fees derived from the managed Medical Practices' net revenue and/or earnings. Total costs of services as a percentage of revenues were 77.8% in the first quarter of 1999 as compared to 77.2% in the first quarter of 1998. Direct materials and other expenses increased primarily due to the increase in patient 9 volume at the managed Medical Practices. Employee compensation and related expenses, occupancy costs and depreciation as a percentage of revenues decreased primarily due to the significant increase in revenues. Network Sites' contribution was approximately $2.3 million in the first quarter of 1999 as compared to $1.9 million in the first quarter of 1998, an increase of approximately 22.8%. Such increase resulted from there being a full quarter of Network Site contribution from the Shady Grove Network Site, which was acquired late in the first quarter of 1998, and the increase in revenues at existing Network Sites. As a percentage of revenues, Network Sites' contribution decreased to 22.2% in the first quarter of 1999 as compared to 22.8% in the first quarter of 1998, primarily due to increases in contractual allowances related to lower reimbursements under managed care contracts. General and administrative expenses for the first quarter of 1999 were approximately $1.4 million as compared to approximately $1.1 million in the first quarter of 1998, an increase of 24.0%. The increase was largely due to an increase in staffing, consulting and other costs attributable to the development, implementation and maintenance of the Company's proprietary ArtWorks(TM) suite of fertility care information systems, and to an increase in marketing costs. As a percentage of revenues, general and administrative expenses decreased to approximately 13.1% from approximately 13.3% due to the increase in revenues previously discussed. Amortization of intangible assets was $244,000 in the first quarter of 1999 as compared to $181,000 in the first quarter of 1998. This increase was attributable to the Company's acquisition of the Shady Grove Network Site late in the first quarter of 1998. This increase was partially offset by the elimination of amortization of exclusive management rights associated with two single-physician Network Site management agreements which were terminated and written off in 1998. Interest income for the first quarter of 1999 increased to $23,000 from $12,000 for the first quarter of 1998, due to a higher cash balance. Interest expense for the first quarter of 1999 increased to $135,000 from $72,000 in the first quarter of 1998, due to an increase in bank borrowings and in amounts payable to Medical Providers for exclusive management rights. The provision for income taxes primarily related to state taxes. The provision for income taxes increased to $80,000 in the first quarter of 1999 from $49,000 in the first quarter of 1998 due to the increase in Network Site contribution at existing sites and to the addition of the Shady Grove Network Site. Income from continuing operations was $518,000 in the first quarter of 1999 as compared to $498,000 in the first quarter of 1998. The increase was primarily due to the $433,000 increase in Network Sites' contribution, which was partially offset by increases in general and administrative expenses, amortization of intangible assets and interest expense. Net income increased to $518,000 in the first quarter of 1999 as compared to $210,000 in the first quarter of 1998 due to the increase in income from continuing operations and the elimination of losses from the AWM Division which is classified as discontinued operations and was sold in the third quarter of 1998. Liquidity and Capital Resources Historically, the Company has financed its operations primarily through sales of equity securities. More recently, the Company has commenced using bank financing for working capital and acquisition purposes. The Company anticipates that its acquisition strategy will continue to require substantial capital investment. Capital is needed not only for additional acquisitions, but also for the effective integration, operation and expansion of the Company's existing Network Sites. The Medical Practices may require capital for renovation and expansion and for the addition of medical equipment and technology. At March 31, 1999, the Company had working capital of approximately $7.4 million, approximately $2.3 million of which consisted of cash and cash equivalents, compared to working capital of approximately $7.7 million at 10 December 31, 1998, approximately $4.2 million of which consisted of cash and cash equivalents. The net decrease in working capital at March 31, 1999 was principally due to purchases of fixed assets and leasehold improvements of approximately $1.3 million and to the repurchase of 110,000 shares of the Company's Common Stock for an aggregate purchase price of $509,000, partially offset by decreases in patient deposits and accrued liabilities. Effective April 1, 1999, the Company entered into a sale-leaseback transaction with Fleet Capital Corporation ("FCC") related to new computer equipment and billing software acquired by the Company primarily during the first quarter of 1999. Pursuant to this transaction, the Company sold approximately $532,000 of equipment and software to FCC and contemporaneously entered into a four-year capital lease of this equipment with FCC for the same amount. The Company did not recognize a gain on the sale of the equipment or software. Under the lease, rental payments of approximately $12,900 are due monthly for forty-eight months commencing on April 1, 1999. Year 2000 Issue The Company's management has recognized the need to ensure that its operations and relationships with its vendors and other third parties will not be adversely impacted by software processing errors arising from calculations using the year 2000 and beyond ("Y2K"). As such, the Company has appointed a Y2K Task Force to identify and assess the risks associated with its information systems and operations, and its interactions with vendors and third-party insurance payors ("the Y2K Project"). The Y2K Project is comprised of five phases as follows: 1) identification of risks, 2) assessment of risks, 3) development of remediation and contingency plans, 4) implementation, and 5) testing. The Company has identified the Y2K risks and is approximately 75% complete in assessing these risks. The Company is currently working on the last three phases of the Y2K Project. The Company believes that the Y2K risks associated with its information systems and certain medical equipment may be potentially significant. In nearly all cases, the Company is relying on assurances from third party vendors that certain information systems and medical equipment will be Y2K compliant. In addition, in the normal course of business, the Company has made capital investments in certain vendor supplied software applications and hardware systems to address the financial and operational needs of its business. These systems, which will improve the efficiencies and productivity of the replaced systems, have been represented to be Y2K compliant by the vendors and have been or will be installed by November 1999. The Company has tested, is currently testing or will have tested such vendor supplied systems and equipment, but cannot be sure that its tests will be adequate or that, if problems are identified, they will be addressed in a timely and satisfactory manner. The Company is also highly dependent upon receiving payments from third party payors for insurance reimbursement for claims submitted by the managed Medical Practices, and as such, the ability of such payors to process claims submitted by Medical Practices accurately and timely, constitutes a significant risk to the Company's cash flow. Individual Network Sites have been or will be in communication with these payors throughout the country to insure that these payors will be Y2K compliant and will be able to process the Medical Practices' claims uninterrupted. In addition, the Company deals with numerous financial institutions, all of whom have indicated that the Y2K compliance issue is being addressed proactively and should not present a problem on or after January 1, 2000. 11 As the Company and its managed Medical Practices are primarily reliant on third party vendors and payors to be Y2K compliant, the Company does not anticipate that it will incur a material incremental cost associated with addressing Y2K problems. To date, all of the Company's capital projects regarding information systems were part of its long-term capital strategic plan. The timing of implementation of these capital projects was not accelerated as a result of the Y2K issue, with the exception of the timing of the installation of a new financial system at the FCI Network Site which was accelerated from the year 2000 to 1999. The Company estimates that it will incur an aggregate cost of $315,000 related to the Y2K Project as follows: (i) approximately $140,000 related to computer hardware and software and medical equipment replacements and upgrades, of which approximately 90% will be capitalizable due to the added value of such replacements and upgrades; (ii) approximately $130,000 of non-incremental employee opportunity costs for time spent by information systems and Y2K Task Force employees who would have ordinarily been spending their time elsewhere; and (iii) approximately $45,000 in incremental staffing costs. By accelerating the implementation of the new financial system at the FCI Network Site, approximately $110,000 of capitalizable equipment and software costs and approximately $50,000 of training costs will be incurred in 1999 instead of the year 2000. In the event any third parties cannot timely provide the Company with information systems, equipment or services that meet the Y2K requirements, the Company's ability and that of its managed Medical Practices to offer services and to process sales, and the Company's cash flows, could be disrupted. In addition, if the Company fails to satisfactorily resolve Y2K issues related to its operations in a timely manner, it could be exposed to liability, particularly to the managed Medical Practices and their patients. As developed to date, the Company's contingency plan provides for the following: (i) stockpiling higher than normal inventories of critical supplies; (ii) ensuring an adequate line of bank credit if third party payor payments are disrupted; and (iii) ensuring all critical staff are available or scheduled for work prior to, during and immediately after December 31, 1999. Management believes that the Company is taking reasonable and adequate measures to address Y2K issues. However, there can be no assurance that the Company's information systems, medical equipment and other non- information technology systems will be Y2K compliant on or before December 31, 1999, or that vendors and third-party insurance payors are, or will be, Y2K compliant, or that the costs required to address the Y2K issue will not have a material adverse effect on the Company's business, financial condition or results of operations. Like virtually every company, and indeed every aspect of contemporary society, the Company is at risk for the failure of major infrastructure providers to adequately address potential Y2K problems. The Company is highly dependent on a variety of public and private infrastructure providers to conduct its business in numerous jurisdictions throughout the country. Failures of the banking system, basic utility providers, telecommunication providers and other services, as a result of Y2K problems, could have a material adverse effect on the ability of the Company to conduct its business. While the Company is cognizant of these risks, a complete assessment of all such risks is beyond the scope of the Company's Y2K Project or ability of the Company to address. The Company has focused its resources and attention on the most immediate and controllable Y2K risks. Forward Looking Statements This Form 10-Q and discussions and/or announcements made by or on behalf of the Company, contain certain forward-looking statements regarding events and/or anticipated results within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the attainment of which involve various risks and uncertainties. Forward-looking statements may be identified by the use of forward-looking terminology such as, "may," "will," "expect," "believe," "estimate," "anticipate," "continue," or similar terms, variations of those terms or the negative of those terms. The Company's actual results may differ materially from those described in these forward- looking statements due to the following factors: the Company's ability to acquire additional management agreements, including the Company's ability to raise additional debt and/or equity capital to finance future growth, the loss of significant management agreement(s), the profitability or lack thereof at Reproductive Science Centers managed by the Company, the Company's ability to transition sole practitioners to group practices, increases in overhead due to expansion, the exclusion of infertility and ART services from insurance coverage, government laws and regulations regarding health care, changes in managed care contracting, the timely development of and acceptance of new infertility, ART and/or genetic technologies and techniques and the risks relating to Y2K. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 12 Part II - OTHER INFORMATION Item 1. Legal Proceedings. On October 9, 1998, W.F. Howard, M.D., P.A., filed a lawsuit against the Company in the District Court of Denton County, Texas, seeking to rescind the management agreement (the "Management Agreement") related to the Dallas Network Site, or collect damages, on the ground that its practice has not realized the degree of growth or increases as allegedly projected by the Company. The complaint asserts alleged breaches of contract, fiduciary duties and warranties, as well as a claim under the Texas Deceptive Trade Practices Act, and claims lost profit damages as well as an exemplary award under statute. The Company believes that this complaint is without merit, denies the allegations, and intends to vigorously defend its position. Despite the filing of the suit, the Company continued to perform its obligations under the Management Agreement. On March 30, 1999, W.F. Howard, M.D., P.A., communicated its intent to terminate the Management Agreement and no longer allowed the Company to provide its management services to the Dallas Network Site. The Company immediately terminated the Management Agreement for cause, and interposed several counterclaims, against the P.A., Dr. W.F. Howard and two former Company employees of the Network Site. These counterclaims allege breach of fiduciary duties, interference with the Company's contractual relations and conversion of assets. The Company also sought, and was provided, return of its confidential and proprietary business documents and the P.A.'s cessation of use of the name "Reproductive Science Center". The Company intends to vigorously pursue all counterclaims, both as against the P.A. and the individuals named as parties to the lawsuit. Litigation counsel has advised the Company that it is too early in the litigation to meaningfully assess the likelihood of success of this lawsuit. Nonetheless, counsel believes that even an unfavorable result will not have a material adverse effect on the results of the Company's operations. On May 4, 1999, the Court of Appeals of New York, in a lawsuit encaptioned Karlin v. IVF America, et. al., determined that plaintiffs' claims could be heard under the New York consumer protection statute, General Business Law ss.ss. 349 and 350. The case was originally instituted in New York Supreme Court, Westchester County, in 1995. Plaintiffs originally denominated the case as a class action, and their request for certification as a class was denied by both the trial and appellate courts (Appellate Division, Second Department). The Court of Appeals refused to review the denial of class action status. The case now represents a single individual claim. The action seeks damages from the Company, United Hospital and Dr. John Stangel, for pecuniary loss and personal injuries, purportedly arising out of an alleged misstatement of success rates at the in vitro fertilization program at United Hospital which was managed by the Company at that time. The complaint originally asserted multiple causes of action; however, through motion practice, the defendants have achieved dismissal of all causes of action except the General Business Law claims which were reinstated by the Court Appeals in May 1999. The Company intends to vigorously defend the remaining cause. Litigation counsel has advised the Company that its position is supported on the merits and that the action, even if successful, would not have a material adverse effect on the Company. There are other minor legal proceedings to which the Company is a party. In the Company's view, the claims asserted and the outcome of these proceedings will not have a material adverse effect on the financial position, results of operations or the cash flows of the Company. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. 13 Item 4. Submission of Matters to Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. None. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTEGRAMED AMERICA, INC. (Registrant) Date: May 14, 1999 By: /s/Gerardo Canet --------------------------------- Gerardo Canet President, CEO and Acting Chief Financial Officer (Principal Financial and Accounting Officer) 15 INDEX TO EXHIBITS Exhibit Number Exhibit 4.11(d) -- Warrant issued to Robert J. Stillman, M.D. dated January 6, 1999 (1) 10.48(c) -- Management Agreement among IntegraMed America, Inc. and Reproductive Endocrine & Fertility Consultants, P.A. and Midwest Fertility Foundations & Laboratory, Inc. 10.61(b) -- Amendment No. 2 to Management Agreement between IntegraMed America, Inc. and Bay Area Fertility and Gynecology Medical Group, Inc. 10.114 -- Management Agreement Among IntegraMed Pharmaceutical Services, Inc., IVP Pharmaceutical Care, Inc., and IntegraMed America, Inc. 27 -- Financial Data Schedule - --------------------------------- (1) Incorporated by reference to the Exhibit with the identical number to Registrant's Annual Report on Form 10- K for the year ended December 31, 1998. 16 EX-10.48(C) 2 INTEGRAMED AMERICA, INC. MANAGEMENT AGREEMENT AMONG INTEGRAMED AMERICA, INC. AND REPRODUCTIVE ENDOCRINE & FERTILITY CONSULTANTS, P.A. AND MIDWEST FERTILITY FOUNDATIONS & LABORATORY, INC. THIS MANAGEMENT AGREEMENT ("Agreement"), dated as of May 1, 1999, by and among IntegraMed America, Inc., a Delaware corporation, with its principal place of business at One Manhattanville Road, Purchase, New York 10577 ("Management Company"), Reproductive Endocrine & Fertility Consultants, P.A., a Kansas professional association, having its principal place of business at Two Brush Creek, Suite 500, Kansas City, Missouri 64112 ("PA"), and Midwest Fertility Foundations & Laboratory, Inc., a Kansas corporation, having its principal place of business at Two Brush Creek, Suite 500, Kansas City, Missouri 64112 ("Midwest"). PA and Midwest are collectively referred to herein as "Providers" and PA, Midwest and Management Company are collectively referred to as "Parties" and individually, as a "Party." RECITALS: PA is a medical practice ("Medical Practice") specializing in gynecological services, treatment of human infertility encompassing the provision of in vitro fertilization and other assisted reproductive services ("Infertility Services"). Midwest is a licensed clinical reference laboratory (the "Lab"). Management Company is in the business of owning certain assets and providing management and administrative services ("Management Services") to medical practices specializing in the provision of Infertility Services, and furnishing such medical practices with the necessary facilities, equipment, personnel, supplies and support staff. This Agreement is made with reference to that certain management agreement by and among the Parties dated November 1, 1995, as amended by agreements dated May 22, 1997 and July 1, 1998, and that certain interim agreement by and among the Parties dated January 25, 1999, as amended by agreement dated March 26, 1999 (collectively, "Former Agreements"). All Former Agreements, upon execution of this Agreement are canceled, null, void and of no further legal effect. Any obligation of a Party contained in the Former Agreements not specifically set forth herein is deemed canceled. Management Company will provide Management Services and the use of certain Facilities, as defined herein, on the terms and conditions provided herein for use by PA for conducting its Medical Practice, and Midwest to operate the Lab, which Facilities and Management Services will be provided simultaneously to other entities providing Infertility Services. PA desires to utilize the services of Management Company to perform management and administrative functions, on its behalf, to permit PA to devote its efforts on a concentrated and continuous basis to the rendering of Infertility Services to its patients; and Midwest desires to obtain the services of Management Company to manage and administer the Lab. NOW THEREFORE, in consideration of the above recitals which the parties incorporate into this Agreement, the mutual covenants and agreements herein contained and other good and valuable consideration , Management Company agrees to provide the Management Services and the Facilities on the terms and conditions provided herein. ARTICLE 1 DEFINITIONS 1.1 DEFINITIONS. For the purposes of this Agreement, the following definitions shall apply: 1.1.1 "Assets" shall mean those fixed assets owned by Management Company and utilized in connection with the operation of the Medical Practice and the Lab, including, but not limited to, fixed assets and leasehold improvements. 1.1.2 "Adjustments" shall mean adjustments for refunds, discounts, contractual adjustments, professional courtesies and other activities that do not generate a collectible fee as reasonably determined by Management Company and Providers. 1.1.3 "Facilities" shall mean the medical offices and clinical spaces of Providers, including any satellite locations, related businesses and all medical group business operations of PA, which are provided by Management Company and utilized by Providers. 1.1.4 "Fiscal Year" shall mean the 12-month period beginning January 1 and ending December 31 of each year. 1.1.5 "Infertility Services" shall mean gynecological services, treatment of human infertility encompassing the provision of in vitro fertilization, and other assisted reproductive services provided by PA, Midwest or any Physician Employee, Other Professional Employee, or Technical Employee. 1.1.6 "Lab Revenue" shall mean all fees earned and actually recorded each month (net of Adjustments) based on the accrual method of accounting pursuant to generally accepted accounting principles ("GAAP") by or on behalf of Midwest as a result of laboratory services furnished by Lab. 1.1.7 "Other Professional Employee" shall mean a non-physician individual who provides services to Providers, including nurse anesthetists, physician assistants, nurse practitioners, psychologists, and other such professional employees who generate professional charges, but shall not include Technical Employees. 1.1.8 "RMC Receivables" shall mean, and include, those receivables for services rendered by PA to RMC patients as more particularly defined in Section 4.3 of that certain agreement among Management Company, PA and Research Medical Center ("RMC") dated July 15, 1998 ("RMC Agreement"). RMC Receivables shall not mean, and excludes, those receivables under the RMC Agreement for services rendered by Management Company to RMC under the RMC Agreement. 1.1.9 "PDE" shall mean an amount equal to a) Revenue, less b) the amount calculated under Section 7.1.1 plus the amount calculated under Section 7.1.2. 1.1.10 "Physician-Employee" shall mean an individual, who is an employee of PA or is otherwise under contract with PA to provide professional services to PA patients and is duly licensed as a physician in the state of Missouri. 1.1.11 "Physician and Other Professional Revenue" shall mean all fees earned, and actually recorded each month (net of Adjustments) in accordance with GAAP, by or on behalf of PA as a result of professional medical services personally furnished to patients of PA by Physician-Employees or Other Professional Employees, and other fees or income earned in their capacity as professionals, whether rendered in an inpatient or outpatient setting, including but not limited to, medical director fees or technical fees from medical ancillary services, consulting fees and ultrasound fees from businesses owned or operated by Physician-Stockholders. In addition, Physician and Other Professional Revenue shall include all fees earned, and actually recorded each month (net of Adjustments) in accordance with GAAP, as a result of professional medical services performed by PA for RMC at the Facilities pursuant to the RMC Agreement. Physician and Other Professional Revenues shall not include (i) board attendance fees and other compensation in connection with board memberships, (ii) other services where a Physician-Employee does not provide professional medical services such as testimony and consultation for litigation-related proceedings, lectures, passive investments, fundraising, or writing ("Permitted Services"), the compensation from which Permitted Services such Physician-Employee may retain without limit, and (iii) compensation resulting from a Physician-Employee's affiliation with an academic institution in a teaching capacity. PA agrees that not less than 14 days prior to a Physician-Employee engaging in an affiliation with an academic institution in a teaching capacity, PA and the Physician-Employee will obtain Management Company's consent, which shall not be unreasonably withheld, to such activities. 1.1.12 "Providers' Receivables" shall mean and include all rights to payment for services rendered or goods sold, accounts, receivables, contract rights, chattel paper, documents, instruments and other evidence of patient indebtedness to PA or Midwest, policies and certificates of insurance relating to any of the foregoing, all rights to payment, reimbursement or settlement or insurance or other medical benefit payments assigned to PA or Midwest by patients or pursuant to any Preferred Provider, HMO, capitated payment agreements, or other agreements between PA and/or a payer, and all of PA's rights to payment for services rendered by PA for RMC patients at the Facilities in accordance with the RMC Agreement, recorded each month (net of Adjustments) in accordance with GAAP. Providers' Receivables shall not include any Medicare or Medicaid receivables. 1.1.13 "Receivables" shall mean the sum of Providers' Receivables and RMC Receivables. 1.1.14 "Revenue" shall mean the sum of Physician and Other Professional Revenue, and Lab Revenue. 1.1.15 "Technical Employees" shall mean technicians such as embryologists and other laboratory personnel, ultrasonographers and phlebotomists who provide services to Providers. ARTICLE 2 COST OF SERVICES 2.1 "Cost of Services" shall mean all ordinary and necessary expenses of Providers and all direct ordinary and necessary operating expenses of Management Company incurred in connection with the management of Providers, and the provision of Facilities, unless expressly provided otherwise herein, including but not limited to: 2.1.1 Salaries, benefits, payroll taxes and other direct cost of all Management Company employees working at the Facilities; 2.1.2 Expenses incurred in the recruitment of additional physicians for PA, including, but not limited to employment agency fees, relocation and interviewing expenses and any actual out-of-pocket expenses, provided such out-of-pocket expenses are agreed upon by Management Company and PA prior to being incurred, of Management Company personnel or any Physician-Employee in connection with such recruitment effort; 2.1.3 Direct marketing expenses of PA, such as direct costs of printing marketing materials prepared by Management Company; 2.1.4 Any sales and use taxes assessed against PA related to the operation of PA's medical practice; 2.1.5 Lease payments, depreciation expense (determined according to GAAP), taxes and interest directly relating to the Facilities and equipment, and other expenses of the Facilities described in Section 3.2 below; 2.1.6 Legal fees paid by Management Company or PA to outside counsel in connection with matters specific to the operation of PA such as regulatory approvals required as a result of the parties entering into this Agreement; provided, however, legal fees incurred by the parties relative to completion of this Agreement or as a result of a dispute between the parties under this Agreement shall not be considered a Cost of Services; 2.1.7 All insurance necessary to operate PA including fire, theft, general liability and malpractice insurance for Physician-Employees of the PA; 2.1.8 Professional licensure fees and board certification fees of Physician-Employees, and Other Professional Employees rendering Infertility Services on behalf of PA; 2.1.9 Membership in professional associations and continuing professional education for Physician-Employees and Other Professional Employees; 2.1.10 Quality Improvement Program described in Section 3.8 herein; 2.1.11 Cost of filing fictitious name permits pursuant to this Agreement; 2.1.12 Cost of supplies, medical and administrative, and all direct general and administrative expenses of PA; 2.1.13 $10,000 in the aggregate, annually, per Physician-Employee for travel and entertainment expenses, car allowances (including car leases), dues and subscriptions, cellular telephone and other business related expenses relative to PA; 2.1.14 $9,000 in the aggregate, annually, per Physician-Employee for health, life and long-term disability insurance; and 2.1.15 Such other costs and expenses directly incurred by Management Company necessary for the management or operation of PA. 2.2 Management Company covenants and represents that any management agreement consummated between Management Company and a Co-Occupant shall include a definition of cost of services that is substantially the same as the definition of Cost of Services in Section 2.1 of the Agreement. 2.3 "Facilities Cost of Services" shall mean the costs incurred under Section 2.1 of this Agreement plus the costs incurred under the definition of cost of services contained in each management agreement consummated between Management Company and a Co-Occupant. 2.4 The amount paid to Management Company monthly by PA pursuant to Section 7.1.1 hereof shall cover the Cost of Services identified in Section 2.1. To the extent that PA requires services or equipment over and above those provided for in, and covered by, Section 2.1, PA shall bear the cost of such services or additional expenses, which costs and additional expenses shall be excluded from determination of the PDE calculation defined in Section 1.1.9. Management Company shall have no obligation to make any payments for such costs and additional expenses, and PA agrees not to incur any such costs or additional expenses in the name of Management Company. ARTICLE 3 DUTIES AND RESPONSIBILITIES OF MANAGEMENT COMPANY 3.1 MANAGEMENT SERVICES AND ADMINISTRATION. 3.1.1 The PA and Midwest acknowledge and agree that the Management Services and Facilities will be provided to PA and Midwest on a non-exclusive basis and that such Management Services and the Facilities may be shared by other entities and/or medical practices who have signed a management agreement with Management Company ("Co-Occupants"). Management Company will allocate resources and its personnel's time so as to fulfill its obligations under this Agreement. Notwithstanding anything herein to the contrary, nothing herein shall obligate Management Company to devote all of its personnel at the Facilities and Management Services to PA, Midwest and Co-Occupants, to the exclusion of anyone of them. 3.1.2 Providers hereby appoint Management Company as Providers' sole and exclusive manager and administrator of all of their day-to-day business functions and grant Management Company all the necessary authority to carry out, with Providers' advice and consent, its duties and responsibilities pursuant to the terms of this Agreement to provide the Management Services on a non-exclusive basis. Only Physician-Employees or their designees, whose credentials are reviewed and approved by Management Company prior to rendering any medical functions at the Facilities, will perform the medical functions of the Medical Practice. Management Company will have no authority, directly or indirectly, to perform, and will not perform, any medical function. 3.1.3 Management Company will, on behalf of PA and Midwest, and in accordance with applicable laws, bill patients and other responsible persons and third-party payors and collect professional fees for Infertility Services rendered by Providers to Providers' patients at the Facilities, outside the Facilities for PA's hospitalized patients, and for all other Infertility Services rendered by any Physician- Employee, Other Professional Employee, or Technical Employee. Providers hereby appoint Management Company for the term hereof to be their true and lawful attorney-in-fact, for the following purposes: (i) to bill patients in Providers' name and on their behalf; (ii) to collect Receivables resulting from such billing in Providers' name and on their behalf; (iii) to receive payments from insurance companies, prepayments received from health care plans, and all other third-party payors; (iv) to take possession of and endorse in the name of Providers (and/or in the name of any Physician-Employee or Other Professional Employee rendering Infertility Services to patients of PA) any notes, checks, money orders, and other instruments received in payment of Receivables; and (v) to initiate the institution of legal proceedings in the name of Providers, with Providers' advice and consent, to collect any accounts and monies owed to Providers, to enforce the rights of either Provider as creditor under any contract or in connection with the rendering of any service, and to contest adjustments and denials by governmental agencies (or its fiscal intermediaries) as third-party payors. 3.1.3.1 Prior to referring any Receivable to a collection agency, or sending any letter, other than a standard billing cycle statement, or commencing litigation, Management Company shall provide Providers with thirty (30) days' written notice of its intent to take such action. If within said period, Providers advise Management Company that Providers do not want (i) a particular Receivable or any part thereof referred to a collection agency, or (ii) any letter other than a standard billing cycle statement sent or (iii) litigation commenced, then Providers will repurchase the Receivable from Management Company within thirty (30) days of such notice from Management Company. If Providers fail to repurchase the Receivable within the thirty (30) days, Management Company will proceed with such collection efforts, as it deems appropriate. 3.1.4 Management Company will provide the administrative services function of supervising and maintaining (on behalf of Providers) all files and records relating to the operations of the Facilities, including but not limited to accounting and billing records, including for billing purposes, patient medical records, and collection records. Patient medical records shall at all times be and remain the property of PA and, if applicable, Midwest, and shall be located at the Facilities and be readily accessible for patient care. Management Company's management of all files and records shall comply with all applicable state and federal laws and regulations, including without limitation, those pertaining to confidentiality of patient records. The medical records of each patient shall be expressly deemed confidential and shall not be made available to any third party except in compliance with all applicable laws, rules and regulations. Management Company shall have access to such records in order to provide the Management Services hereunder, to perform billing functions, and to prepare for the defense of any lawsuit in which those records may be relevant. The obligation to maintain the confidentiality of such records shall survive termination of this Agreement. Providers shall have access, on reasonable notice, to all of their records, including but not limited to documentation of any expense incurred by Management Company as Cost of Services, whether on behalf of Providers or, to the extent Providers share payment of the expense, Providers and/or other Co-Occupants, at all times. 3.1.5 Management Company will supply to Providers all reasonably necessary clerical, accounting, bookkeeping and computer services, printing, postage and duplication services, medical transcribing services, and any other necessary or appropriate administrative services reasonably necessary for the efficient operation of Providers' businesses at the Facilities. 3.1.6 Management Company, subject to Providers' prior approval, shall design and assist Providers with the implementation of an appropriate marketing and public relations program, with appropriate emphasis on public awareness of the availability of Infertility Services from PA and the services of Midwest. The Parties agree that the public relations program shall be conducted in compliance with applicable laws and regulations governing advertising by the medical profession. Recognizing that Providers' participation in carrying any marketing and public relations program is essential, Providers shall participate in developing advertising and marketing strategies, and approve collateral materials, relative to any marketing and public relations program. 3.1.7 Management Company, upon request of PA, will assist PA in recruiting additional physicians, including such administrative functions as advertising for and identifying potential candidates, checking credentials, and arranging interviews; provided, however, PA shall interview and make the ultimate decision as to the suitability of any physician to become associated with PA. All physicians recruited by Management Company and accepted by PA shall be employees of or independent contractors to PA. 3.1.8 Management Company will assist Providers in negotiating any managed care, PPO, HMO and other provider contracts to which either Provider desires to become a party. Decisions regarding the establishment, maintenance or termination of relationships with institutional health providers shall be made by Providers, in consultation with Management Company. Management Company will provide administrative assistance to Providers in fulfilling their respective obligations under any such contract. In connection with assisting Providers in negotiating any managed care, PPO, HMO and other provider contracts, Management Company will use its best efforts to safeguard the confidentiality of Providers' Confidential Information, as herein defined, as well as to avoid use of Providers' Confidential Information for anti-competitive purposes. 3.1.9 Management Company will arrange for legal services as may be reasonably required in the ordinary course of Providers' operations, including the cost of enforcing any physician contract containing restrictive covenants, but excluding personal legal, accounting and tax services to any Physician-Employee. 3.1.10 Management Company will negotiate for and cause premiums to be paid with respect to the insurance provided for in Article 11. 3.1.11 Management Company will take such other reasonable actions to collect fees and pay expenses of the Facilities in a timely manner as are deemed reasonably necessary to facilitate the operations of Providers at the Facilities. 3.2 FACILITIES. Management Company will provide the Facilities identified in Exhibit 3.2 hereto, on a non-exclusive basis, necessary for the operation of the Medical Practice and the Lab, including but not limited to, the use of the Facilities, all furniture, equipment and furnishings necessary for the proper and efficient operation of the Facilities, all repairs, maintenance and improvements thereto, utility (telephone, electric, gas, water) services, customary janitorial services, refuse disposal and all other services reasonably necessary in conducting the Facilities' physical operations. Management Company will provide for the cleanliness of the Facilities, and timely maintenance and cleanliness of the equipment, furniture and furnishings located therein. 3.3 EXECUTIVE DIRECTOR AND OTHER PERSONNEL. 3.3.1 EXECUTIVE DIRECTOR. Management Company will hire and appoint a manager, subject to the approval of the Joint Practices Management Board, to manage and administer all of the day-to-day business functions of the Facilities ("Executive Director/Manager"). Management Company shall determine salary and fringe benefits paid to the Executive Director/Manager. At the direction, supervision and control of Management Company, the Executive Director/Manager, subject to the terms of this Agreement, will implement the policies agreed upon by the Joint Practices Management Board and will generally perform the administrative duties assigned to the Executive Director/Manager by Management Company. 3.3.2 PERSONNEL. Management Company will employ and provide Other Professional Employees, Technical Employees, support and administrative personnel, clerical, secretarial, bookkeeping and collection personnel reasonably necessary for the efficient operation of the Providers at the Facilities. Management Company shall determine and cause to be paid the salaries and benefits of all such personnel who will be under the direction, supervision and control of Management Company, with Technical Employees and Other Professional Employees subject to the professional supervision of PA. Management Company agrees that Other Professional Employees and Technical Employees will comply with the reasonable instructions of Physician-Employees supervising such personnel. If Providers are dissatisfied with the services of any person employed by Management Company and working at the Facilities, Providers will consult with Management Company. Management Company shall in good faith determine whether the employment of that employee warrants termination. The overriding principle and goal of facilitating the Providers' provision of high quality medical care and laboratory services will govern Management Company's obligations to personnel described herein. Personnel assignments shall be made to ensure consistent and continued rendering of quality support services in the Facilities and to ensure prompt availability and accessibility of individual medical support staff to Physician-Employees in order to develop constant, familiar, and routine working relationships between individual Physician-Employees and individual members of the support staff. If Providers disagree with an assignment Providers may appeal such assignment to the Management Company. Management Company shall make every effort consistent with sound business practices to honor the specific requests of Providers with regard to the assignment of Management Company's employees. In addition, Management Company, upon PA's request for nursing or other personnel in excess of such covered by PA's share of Cost of Services as provided for in Section 7.1.1, shall assist PA in recruiting additional nursing and/or other personnel specific or unique to PA's Medical Practice. All recruiting costs, salaries and benefits for such personnel shall be borne by PA from PA's share of PDE. 3.3.1 OTHER PROFESSIONAL EMPLOYEES AND TECHNICAL EMPLOYEES. Management Company will ensure that each Other Professional Employee and Technical Employee: 3.3.3.1 Maintains a current, valid, unrestricted license or other applicable authorization to practice his or her profession in the State of Missouri, and maintains good standing with the authority responsible for such licensure or authorization; 3.3.3.2 Performs professional services at the Facilities in accordance with applicable laws and regulations and prevailing standards of care in the medical community and in accordance with the reasonable direction and/or instructions of a Physician-Employee. 3.3.3.3 Maintains his or her professional skills through continuing education and training; and 3.3.3.4 Maintains eligibility for insurance under the professional liability policy or policies carried by Management Company. 3.4 FINANCIAL PLANNING AND GOALS. Management Company will prepare, for the approval of Providers, an annual capital and operating budget (the "Budget") reflecting the anticipated Revenue and Cost of Services, sources and uses of capital for growth of PA's practice and for the provision of Infertility Services at the Facilities. Management Company will present the Budget to Providers for approval at least sixty (60) days prior to the commencement of the Fiscal Year. Management Company will indicate the targeted profit margin for Providers which will be reflected in the Budget. If the parties can not agree on the Budget for PA for any Fiscal Year during the term of this Agreement, the Budget for the preceding Fiscal Year will serve as the Budget until such time as the dispute can be resolved. 3.5 FINANCIAL STATEMENTS. Management Company will prepare and deliver to the representative of each Provider provided for in the notice section of this Agreement an annual management report within sixty (60) days of the close of the Fiscal Year ("Annual Management Report"). Management Company will prepare and deliver to the representative of each Provider provided for in the notice section of this Agreement a monthly management report within twenty (20) days of the close of each month ("Monthly Management Report"). Each Annual or Monthly Management Report will contain a balance sheet, statement of operations showing Revenue and Costs of Services, and Receivables aging schedule. The Receivables aging schedule will indicate Receivables aging for 30, 90 and 120 days. Providers have the right to request from Management Company and inspect all billing statements, original receipts, and other documents relating to the management of Providers under this Agreement. 3.6 TAX PLANNING AND TAX RETURNS. Management Company will not be responsible for any tax planning or tax return preparation for Providers, but will provide support documentation in connection with the same. Such support documentation will not be destroyed without Providers consent. 3.7 INVENTORY AND SUPPLIES. Management Company shall order and purchase inventory and supplies, and such other materials that are requested by Providers to enable PA Midwest to deliver Infertility Services in a cost-effective high quality manner. 3.8 QUALITY IMPROVEMENT. Management Company shall assist PA in fulfilling its obligations to maintain a Quality Improvement Program and in meeting the goals and standards of such program. Management Company will also establish policies and procedures for assisting Providers in offering Infertility Services to patients under financial arrangements arranged through third parties, and assisting patients in determining eligibility for Infertility Services coverage through patients' medical carriers. 3.9 RISK MANAGEMENT. Management Company shall assist PA in the development of a Risk Management Program and in meeting the standards of such Program. 3.10 PERSONNEL POLICIES AND PROCEDURES. Management Company shall develop personnel policies, procedures and guidelines, to govern office behavior, protocol and procedures, designed to insure that the Facilities observe all laws and guidelines related to employment and human resources management. 3.11 LICENSES AND PERMITS. Management Company shall, on behalf of Providers, coordinate and assist Providers in its application for and efforts to obtain and maintain all federal, state and local licenses, certifications and regulatory permits required for or in connection with the operations of PA and Midwest, and equipment located at the Facilities, including those relating to the practice of medicine or the administration of drugs by Physician-Employees. 3.12 PRODUCTION REPORTS. Within thirty (30) days of the execution of this Agreement, Management Company and Providers will mutually agree upon appropriate periodic production reports that will provide Providers with the number and types of procedures performed by Physician-Employees, and the charges for each such procedures, and the number of patients who have received Infertility Services at the Facilities over the applicable period and the aggregate charges for all such services. Such production reports shall be produced on no less than a monthly basis. ARTICLE 4 DUTIES AND RESPONSIBILITIES OF PA AND MIDWEST 4.1 PROFESSIONAL SERVICES. PA shall cause its Physician-Employees to provide Infertility Services to PA's patients in compliance at all times with ethical standards, laws and regulations applying to the practice of medicine in the applicable jurisdiction which such Physician-Employee provides Infertility Services on behalf of PA. Such obligation of PA shall include ensuring that adequate patient coverage is provided at all times for its patients. PA shall ensure that each Physician-Employee, any Other Professional Employee employed by PA, and any other professional provider associated with PA is duly licensed to provide the Infertility Services being rendered within the scope of such provider's practice. In addition, PA shall require each Physician-Employee to maintain a DEA number and appropriate medical staff privileges as determined by PA during the term of this Agreement. In the event that any disciplinary actions or medical malpractice actions are initiated against any Physician-Employee or other professional provider, PA shall promptly inform the Executive Director/Manager and provide the underlying facts and circumstances of such action, and the proposed course of action to resolve the matter. Periodic updates, but not less than monthly, shall be provided to Management Company. 4.2 MEDICAL PRACTICE. PA shall use and occupy the Facilities exclusively for the purpose of providing gynecologic services, Infertility Services, and related services and shall comply with all applicable laws and regulations and all applicable standards of medical care, including, but not limited to, those established by the American Society of Reproductive Medicine. The Medical Practice conducted at the Facilities by PA shall be conducted solely by Physician-Employees, and Other Professional Employees employed by PA, Midwest or Management Company, as applicable. No other physician or medical practitioner shall be permitted to use or occupy the Facilities without the prior written consent of Management Company, except in the case of a medical emergency, in which event, notification shall be provided to Management Company as soon after such use or occupancy as possible. 4.3 EMPLOYMENT OF PHYSICIAN-EMPLOYEES AND OTHER PROFESSIONAL EMPLOYEES. In the event PA shall determine that additional physicians are necessary, PA shall undertake and use its best efforts to locate physicians who, in PA's judgment, possess the credentials and expertise necessary to enable such physician candidates to become affiliated with PA for the purpose of providing Infertility Services. PA shall cause each Physician-Employee to enter into an employment agreement in a form that is mutually acceptable to PA and Management Company ("Physician-Employment Agreement"), which acceptance shall not be unreasonably withheld by either party. As long as Elwyn M. Grimes, MD ("Dr. Grimes"), remains the sole shareholder and Physician-Employee of PA, Management Company shall not withhold acceptance of Dr. Grimes' Physician-Employment Agreement on the basis that it lacks a non-compete provision. Except as otherwise provided in Sections 4.6.4 and 5.2.8 of this Agreement, PA shall have complete control of and responsibility for the hiring, compensation, supervision, evaluation, and termination of its Physician-Employees, although at the request of PA, Management Company shall consult with PA respecting such matters. 4.4 CONTINUING MEDICAL EDUCATION. PA shall require its Physician-Employees to participate in such continuing medical education as PA deems to be reasonably necessary for such physicians to remain current in the provision of Infertility Services. 4.5 PROFESSIONAL INSURANCE ELIGIBILITY.PA shall cooperate in the obtaining and retaining of professional liability insurance by assuring that its Physician-Employees and Other Professional Employees, if applicable, are insurable and participating in an on-going Risk Management Program, under Management Company's directions. 4.6 DIRECTION OF PRACTICE. PA, as a continuing condition of Management Company's obligations under this Agreement, shall at all time during the Term be and remain legally organized and operated to provide Infertility Services in a manner consistent with state and federal laws. In furtherance of which: 4.6.1 PA shall operate and maintain at the Facilities, on a non-exclusive basis, a full-time practice of medicine specializing in the provision of Infertility Services and shall maintain and enforce the Physician-Employment Agreements. PA covenants that it shall not employ any physician, or have any physician as a shareholder, unless said physician shall sign a Physician Employment Agreement prior to assuming the status as employee and/or shareholder of PA. 4.6.2 PA shall not, except in accordance with the Physician-Employment Agreement or as otherwise stated herein, terminate any Physician-Employment Agreement, amend or modify any Physician-Employment Agreement in any material manner, waive any material rights of the PA thereunder without the prior written approval of Management Company, which approval will not be unreasonably withheld. PA may amend or modify the Physician-Employment Agreements without Management Company's consent in order to comply with applicable law. In addition, in the exercise of Management Company's sole discretion, if PA fails to pursue the enforcement of its rights against a Physician-Employee, Management Company shall have the right, but not the obligation, to direct, initiate, or join in a lawsuit to enforce the provisions of any Physician Employment Agreement and PA shall assign its rights and remedies against such Physician-Employee upon the request of Management Company. 4.6.3 Recognizing that Management Company would not have entered into this Agreement but for the PA's covenant to maintain and enforce the Physician-Employment Agreements, subject to the limitations stated in Section 4.6.2, and in reliance upon a Physician-Employee's observance and performance of all of the obligations under a Physician Employment Agreement, any damages, liquidated damages, compensation, payment, or settlement received by the PA from a physician whose employment is terminated, shall be paid to Management Company in proportion to Management Company's loss or damages. 4.6.4 PA shall retain that number of Physician-Employees as are reasonably necessary and appropriate for the provision of Infertility Services. However, PA agrees that it will not hire more physicians than consented to by the Joint Practice Management Board, which shall not be unreasonable in giving its consent. Each Physician-Employee shall hold and maintain a valid and unrestricted license to practice medicine in the applicable jurisdiction where such Physician-Employee provides Infertility Services on behalf of PA, and shall be board eligible in the practice of gynecology, with training in the subspecialty of infertility and assisted reproductive medicine. PA shall be responsible for paying the compensation and benefits, as applicable, for all Physician-Employees, and for withholding, as required by law, any sums for income tax, unemployment insurance, social security, or any other withholding required by applicable law. Management Company may, on behalf of the PA, and at PA's request, administer the compensation with respect to such Physician-Employees in accordance with the written agreement between the PA and each Physician-Employee. Management Company shall neither control nor direct any Physician in the performance of Infertility Services for patients, and Management Company will not unreasonably interfere with the employer-employee relationship between PA and its Physician-Employees. 4.6.5 PA shall insure that Physician-Employees provide patient care and clinical backup as required to insure the proper provision of Infertility Services to patients of the PA at the Facilities set forth in Exhibit 3.2, and/or such other location as shall be mutually agreed to by PA and Management Company. PA shall insure that its Physician-Employees devote substantially all of their professional time, effort and ability to PA's practice, including the provision of Infertility Services and the development of such practice. PA shall insure that Physician-Employees timely (within 24 hours of rendering services) note in all patient charts, any and all procedures performed and services rendered so that proper billing of patients and third-party payors can be performed by Management Company. 4.6.6 PA covenants to obtain necessary licenses and operate clinical laboratory and tissue bank services in accordance with all applicable laws and regulations. PA agrees that any Medical Director(s) or Tissue Bank Director(s) shall be Physician-Employees or Other Professional Employees, if applicable, of the PA who meet the qualifications required by applicable State law or regulation, and that should there be a vacancy in any such position, PA will cause another Physician-Employee or Other Professional Employee, if applicable, to fill such vacancy in accordance with applicable State law. 4.6.7 PA acknowledges that it bears all medical obligations to patients treated at the Facilities and PA and Midwest covenant that they are responsible for all tissue, specimens, embryos or biological material ("Biological Materials") kept at the Facilities on behalf of the patients (or former patients) of PA or Midwest. In the event of a termination or dissolution of PA or Midwest, or the termination of this Agreement for any reason, PA and Midwest will have the obligation to account to its patients and to arrange for the storage or disposal of such Biological Materials in accordance with patient consent and the ethical guidelines of the American Society of Reproductive Medicine ("Relocation Program"). Management Company, in such event, will, at the request of the PA, assist in the administrative details of such a Relocation Program. These obligations shall survive the termination of this Agreement. 4.6.8 Except for circumstances outside the control of PA or Shareholders of PA, PA covenants not to terminate or dissolve as a professional services corporation except on six months prior written notice to Management Company. In the event that such termination or dissolution occurs, for a reason other than the death or disability of all of the shareholders, or any successor entity fails to continue the medical practice of PA substantially in the form contemplated by this Agreement, PA and its individual shareholders, shall indemnify Management Company for: (a) the actual costs of maintaining the Facilities and any reasonably necessary Other Professional Employees during a Relocation Program (Section 4.6.7); and (b) any damages, costs, liabilities, including reasonable attorneys fees, arising from claims, suits, causes of action or proceedings, brought by a patient of the PA having an interest in any Biological Materials kept at the Facilities. These obligations shall survive the termination of this Agreement. 4.7 PHYSICIAN-EMPLOYEES, SUPERVISION OF OTHER PROFESSIONAL AND TECHNICAL EMPLOYEES. PA will ensure that each Physician-Employee: 4.7.1 Maintains a current, valid, unrestricted license or other applicable authorization to practice his or her profession in the State of Missouri, and maintains good and unrestricted standing with the authority responsible for such licensure or authorization; 4.7.2 Performs professional services at the Facilities in accordance with applicable laws and regulations and prevailing standards of care in the community; 4.7.3 Maintains his or her professional skills through continuing education and training; 4.7.4 Maintains eligibility for insurance; and 4.7.5 Does not ask or direct any Management Company employee to engage in any conduct that violates any federal, local or state law or regulation, or ask or direct any Management Company employee to engage in conduct for which said employee is not licensed to perform or engage. 4.8 PRACTICE DEVELOPMENT, COLLECTION EFFORTS AND NETWORK INVOLVEMENT. PA agrees that during the term of this Agreement, PA covenants for itself and will use its best efforts to cause its Physician-Employees to: 4.8.1 Execute such documents and take such steps reasonably necessary to assist billing and collecting for patient services rendered by PA, Midwest and Physician-Employees; 4.8.2 Promote PA's medical practice and Midwest's Infertility Services and participate in marketing efforts developed by Management Company, and approved by PA and the Joint Practices Management Board. 4.8.3 Participate in Management Company Reproductive Science Center Network activities and programs such as the Physician and Scientist Council. 4.9 PERSONNEL POLICIES. PA covenants for itself and will cause its Physician-Employees and any other employees to comply with reasonable personnel policies and guidelines developed for the PA and Midwest by Management Company and/or the Joint Practice Management Board, which shall include administrative protocols and policies designed to insure that the Facilities comply with all applicable laws and regulations, federal, state and local. 4.10 MIDWEST. Midwest shall provide clinical laboratory services to patients in compliance at all times with all applicable ethical standards, laws and regulations. ARTICLE 5 JOINT DUTIES AND RESPONSIBILITIES 5.1 FORMATION AND OPERATION OF JOINT PRACTICES MANAGEMENT BOARD. Management Company, PA and Co-Occupants will establish a joint practices management board ("Joint Practices Management Board") which will be responsible for developing management and administrative policies for the overall operation of the Facilities. The Joint Practices Management Board will consist of designated management representatives from Management Company, one representative from PA, one from each Co-Occupant, and the Executive Director/ Manager. It is the intent and objective of Management Company and PA that they agree on the overall operations of the Facilities. In the case of any matter requiring a formal vote, PA shall have one (1) vote, each Co-Occupant shall have one (1) vote, and Management Company shall have one (1) vote. The desire is that Management Company, PA and Co-Occupants agree on matters of operations and that, if they disagree, they will have to work cooperatively to resolve any disagreement. 5.2 DUTIES AND RESPONSIBILITIES OF THE JOINT PRACTICES MANAGEMENT BOARD. The Joint Practices Management Board shall have, among others, the following duties and responsibilities: 5.2.1 ANNUAL BUDGETS AND PROFITABILITY. All annual capital and operation budgets prepared by Management Company for the Facilities shall be subject to the review, amendment, approval, and disapproval of the Joint Practices Management Board. Providers covenant and agree to use their best efforts to agree upon the budgets, in place from time to time. Providers and Management Company agree that, recognizing changes in circumstances, annual budgets and forecast are subject to revisions and, accordingly, they will cause the Joint Practices Management Board to modify the annual budgets, as needed, including without limitation, staff reductions, to ensure that Providers operate in a profitable mode, subject to Management Company's duties and responsibilities under this Agreement. 5.2.2 CAPITAL IMPROVEMENTS AND EXPANSION. Except as otherwise provided herein, any renovation and expansion plans, and capital equipment expenditures with respect to the Facilities shall be reviewed and approved by the Joint Practices Management Board and shall be based upon the best interests of all occupants, and shall take into account capital priorities, economic feasibility, physician support, productivity and then current market and regulatory conditions. 5.2.3 ADVERTISING BUDGET. All annual advertising and other marketing budgets for the Facilities prepared by Management Company shall be subject to the review, amendment, approval and disapproval of the Joint Practices Management Board. 5.2.4 PATIENT FEES. Providers, in their sole discretion, shall determine an appropriate fee schedule for all physician and ancillary services rendered by Providers at the Facilities. 5.2.5 ANCILLARY SERVICES. The Joint Practices Management Board shall approve ancillary services rendered at the Facilities. 5.2.6 STRATEGIC PLANNING. The Joint Practices Management Board shall, to the extent permitted by applicable law, develop long-term strategic plans, from time to time. 5.2.7 PHYSICIAN HIRING. The Joint Practices Management Board shall, in conjunction with PA and Co-Occupants, determine the number and type of physicians required for the efficient operation of the Facilities. 5.2.8 EXECUTIVE DIRECTOR AND KEY PERSONNEL. (a) The selection and retention of the Executive Director/Manager pursuant to Section 3.3.1 by Management Company shall be subject to the recommendation of the Joint Practices Management Board. If PA is dissatisfied with the services provided by the Executive Director/Manager, PA shall consult with Management Company who shall, in good faith, determine whether the performance of the Executive Director/Manager could be brought to acceptable levels through counsel and assistance, or whether the Executive Director/Manager should be terminated. (b) Management Company shall follow the recommendations of the Joint Practices Management Board with respect to the hiring, terminating, or relocating of key personnel at the Facilities, provided such recommendations do not cause Management Company to violate any federal, state or local laws or regulations. 5.3 FEE SCHEDULES. PA understands and agrees that each Co-Occupant of the Facilities may establish and publish its own separate and distinct fee schedule, and nothing herein shall obligate PA to share its fee schedule with a Co-Occupant or utilize the schedule of a Co-Occupant. Upon request of patients, third parties, or governmental agencies, Management Company personnel will be permitted to disclose PA's fee schedule. ARTICLE 6 LICENSE OF MANAGEMENT COMPANY NAME 6.1 GRANT OF LICENSE. Management Company hereby grants to Providers a revocable, non-exclusive and non-assignable license for the term of this Agreement to use the name REPRODUCTIVE SCIENCE ASSOCIATES and a revocable, non-exclusive and non-assignable license with respect to any other service names, trademark names and logos of Management Company (the "Trade Names") in conjunction with the provision of Infertility Services at the Facilities. 6.2 FICTITIOUS NAME PERMIT. If necessary, PA and Midwest shall file or cause to be filed an original, amended or renewal application with an appropriate regulatory agency to obtain a fictitious name permit which allows PA and Midwest to practice at the Facilities under the Trade Names and shall take any other actions reasonably necessary to procure protection of or protect Management Company's rights to the Trade Names. Management Company shall cooperate and assist PA and Midwest in obtaining any such original, amended or renewal fictitious name permit. 6.3 RIGHTS OF MANAGEMENT COMPANY. PA and Midwest acknowledge Management Company's exclusive right, ownership, title and interest in and to the Trade Names and will not at any time do or cause to be done any act or thing contesting or in any way impairing or tending to impair any part of such right, title and interest. In connection with the use of the Trade Names, PA and Midwest shall not in any manner represent that it has any ownership interest in the Trade Names, and PA's and Midwest's use shall not create in PA's and Midwest's favor any right, title, or interest in or to the Trade Names other than the right of use granted hereunder, and all such uses by PA Midwest shall inure to the benefit of Management Company. PA and Midwest shall notify Management Company immediately upon becoming aware of any claim, suit or other action brought against it for use of the Trade Names or the unauthorized use of the Trade Names by a third party. PA and Midwest shall not take any other action to protect the Trade Names without the prior written consent of Management Company. Management Company, if it so desires, may commence or prosecute any claim or suit in its own name or in the name of PA or Midwest or join PA and Midwest as a party thereto. PA and Midwest shall not have any rights against Management Company for damages or other remedy by reason of any determination of Management Company not to act or by reason of any settlement to which Management Company may agree with respect to any alleged infringements, imitations, or unauthorized use by others of the Trade Names, nor shall any such determination of Management Company or such settlement by Management Company affect the validity or enforceability of this Agreement. 6.4 RIGHTS UPON TERMINATION. 6.4.1 Upon termination of this Agreement, PA and Midwest shall: (i) within 30 days of the termination, cease using the Trade Names in all respects and refrain from making any reference on its letterhead or other publicly-disseminated information or material to its former relationship with Management Company; and (ii) take any and all actions required to make the Trade Names available for use by any other person or entity designated by Management Company. 6.4.2 PA's or Midwest's failure (except as otherwise provided herein) to cease using the Trade Names at the termination or expiration of this Agreement will result in immediate and irreparable damage to Management Company and to the rights of any licensee of Management Company. There is no adequate remedy at law for such failure. In the event of such failure, Management Company shall be entitled to equitable relief by way of injunctive relief and such other relief as any court with jurisdiction may deem just and proper. Additionally, pending such a hearing and the decision on the application for such permanent injunction, Management Company shall be entitled to a temporary restraining order, without prejudice to any other remedy available to Management Company. All such remedies hereunder shall be at the expense of PA and Midwest and shall not be a Cost of Services. ARTICLE 7 FINANCIAL ARRANGEMENTS 7.1 COMPENSATION. The compensation set forth in this Article 7 is being paid to Management Company in consideration of the substantial commitment made and services to be rendered by Management Company hereunder and is fair and reasonable. Management Company shall be paid the following amounts (collectively "Compensation"): 7.1.1 Based on Providers' current staffing and operations, for the first 12 months of this Agreement, $75,000 per month ("Initial Monthly Cost of Services") for all Cost of Services provided for in Section 2.1 (whether incurred by Management Company or Providers) accrued by Management Company pursuant to the terms of this Agreement. Beginning with the 13th month of this Agreement and on a quarterly basis thereafter, the Initial Monthly Cost of Services will be adjusted and, as adjusted, will equal the product of (i) Revenue for the previous 3 months divided by total revenue for all medical services provided at the Facilities for the previous 3 months, multiplied by (ii) Facilities Cost of Services for the previous 3 months ("Adjusted Monthly Cost of Services"). Notwithstanding the above, neither the Initial Monthly Cost of Services nor the Adjusted Monthly Cost of Services for the 36-month period beginning May 1, 1999 and ending April 30, 2002, shall exceed $75,000 per month. 7.1.1.1 Notwithstanding the provisions of Section 7.1.1, in the event that Co-Occupants begin utilizing the Facilities during the first 12 months of this Agreement, cost of services paid to Management Company by all occupants, including Providers, for the first 12 months of this Agreement, in excess of the Facilities Cost of Services for the first 12 months of this Agreement shall be remitted to Providers within 60 days after the first 12 months of this Agreement. 7.1.1.2 PA and Management Company recognize and agree that it is in their mutual best interests to cooperate in bringing Co-Occupants into the Facility. Accordingly, Providers agree to use their best efforts to assist Management Company in consummating management agreements with other Co-Occupants as soon as possible. In the event Management Company successfully consummates a management agreement with a Co-Occupant on or before October 31, 1999, Management Company will pay $7,500.00 to PA. In the event Management Company successfully consummates a management agreement with a second Co-Occupant on or before October 31, 1999, Management Company will pay PA an additional $15,000.00. All payments under this Section will be paid to PA as follows: one-third of the total on the effective date of the relevant management agreement between Management Company and a Co-Occupant, and the remaining two-thirds in two equal monthly payments 30 days and 60 days after the effective date of the relevant management agreement. This offer expires at midnight, October 31, 1999, except that any payments due thereafter based on management agreements consummated prior to that date will be paid in accordance with the schedule provided for in this Section 7.1.1.2. 7.1.2 During each year of this Agreement, a Base Management Fee, paid monthly but reconciled to annual Revenues, of an amount equal to six percent (6%) of Revenues; 7.1.3 During each year of this Agreement, an Additional Management Fee, paid monthly but reconciled to annual operating results of PA, equal to 20% of PDE; provided, however, the first $8,333.33 of monthly PDE and the first $100,000 of annual PDE shall inure to PA; 7.1.4 In the event that Section 7.1.2 and/or Section 7.1.3 of this Agreement is found to be illegal, unenforceable, against public policy, or forbidden by law, by any local, state or federal agency or department, or any court of competent jurisdiction ("Findings"), then Section 7.1.2 and/or 7.1.3 and the Base Management Fee and Additional Management Fee shall be replaced, effective immediately and retroactive tot he date of this Agreement, by a fixed annual Management Fee, payable in equal monthly installments ("Alternate Management Fee") on or before the 15th business day of each month. Said Alternate Management Fee shall be an amount mutually agreed upon, within thirty (30) day's time from the Findings, between Management Company and Providers; however, pending such agreement, the Alternate Management Fee shall be $96,700 per annum. In the event of a Finding which causes the Alternate Management Fee to become operative, the parties shall, within sixty (60) days of the Finding, account for all payments made prior to the date of the Finding, and recalculate such amounts pursuant to the formula provided for in the Alternate Management Fee. Any overpayment to Management Company resulting from the prior application of Sections 7.1.2 and/or 7.1.3 shall be applied so as to satisfy 50% of each future monthly Alternate Management Fee until the aggregate of such overpayment is fully paid by Management Company. Any underpayment to Management Company resulting from the prior application of Sections 7.1.2 and/or 7.1.3 shall be paid to Management Company commencing on the first day of the next full month following the date of the Finding, in eighteen (18) equally monthly installments. 7.1.5 The right of termination provided for in Section 9.1.3 of this Agreement, if based on the fact that Section 7.1.2 and Section 7.1.3 of this Agreement have been found to be illegal, unenforceable, void, against public policy or forbidden by law, shall only be exercisable in the event that both (i) Sections 7.1.2 and 7.1.3 and (ii) the Alternate Management Fee have been so found by a local, state or federal agency or department, or a court of competent jurisdiction. 7.2 MONTHLY NET INCOME. 7.2.1 On or before the 15th business day of each month, Management Company shall calculate the Receivables arising during the previous calendar month. Subject to the terms and conditions of this Agreement, PA and Midwest hereby sell and assign to Management Company as absolute owner, and Management Company hereby agrees to purchase from PA and Midwest all such Receivables following their calculation by Management Company as above. All Receivables are sold on a full recourse basis. PA and Midwest shall cooperate with Management Company and execute all necessary documents in connection with the purchase and assignment of such Receivables to Management Company or at Management Company's option, to its lenders. All collections in respect of such Receivables shall be deposited in a bank account at a bank designated by Management Company. To the extent PA or Midwest comes into possession of any payments in respect of such Receivables, PA and Midwest shall direct such payments to Management Company for deposit in bank accounts designated by Management Company. 7.2.2 Each month during the term of the Agreement, in consideration for Providers' transfer and sale of the previous calendar month's Receivables to Management Company in accordance with Section 7.2.1, Management Company shall pay to PA the sum of the Receivables for the previous calendar month, less Compensation due Management Company for the previous calendar month calculated in accordance with Section 7.1 ("Monthly Net Income") on the first and third Friday of each calendar month, with the first payment of each month to equal $7,500 and the second payment of each month to equal Monthly Net Income for the previous calendar month less $7,500. For the month of May 1999 only, both payments shall equal $7,500. 7.3 PRIOR DEBT AND COVENANT BY PHYSICIAN. PA and Management Company acknowledge and agree that effective as the date hereof PA is indebted to Management Company in the amount set forth on Exhibit 7.3(A) ("PA Debt") as a result of the Former Agreements. Management Company acknowledges that it has no right to payment of PA Debt from Midwest. PA hereby covenants and represents that the obligation for payment of the PA Debt is PA's. PA and Management Company agree that the PA Debt will be evidenced by a note (the "Note") in the form attached hereto as Exhibit 7.3(B). 7.3.1 On the anniversary date of this Agreement during the term of the Agreement, Management Company will deduct $166,953.60 from the PA Debt. This provision shall survive the termination of this Agreement if Dr. Grimes continues to provide Infertility Services at the Facilities. 7.3.2 In the event this Agreement terminates for any reason prior to the satisfaction of the Note and Dr. Grimes no longer provides Infertility Services at the Facilities, PA agrees to pay the unpaid balance of the Note within 90 days of the termination. ARTICLE 8 EXCLUSIVE MANAGEMENT RIGHT AND TERM 8.1 In consideration of the considerable investment of time and resources in PA and Midwest expected by Management Company, PA and Midwest grant to Management Company the exclusive right to manage PA and Midwest during the term of this Agreement (the "Exclusive Management Right"). 8.2 The term of this Agreement shall begin May 1, 1999 (the "Effective Date") and shall expire May 1, 2004 (the "Term") unless earlier terminated pursuant to Article 9, below. This Agreement may be renewed by either party, if within the period of 180 days prior to the expiration date one party gives notice to the other of its intention to continue this Agreement under the same terms and conditions as set forth herein or under such different terms and conditions as particularly set forth in the written notice and further providing that the other party has 30 days from the date of notice to accept, reject or modify the offer. If within 30 days, the other party does not respond or by written notice accepts, this Agreement shall continue for an additional 10 years under the terms and conditions as provided in the notice. 8.3 PA and Midwest acknowledge and agree that they have been advised by Management Company, that Management Company is currently negotiating with other parties, the names of which have been disclosed to them, that may result in such other parties utilizing and having access to the Facilities. Although Management Company has not finalized such negotiations, PA and Midwest understand that the results of such negotiations may impact this Agreement. Management Company intends to continue with such negotiations and will use its best efforts to preserve the economic benefits anticipated by PA and Midwest hereunder. ARTICLE 9 TERMINATION OF THE AGREEMENT 9.1 TERMINATION Either party in the event of the following may terminate this Agreement: 9.1.1 Insolvency. If a receiver, liquidator or trustee of any party shall be appointed by court order, or a petition to reorganize shall be filed against any party under any bankruptcy, reorganization, or insolvency law, and shall not be dismissed within 90 days, or any party shall file a voluntary petition in bankruptcy or make assignment for the benefit of creditors, then either Management Company or Providers may terminate this Agreement upon 10 days prior written notice to the other parties. 9.1.2 MATERIAL BREACH. If either party shall materially breach its obligations hereunder, then the other party may terminate this Agreement by providing 30 days prior written notice to the breaching party detailing the nature of the breach and providing the breaching party with the opportunity to cure the breach. If the breach is not cured within such 30-day period, this Agreement shall terminate, provided that if the breach is not curable within such 30-day period and the breaching party is making diligent efforts to cure the breach during such 30-day period, this Agreement shall not terminate. If after the exercise of diligent efforts, the breaching party shall be unable to cure the breach within 60 days from the notice of breach from the non-breaching party, the non-breaching party in its sole discretion may extend the time in which to cure the breach, upon request of the breaching party. In the event the non-breaching party does not extend the time in which to cue the breach, this Agreement will terminate at the expiration of 60 days from the original notice of breach from the non-breaching party. 9.1.3 ILLEGALITY. Any party may terminate this Agreement immediately upon receipt of notification by any local, state, or federal agency or court of competent jurisdiction that the conduct contemplated by this Agreement is forbidden by law; except that this Agreement shall not terminate during such period of time as to any party which contests such notification in good faith and the conduct contemplated by this Agreement is allowed to continue during such contest. If any governing regulatory agency asserts that the services provided by Management Company under this Agreement are unlawful or that the practice of medicine by PA as contemplated by this Agreement requires a certificate of need, and any such assertion is not contested (or if contested, the agency's assertion is found to be correct by a court of competent jurisdiction and no appeal is taken, or if any appeals are taken and the same are unsuccessful), this Agreement shall thereupon terminate with the same force as if such termination date was the date originally specified in this Agreement as the date of final expiration of the terms of this Agreement. 9.2 TERMINATION BY MANAGEMENT COMPANY This Agreement may be terminated by Management Company for the following reasons: 9.2.1 FOR PROFESSIONAL DISCIPLINARY ACTIONS. PA shall be obligated to suspend a Physician-Employee whose license to practice medicine in Missouri is suspended, revoked, or not renewed. Management Company may terminate this Agreement upon 10 days prior written notice to PA if a Physician-Employee's license to practice medicine is suspended, revoked, or not renewed and PA has failed to suspend such Physician-Employee; provided, however, such action may not be taken until PA has been given 30 days to resolve such physician's authorization to practice medicine in Missouri. PA shall notify Management Company within five (5) days of a notice that a Physician-Employee's license to practice medicine in Missouri is suspended, revoked, or not renewed or that formal disciplinary action has been taken against a physician which could reasonably lead to a suspension, revocation, or non-renewal of a physician's license. 9.3 TERMINATION BY PA OR MIDWEST. PA or Midwest may terminate this Agreement in the event that a Physician-Employee who is also a shareholder in PA and Midwest, and is the only Physician-Employee, dies or becomes disabled. 9.4 TERMINATION WITHOUT CAUSE. Either party may terminate this Agreement without cause by notifying the other party in writing 90 days before the effective date of the termination. ARTICLE 10 PURCHASE OF ASSETS - OBLIGATIONS AND OPTIONS 10.1 TERMINATION BY MANAGEMENT COMPANY. If Management Company terminates this Agreement due to the insolvency of PA or Midwest (Section 9.1.1), for a material breach by PA or Midwest (Section 9.1.2), or PA fails to suspend a Physician-Employee whose license is suspended, revoked or not renewed (Section 9.2.1), PA and/or Midwest agree, within 90 days of the date of termination of this Agreement, at Management Company's option, to purchase from Management Company the Assets as more fully set forth in Sections 10.1.1 and 10.1.3 below if there is no Co-Occupant. 10.1.1 The purchase price of the Assets will be the net book value determined in accordance with GAAP, consistently applied, as at the date of the termination. 10.1.2 In addition to purchasing the Assets, PA shall satisfy any remaining obligations under the Note. 10.1.3 If a purchase is completed under Section 10.1, PA shall assume all leases for offices and equipment used directly for the management and operation of Providers' businesses and may hire such employees from Management Company as Providers chose. In such event, PA shall be obligated to indemnify Management Company for any and all severance or termination obligations to Management Company employees utilized directly in providing Management Services whom are not subsequently hired by PA or Midwest. 10.2 TERMINATION BY PA. In the event PA terminates this Agreement as a result of the insolvency of Management Company (9.1.1) or material breach by Management Company (9.1.2), PA's obligations under the Note shall continue to be satisfied in accordance with the Note. ARTICLE 11 INSURANCE 11.1 Management Company shall use its best efforts to cause PA to be made an additional insured under Management Company's professional liability coverage; provided, however, conditions for being made an additional insured shall be (i) PA utilizing patient informed consent forms supplied by Management Company, provided such forms are consistent with law and any guidelines issued by the American Society of Reproductive Medicine and (ii) PA complying with requirements of Management Company's insurance company. Management Company shall also carry a policy of public liability and property damage insurance with respect to the Facilities under which the insurer agrees to indemnify Management Company and PA against all cost, expense and/or liability arising out of or based upon any and all claims, accidents, injuries and damages customarily included within the coverage of such policies of insurance available for Management Company. The minimum limits of liability of such insurance shall be $1 million combined single limit covering bodily injury and property damage. Certificates of Insurance evidencing such policies and additional insured status shall be presented to PA within thirty (30) days after such coverage is effected. 11.2 In the event Management Company is unable to cause PA to be made an additional insured under Management Company's professional liability coverage, PA shall procure and maintain throughout the Term of this Agreement, professional liability insurance covering itself and its employees providing Infertility Services pursuant to this Agreement in the minimum amount of $1 million per incident, $3 million in the aggregate. If possible under the terms of such coverage, PA shall use its best efforts to cause Management Company to be named an additional insured. Evidence of such coverage shall be presented to Management Company within 30 days of the execution of this Agreement. 11.3 PA and Management Company shall provide written notice to the other at least thirty (30) days in advance of the effective date of any reduction, cancellation or termination of the insurance required to be carried by each hereunder. ARTICLE 12 MISCELLANEOUS 12.1 INDEPENDENT CONTRACTOR. Management Company, PA and Midwest are independent contracting parties. In this regard, the parties agree that: 12.1.1 The relationship between Management Company, and PA and Midwest is that of an independent supplier of non-medical services and a medical practice and provider of laboratory services, respectively, and, unless otherwise provided herein, nothing in this Agreement shall be construed to create a principal-agent, employer-employee, or master-servant relationship between Management Company and PA and Midwest; 12.1.2 Notwithstanding the authority granted to Management Company herein, Management Company and PA agree that PA shall retain the full authority to direct all of the medical, professional, and ethical aspects of its medical practices; 12.1.3 Any powers of Providers not specifically vested in Management Company by the terms of this Agreement shall remain with Providers; 12.1.4 PA shall, at all times, employ the (i) Physician-Employees, and (ii) Other Professional Employees required by law to be employees of PA. The parties shall be solely responsible for the payment of all applicable federal, state, or local withholding or similar taxes and provision of workers' compensation and disability insurance for their respective employees; 12.1.5 No party shall have the right to participate in any benefits, employment programs or plans sponsored by the other party on behalf of the other party's employees, including, but not limited to, workers' compensation, unemployment insurance, tax withholding, health insurance, life insurance, pension plans, or any profit sharing arrangement; 12.1.6 In no event shall any party be liable for the debts or obligations of any other party except as otherwise specifically provided in this Agreement; and 12.1.7 Matters involving the internal agreements and finances of Providers, including but not limited to the distribution of professional fee income among Physician-Employees and, if applicable, Other Professional Employees who are providing professional services to patients of Providers, and other employees of Providers, disposition of Providers property and stock, accounting, tax preparation, tax planning, and pension and investment planning (and expenses relating solely to these internal business matters), hiring and firing of Physician-Employees, decisions and contents of reports to regulatory authorities governing Providers and licensing, shall remain the sole responsibility of Providers and the individual Physician-Employees who are Shareholders of Providers, except with respect to the number of Physician-Employees the Providers hire which will be based upon recommendations of the Joint Practices Management Board. 12.2 FORCE MAJEURE. No party shall be liable to the other parties for failure to perform any of the services required under this Agreement in the event of a strike, lockout, calamity, act of God, unavailability of supplies, or other event over which such party has no control, for so long as such event continues and for a reasonable period of time thereafter, and in no event shall such party be liable for consequential, indirect, incidental or like damages caused thereby. 12.3 EQUITABLE RELIEF. Without limiting other possible remedies available to a non-breaching party for the breach of the covenants contained herein, including the right of Management Company to cause PA to enforce any and all provisions of the Physician Employment Agreements described in Section 4.3 hereof, injunctive or other equitable relief shall be available to enforce those covenants, such relief to be without the necessity of posting bond, cash or otherwise. If any restriction contained in said covenants is held by any court to be unenforceable or unreasonable, a lesser restriction shall be enforced in its place and remaining restrictions therein shall be enforced independently of each other. 12.4 PRIOR AGREEMENTS; AMENDMENTS. This Agreement supersedes all prior agreements and understandings, including the Former Agreements, between the parties as to the subject matter covered hereunder, and this Agreement may not be amended, altered, changed or terminated orally. No amendment, alteration, change or attempted waiver of any of the provisions hereof shall be binding without the written consent of all parties, and such amendment, alteration, change, termination or waiver shall in no way affect the other terms and conditions of this Agreement, which in all other respects shall remain in full force. 12.5 ASSIGNMENT; BINDING EFFECT. This Agreement and the rights and obligations hereunder may not be assigned without the prior written consent of all of the parties, and any attempted assignment without such consent shall be void and of no force and effect, except that Management Company may assign this Agreement to any affiliate, which for purposes of this Agreement, shall include any parent or subsidiary of Management Company, without the consent of PA. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties' respective heirs, legal representatives, successors and permitted assigns. 12.6 WAIVER OF BREACH. The failure to insist upon strict compliance with any of the terms, covenants or conditions herein shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any right at any one or more times be deemed a waiver or relinquishment of such right at any other time or times. 12.7 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, irrespective of the principal place of business of the parties hereto. Any and all claims, disputes, or controversies arising under, out of, or in connection with this Agreement or any breach thereof, except for equitable relief sought pursuant to Section 6.4 or Section 12.3 hereof, shall be determined by binding arbitration in the State of Missouri, City of Kansas City (hereinafter "Arbitration"). The party seeking determination shall subject any such dispute, claim or controversy to either (i) JAMS/Endispute or (ii) the American Arbitration Association, and the rules of commercial arbitration of the selected entity shall govern. The Arbitration shall be conducted and decided by three (3) arbitrators, unless the parties mutually agree, in writing at the time of the Arbitration, to fewer arbitrators. In reaching a decision, the arbitrators shall have no authority to change or modify any provision of this Agreement, including any liquidated damages provision. Each party shall bear its own expenses and one-half the expenses and costs of the arbitrators. Any application to compel Arbitration, confirm or vacate an arbitral award or otherwise enforce this Paragraph shall be brought in the Courts of the State of Missouri or the United States District Court for the District of Missouri, to whose jurisdiction for such purposes PA and Management Company hereby irrevocably consent and submit. 12.8 SEPARABILITY. If any portion of the provisions hereof shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such portion or provisions in circumstances other than those in which it is held invalid or unenforceable, shall not be affected thereby, and each portion or provision of this Agreement shall be valid and enforced to the fullest extent permitted by law, but only to the extent the same continues to reflect fairly the intent and understanding of the parties expressed by this Agreement taken as a whole. 12.9 HEADINGS. Section and paragraph headings are not part of this Agreement and are included solely for convenience and are not intended to be full or accurate descriptions of the contents thereof. 12.10 NOTICES. Any notice or other communication required by or which may be given pursuant to this Agreement shall be in writing and mailed, certified or registered mail, postage prepaid, return receipt requested, or overnight delivery service, such as FedEx or Airborne Express, prepaid, and shall be deemed given when postmarked or when placed with any such delivery service. Any such notice or communication shall be sent to the address set forth below: 12.10.1 If for Management Company: Gerardo Canet, President IntegraMed America, Inc. One Manhattanville Road Purchase, New York 10577 With copies to: Claude E. White, Esq. General Counsel IntegraMed America Inc. One Manhattanville Road Purchase, New York 10577 12.10.2 If for PA: Elwyn M. Grimes, MD, President Reproductive Endocrine & Fertility Consultants, P.A. Two Brush Creek Suite 500 Kansas City, Missouri 64112 With copies to: Douglas M. Salaway, Esq. Polsinelli, White, Vardeman & Shalton, P.C. West 47th Street, Suite 1000 Kansas City, Missouri 64112 12.10.3 If for Midwest: Elwyn M. Grimes, MD, President Midwest Fertility Foundations & Laboratory, Inc. Two Brush Creek Suite 500 Kansas City, Missouri 64112 With copies to: Douglas M. Salaway, Esq. Polsinelli, White, Vardeman & Shalton, P.C. West 47th Street, Suite 1000 Kansas City, Missouri 64112 Any party hereto, by like notice to the other parties, may designate such other address or addresses to which notice must be sent. 12.11 ENTIRE AGREEMENT. This Agreement and all attachments hereto represent the entire understanding of the parties hereto with respect to the subject matter hereof and thereof, and cancel and supersede all prior agreements and understandings among the parties hereto, whether oral or written, with respect to such subject matter. 12.12 NO MEDICAL PRACTICE BY MANAGEMENT COMPANY. Management Company will not engage in any activity that constitutes the practice of medicine, and nothing contained in this Agreement is intended to authorize Management Company to engage in the practice of medicine or any other licensed profession. 12.13 CONFIDENTIAL INFORMATION. 12.13.1 During the initial term and any renewal term(s) of this Agreement, the parties may have access to or become acquainted with each other's trade secrets and other confidential or proprietary knowledge or information concerning the conduct and details of each party's business ("Confidential Information"). At all times during and after the termination of this Agreement, no party shall directly or indirectly, communicate, disclose, divulge, publish or otherwise express to any individual or governmental or non-governmental entity or authority (individually and collectively referred to as "Person") or use for its own benefit, except in connection with the performance or enforcement of this Agreement, or the benefit of any Person any Confidential Information, no matter how or when acquired, of another party. Each party shall cause each of its employees to be advised of the Confidential nature of such Confidential Information and to agree to abide by the confidentiality terms of this Agreement. No party shall photocopy or otherwise duplicate any Confidential Information of another party without the prior express written consent of the such other party except as is required to perform services under this Agreement. All such Confidential Information shall remain the exclusive property of the proprietor and shall be returned to the proprietor immediately upon any termination of this Agreement. 12.13.2 Confidential Information shall not include information which (i) is or becomes known through no fault of a party hereto; (ii) is learned by a party from a third-party legally entitled to disclose such information; or (iii) was already known to a party at the time of disclosure by the disclosing party. 12.13.3 In order to minimize any misunderstanding regarding what information is considered to be Confidential Information, Management Company or Providers will designate at each other's request the specific information which Management Company or Providers considers to be Confidential Information. 12.14 INDEMNIFICATION. 12.14.1 Management Company agrees to indemnify and hold harmless PA, its, shareholders, directors, officers, employees and servants from any suits, claims, actions, losses, liabilities or expenses (including reasonable attorney's fees) arising out of or in connection with any act or failure to act by Management Company related to the performance of its duties and responsibilities under this Agreement. The obligations contained in this Section 12.14.1 shall survive termination of this Agreement. 12.14.2 PA agrees to indemnify and hold harmless Management Company, its shareholders, directors, officers, employees and servants from any suits, claims, actions, losses, liabilities or expenses (including reasonable attorney's fees) arising out of or in connection with any act or failure to act by PA related to the performance of its duties and responsibilities under this Agreement. The obligations contained in this Section 12.14.2 shall survive termination of this Agreement. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written. INTEGRAMED AMERICA, INC. By: /s/Donald S. Wood --------------------------------------------- DONALD S. WOOD, PH.D., SENIOR VICE PRESIDENT & CHIEF OPERATING OFFICER REPRODUCTIVE ENDOCRINE & FERTILITY CONSULTANTS, P.A. BY: /s/Elwyn M. Grimes --------------------------------------------- ELWYN M. GRIMES, MD, PRESIDENT MIDWEST FERTILITY FOUNDATIONS & LABORATORY, INC. BY:/s/Elwyn M. Grimes ---------------------------------------------- ELWYN M. GRIMES, MD, PRESIDENT EXHIBIT 3.2 OFFICE AND FACILITIES TO BE PROVIDED BY MANAGEMENT COMPANY TO PA AND LAB Two Brush Creek, Suite 500, Kansas City, Missouri 64112 EXHIBIT 7.4(A) PA DEBT (AS OF DECEMBER 31, 1998) $ 923,101 Advances balance as of December 31, 1998 175,000 Note Balance at December 31, 1998 ($250,000 Original Amount) -------- $ 1,098,101 Balance Due IntegraMed America Inc. as of December 31, 1998 263,333 Unpaid Right to Manage Fees ========= $ 834,768 Balance of PA Debt owed to IntegraMed America Inc. EXHIBIT 7.4 (B) PROMISSORY NOTE [See attached] EX-10.61(B) 3 INTEGRAMED AMERICA, INC. AMENDMENT NO. 2 TO MANAGEMENT AGREEMENT BETWEEN INTEGRAMED AMERICA, INC. AND BAY AREA FERTILITY AND GYNECOLOGY MEDICAL GROUP, INC. THIS AMENDMENT NO. 2 TO MANAGEMENT AGREEMENT ("Amendment No. 2"), dated July 21, 1998 by and between IntegraMed America, Inc., a Delaware corporation, with its principal place of business at One Manhattanville Road, Purchase, New York 10577 ("INMD") and Bay Area Fertility and Gynecology Medical Group, Inc., a California professional medical corporation, with its principal place of business at 5601 Norris Canyon Road, Suite 300, San Ramon, California 94583 ("PC"). RECITALS: WHEREAS, INMD and PC entered into a Management Agreement dated January 7, 1997 (the "Management Agreement"), as amended by Amendment No. 1 to theManagement Agreement dated April 5, 1998; and WHEREAS, INMD and PC wish to amend the Management Agreement, in pertinent part to clarify what the Base Management Fee, as defined in the Management Agreement, includes; and WHEREAS, INMD and PC wish to amend the Management Agreement to provide for joint responsibilities and duties under the Management Agreement. NOW THEREFORE, in consideration of the mutual promises and covenants herein contained, and as contained in the Management Agreement, as amended, INMD and PC agree as follows: 1. Section 3.3.1 of the Management Agreement is hereby deleted in its entirety and the following hereby substituted therefor: "3.3.1 Executive Director. Subject to the approval of the Joint Practice Management Board, INMD shall hire and appoint an Executive Director or other individual with similar responsibilities to manage and administer all the day-to-day business functions of the Facilities and shall determine the salary and fringe benefits paid to such person. At the direction, supervision and control of INMD, such person, subject to the terms of this Agreement, shall perform the administrative duties assigned by INMD and implement the policies agreed to by the Joint Practice Management Board." 2. Section 6.1.2 of the Managment Agreement is hereby deleted in its entirety and the following hereby substituted therefor, effective January 7, 1997: "6.1.2 during each year of this Agreement, a Base Management Fee, which includes a licensing fee for use of the names REPRODUCTIVE SCIENCE CENTER and BAY AREA FERTILITY, in an amount equal to six percent (6%) of the Revenues." 3. The Management Agreement is hereby amended to add the following Article: "Article 12 JOINT DUTIES AND RESPONSIBILITIES 12.1 FORMATION AND OPERATION OF JOINT PRACTICE MANAGEMENT BOARD. INMD and PC will establish a Joint Practice Management Board which will be responsible for developing management and administrative policies for the overall operation of PC. The Joint Practice Management Board will consist of designated management representative(s) from INMD, one or more PC owners, as determined by PC, such other practice physicians, as appropriate and the Executive Directors. In the case of any matter requiring a formal vote, PC shall have one (1) vote and INMD shall likewise have one (1) vote.. 12.2 DUTIES AND RESPONSIBILITIES OF THE JOINT PRACTICE MANAGEMENT BOARD. The Joint Practice Management Board shall have the following duties and responsibilities: 12.2.1 ANNUAL BUDGETS. All annual capital and operation budgets prepared by INMD shall be subject to the review, amendment, approval and disapproval of the Joint Practice Management Board. 12.2.2 CAPITAL IMPROVEMENTS AND EXPANSION. Except as otherwise provided herein, any renovation and expansion plans, and capital equipment expenditures with respect to PC shall be reviewed and approved by the Joint Practice Management Board and shall be based upon the best interests of PC, and shall take into account capital priorities, economic feasibility, physician support, productivity and then current market and regulatory conditions. 12.2.3 ADVERTISING BUDGET. All annual advertising and other marketing budgets prepared by INMD shall be subject to the review, amendment, approval and disapproval of the Joint Practice Management Board. 12.2.4 PATIENT FEES. The Joint Practice Management Board shall review and approve the fee schedule for all physician and ancillary services rendered by PC. 12.2.5 ANCILLARY SERVICES. The Joint Practice Management Board shall approve ancillary services rendered by PC. 12.2.6 PROVIDER AND PAYER RELATIONSHIPS. Decisions regarding the establishment or maintenance of relationship with institutional health care providers and payers shall be made by the Joint Practice Management Board in consultation with PC; provided, however, that unanimous consent of PC designated members of the Joint Practice Management Board shall be necessary to discontinue any existing PC institutional relationship. 12.2.7 STRATEGIC PLANNING. The Joint Practice Management Board shall develop long-term strategic plans, from time to time. 12.2.8 PHYSICIAN HIRING. The Joint Practice Management Board shall determine, except as otherwise provided for herein, the number and type of physicians required for the efficient operation of PC. The approval of the Joint Practice Management Board shall be required for any modifications to the restrictive covenants contained in any physician agreement. 12.2.9 PROVIDER CONTRACTS. The Joint Practice Management Board shall approve, disapprove, or amend all managed care, PPO, HMO, Medicare risk and other provider contracts negotiated by INMD. 4. All other provisions of the Management Agreement, as amended, not in conflict with this Amendment No. 2 remain in full force and effect. IN WITNESS WHEREOF, the parties have signed this Amendment No. 2 as the date first written above. INTEGRAMED AMERICA, INC. By: /s/Gerardo Canet ---------------------------- Gerardo Canet, President BAY AREA FERTILITY AND GYNECOLOGY MEDICAL GROUP, INC. By: /s/Arnold Jacobson, M.D. ---------------------------------- Arnold Jacobson, M.D., President EX-10.114 4 INTEGRAMED AMERICA, INC. Among INTEGRAMED PHARMACEUTICAL SERVICES, INC., IVP PHARMACEUTICAL CARE, INC., And INTEGRAMED AMERICA, INC. THIS MANAGEMENT AGREEMENT ("Agreement"), dated effective as of April 21, 1999 (the "Effective Date"), is made and entered into by and among IntegraMed Pharmaceutical Services, Inc., a Texas corporation with its principal place of business at 2833 Trinity Square Drive, Suite 170, Carrollton, Texas 75006 ("IPSI"), IVP Pharmaceutical Care, Inc., a Texas corporation with its principal place of business at 2833 Trinity Square Drive, Suite 105, Carrollton, Texas 75006 ("IVP"), and IntegraMed America, Inc., a Delaware corporation with its principal place of business at One Manhattanville Road, Purchase, New York 10577 ("IntegraMed"). RECITALS 0.1 WHEREAS, IVP is a licenced pharmacy specializing in dispensing ingestable, injectable, and infusion drugs, pharmaceuticals, and products related to the treatment of human infertility, pursuant to the prescription of a duly licensed and authorized physician ("Pharmaceutical Products"), to end-user patients ("Customers"); 0.2 WHEREAS, IntegraMed has developed, and may develop in the future, relationships with certain Reproductive Science Centers in the United States and the infertility medical practices associated therewith, as set forth on Exhibit 0.2 attached hereto, as may be amended from time to time (such existing and any future Reproductive Science Centers and associated infertility medical practices shall hereinafter be referred to collectively as the "Medical Practices"); 0.3 WHEREAS, IPSI is a for-profit corporation formed by IntegraMed to be engaged in the retail distribution of Pharmaceutical Products to Customers of the Medical Practices ("Pharmaceutical Services"); 0.4 WHEREAS, IntegraMed owns all of the outstanding capital stock of IPSI and has agreed to provide advertising, promotional, and marketing services to IPSI under the terms and conditions set forth herein (the "Marketing Services"); 0.6 WHEREAS, IntegraMed desires to cause IPSI to engage IVP to provide such management, administrative, business, and pharmacy services as are necessary and appropriate for the conduct and day-to-day administration of IPSI'S Pharmaceutical Services (the "Management Services"); and 0.7 WHEREAS, IVP has agreed to be retained by IPSI to perform the Management Services, under the terms and conditions set forth herein; 0.8 NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and obligations set forth herein, and for such other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby covenant and agree as follows: ARTICLE 1 DEFINITIONS 1.1 DEFINITIONS. For the purposes of this Agreement, the following definitions shall apply: 1.1.1 "Cost of Operations" shall mean a monthly fee paid by IPSI to IVP on the first day of each month for the items described in Section 2.1 below. Cost of Operations shall equal that percentage of the Net Revenues of IPSI realized or accrued during the immediately preceding month as set forth on Exhibit 1.1.1 attached hereto, as may be amended from time to time. 1.1.2 "Cost of Pharmaceutical Products" shall mean the cost of Pharmaceutical Products sold on behalf of IPSI to Customers of Medical Practices and shall equal IVP's wholesale cost for such Pharmaceutical Products, as set forth on Exhibit 1.1.2 attached hereto, as may be amended from time to time. 1.1.3 "Collections" shall mean all payments actually received by or on behalf of IPSI from the distribution of Pharmaceutical Products and the provision of Pharmaceutical Services. 1.1.4 "Cycle Kit" shall mean the packaging format and patient education materials that IVP supplies to Customers under the tradename "Cycle Kit(TM)." 1.1.5 "Dedicated Assets" shall mean those fixed assets, including equipment, furniture, and systems, purchased by IPSI and dedicated exclusively to the provision of Pharmaceutical Services by or on behalf of IPSI. 1.1.6 "Direct Costs" shall mean the cost of outside accountants and attorneys who provide services directly to IPSI. 1.1.7 "Employees" shall mean such accounting, nursing, pharmacy, secretarial, receptionist, and billing and collections personnel necessary for IPSI to provide Pharmaceutical Services. Such Employees may be employees exclusively of IPSI, exclusively of IVP, or may be independent contractors or leased employees. 1.1.8 "Facilities" shall initially mean the office and space, including furniture and fixtures, situated initially at 2833 Trinity Square Drive, Suite 170, Carrollton, Texas 75006, or such additional facilities determined by the JOB to be necessary to conduct the Pharmaceutical Services. 1.1.9 "Fiscal Year" shall mean the 12-month period beginning January 1 and ending December 31 of each year. 1.1.10 "GAAP" shall mean generally accepted accounting principles applied to public companies in the United States. 1.1.11 "JOB" shall mean the Joint Operating Board described in Section 5.1 below. 1.1.12 "Just-in-time basis" shall mean that Pharmaceutical Products shall be delivered to IPSI at a point in time contemporaneous with the time for distribution by IPSI to Customers; provided, however, a minimal inventory, not to exceed the dollar amount set forth on Exhibit 1.1.12 attached hereto, as may be amended from time to time, may be maintained at the Facilities at all times during the Term of this Agreement (as defined in Section 8.2 below). 1.1.13 "month" shall mean a calendar month. 1.1.14 "Net Revenues" shall mean gross revenues that are earned and recorded in accordance with GAAP less contractual sales discounts. ARTICLE 2 COST OF OPERATIONS AND ADDITIONAL MANAGEMENT FEE 2.1 OPERATIONS. Operations shall include, and Costs of Operations shall reimburse, cover, and fully compensate IVP for, the following costs and expenses, which shall be paid on behalf of IPSI to IVP: 2.1.1 Salaries, fringe benefits, payroll taxes, and other costs of employing or retaining Employees. 2.1.2 Expenses incurred in the recruitment of Employees for IPSI, including, but not limited to employment agency fees, relocation and interviewing expenses, and any actual out-of-pocket expenses of IVP personnel in connection with such recruitment effort; 2.1.3 Any sales and use taxes assessed against IVP related to the operation of IPSI'S business; 2.1.4 Lease payments, depreciation expense (determined in accordance with GAAP), interest, and property taxes directly relating to the Facilities and equipment, utilities, waste removal, and all other expenses of the Facilities described in Section 3.2 below; 2.1.5 Professional and regulatory licensure fees; 2.1.6 Insurance premiums that are paid with respect to the insurance delineated in Article 11 below. 2.1.7 Such other costs and expenses actually incurred by IVP reasonably necessary for the provision of the Management Services under this Agreement. 2.2 Notwithstanding anything to the contrary contained herein, Cost of Operations shall not include the following: 2.2.1 Direct Costs; 2.2.2 The Additional Management Fee; 2.2.3 Any federal or state income or franchise taxes of IPSI or IVP; or 2.2.4 Cost of Pharmaceutical Products. ARTICLE 3 DUTIES AND RESPONSIBILITIES OF IVP 3.1 MANAGEMENT SERVICES AND ADMINISTRATION. IVP agrees to provide the Management Services provided for in this Section 3.1, all of which shall be covered by and included in the Cost of Operations and the Additional Management Fee, if any. 3.1.1 IPSI hereby appoints IVP as IPSI'S sole and exclusive manager and administrator of all of its day-to-day operations and business functions and grants IVP all the necessary authority to carry out its duties and responsibilities pursuant to the terms of this Agreement. 3.1.2 IVP shall, on behalf of IPSI, bill patients and collect fees for Pharmaceutical Products supplied to Customers of the Medical Practices. IPSI hereby appoints IVP during the Term of this Agreement to be its true and lawful attorney-in-fact, for the following purposes: (a) to bill patients in IPSI'S name and on its behalf; (b) to collect accounts receivable resulting from such billing in IPSI'S name and on its behalf; (c) to receive payments from insurance companies, prepayments received from health care plans, and all other third-party payors; (d) to open in the name of IPSI such savings, checking, and other accounts at such financial institutions as IVP deems appropriate; (e) to take possession of and endorse in the name of IPSI any notes, checks, money orders, and other instruments received in payment of accounts receivable; and (f) with the consent of IPSI, not to be unreasonably withheld, to initiate the institution of legal proceedings in the name of IPSI, to collect any accounts and monies owed to IPSI, to enforce the rights of IPSI as creditor under any contract or in connection with the rendering of any service, and to contest adjustments and denials by governmental agencies (or its fiscal intermediaries) as third-party payors. 3.1.3 IVP shall supervise and maintain (on behalf of IPSI) all files and records relating to the operations of the Facilities, including, but not limited to, accounting and billing records, prescription records, and collection records. Prescription records shall at all times be and remain the property of IVP and shall be located at the Facilities and be readily accessible to IPSI. IVP's management of all files and records shall comply with all applicable state and federal laws and regulations, including, without limitation, those pertaining to confidentiality of patient records. The records relating to patients shall be expressly deemed confidential and shall not be made available to any third party except in compliance with all applicable laws, rules, and regulations. IVP may utilize such records in order to provide the services hereunder, to perform billing functions, and to prepare for the defense of any lawsuit in which those records may be relevant. The obligation to maintain the confidentiality of such records shall survive termination of this Agreement. IPSI shall have unrestricted access to all of such records at all times. 3.1.4 IVP shall supply to IPSI all reasonably necessary management, administrative, supervisory, nursing, pharmacy, clerical, accounting and bookkeeping Employees necessary to provide, and IVP shall provide, quality and competent pharmacy services to Customers of IPSI. IVP shall provide such computer services, printing, postage and duplication services, and any other necessary or appropriate administrative services reasonably necessary for the operation of IPSI'S Pharmaceutical Services. IVP shall have the responsibility for hiring, supervising, promoting, reprimanding, suspending, and/or reinstating and terminating all Employees consistent with IVP's policies and procedures applicable to IVP's own employees. 3.1.5 IVP shall arrange for such legal and accounting services as may be reasonably required in the ordinary course of the IPSI'S operation; provided, however, that IVP shall have no authority to arrange for any legal or accounting services to the extent that the interests of IVP and IPSI in the matter in question shall be adverse. IVP will provide IPSI with all bookkeeping services necessary to support IPSI'S Pharmaceutical Services, including, without limitation, maintenance, custody, and supervision of all business records, papers, documents, ledgers, journals and reports, and the preparation, distribution, and recordation of all bills and statements for services rendered by IPSI, including the billing and completion of reports and forms required by insurance companies, governmental agencies, or other third-party payors. 3.1.6 IVP shall open appropriate bank accounts in the name of IPSI and shall deposit the proceeds of all Capitalization Loans and all Collections in such bank accounts and pay Costs of Operations, Costs of Pharmaceutical Products, Direct Costs, the Additional Management Fee, if any, taxes, the repayment of Capitalization Loans, and the distribution of Net Profits from such bank accounts. 3.1.7 In connection with any Pharmaceutical Products sold to IPSI, IVP shall provide CycleKits and any patient educational materials in the same manner as it provides such to Customers purchasing Pharmaceutical Products directly from IVP. 3.2 FACILITIES. 3.2.1 IVP shall arrange for such Facilities reasonably necessary for the proper operation of IPSI'S Pharmaceutical Services. IVP shall arrange for and ensure that all repairs, maintenance, and improvements thereto, utility (telephone, electric, gas, water) services, customary janitorial services, refuse disposal, and all other services reasonably necessary in conducting the Facilities' physical operations. IVP shall ensure the cleanliness of the Facilities, and timely maintenance and cleanliness of the equipment, furniture, and furnishings located therein. IVP shall consult with IPSI regarding the condition, use, and needs for the Facilities, including equipment, services, and improvements thereto. The Facilities may be rented and/or purchased and may be designated for IPSI'S sole and exclusive use and/or may be shared with IVP or with any person or entity. A description of the initial Facilities are set forth on Exhibit 3.2.1 attached hereto. 3.2.2 In the reasonable judgment of the JOB based on recommendations of IVP, IVP and the IPSI may establish such other or additional Facilities for the operation of the business of IPSI. 3.2.3 IVP (a) shall purchase for its own account at its own cost, and shall maintain in its own inventory, sufficient Pharmaceutical Products as may be necessary from time to time to satisfy IPSI'S Pharmaceutical Services in a timely fashion; (b) shall sell to IPSI, at the Cost of Pharmaceutical Products, only such Pharmaceutical Products as are necessary to fill the orders of Customers of the Medical Practices on a just-in-time basis; and (c) shall distribute such Pharmaceutical Products to Customers of the Medical Practices in accordance with all applicable laws and regulations and as prescribed by physicians associated with the Medical Practices. Cost of Pharmaceutical Products shall be paid by IPSI to IVP under the following schedule: Pharmaceutical Products sold during the first 15 days of a month shall be paid for on the 25th day of such month; Pharmaceutical Products sold during the 16th day through the end of the month shall be paid on the 10th day of the immediately succeeding month. 3.3 FINANCIAL PLANNING AND GOALS. IVP shall prepare an annual capital and operating budget for IPSI reflecting the anticipated revenues and expenses and sources and uses of capital for growth of IPSI'S business at the Facilities. IVP shall present the budget to the JOB for its approval at least 30 days prior to the commencement of the Fiscal Year. If the JOB does not agree on the budget or any aspect thereof for any Fiscal Year, the budget, or portion of the budget in disagreement, for the preceding Fiscal Year shall serve as the budget until such time as a budget is the subject of agreement. 3.4 FlNANCIAL STATEMENTS. 3.4.1 IVP shall arrange for the preparation of, and within 30 days following the end of each Fiscal Year shall present to IPSI, (a) a balance sheet, dated as of the last day of such Fiscal Year; (b) a cash flow statement showing the cash flows for the month and for the entire Fiscal Year then concluded; and (c) a statement showing the income and expenses of IPSI for the month and for the entire Fiscal Year then concluded. At the election of IntegraMed expressed in writing to IVP at least 90 days prior to the end of a Fiscal Year, the financial statements referred to in this Section 3.4 shall be audited by PriceWaterhouseCoopers or other independent certified public account approved by the JOB. IVP's failure to present annual financial statements to IPSI in accordance with this Section 3.4.1 within 45 days following the end of the Fiscal Year shall be deemed a material breach subject to Section 9.1.2 below. 3.4.2 IVP shall prepare, and within six days following the end of each month shall present to IPSI, (a) an unaudited balance sheet, dated as of the last day of such month; (b) a cash flow statement showing the cash flow for the month and for the Fiscal Year to date; and (c) a statement showing the income and expenses of IPSI for such month and for the Fiscal Year to date. 3.5 INVENTORY AND SUPPLIES. IVP shall order and purchase inventory and supplies, other than Pharmaceutical Products governed by Section 3.2.3 of this Agreement, and such other materials that are reasonably requested by IPSI to enable IPSI'S Pharmaceutical Services to be conducted in a cost-effective manner. 3.6 LICENSES AND PERMITS. IVP shall, on behalf of and in the name of IVP or, at the election of IVP, in the name of IPSI, coordinate and maintain all pharmacy and other licenses, permits, and certificates of authority necessary for the conduct of IPSI'S Pharmaceutical Services. ARTICLE 4 DUTIES AND RESPONSIBILITIES OF INTEGRAMED AND IPSI 4.1 USE OF FACILITIES. IntegraMed shall take such reasonable steps as are necessary to cause IPSI to use and occupy, and IPSI shall use and occupy, the Facilities exclusively for the purpose of providing Pharmaceutical Services to Customers of Medical Practices. 4.2 LICENCES AND PERMITS. IntegraMed and IPSI covenant to use diligent efforts to cooperate with IVP in order to obtain necessary licenses, permits, and certificates of authority necessary for IPSI to conduct Pharmaceutical Services. 4.3 PARTICIPATION IN MANAGEMENT. IPSI, while delegating all of the day-to-day operations of its business through this Management Agreement, shall nonetheless actively participate in such management through its participation in the JOB and the presence of its Employees at the Facilities. IntegraMed, as the sole shareholder of IPSI, shall participate in the supervision of IPSI through (a) its election of its representative to the JOB; and (b) its review, supervision, and/or audit of the Management Services provided under this Agreement. IntegraMed hereby agrees that all compensation, expenses, and travel costs for its officers, directors, employees, and consultants, other than Employees, shall be paid by IntegraMed. 4.4 COOPERATION WITH IVP. IPSI and IntegraMed agree that during the Term of this Agreement, they will use their best efforts to cause their officers and employees to execute such documents, agreements, notifications, and consents and take such steps reasonably necessary to assist IVP in conducting its Management Services under this Agreement and in billing and collecting for Pharmaceutical Products sold. 4.5 SALES AND MARKETING. Marketing Services on behalf of IPSI shall be performed exclusively by IntegraMed at its sole cost and expense. IntegraMed shall prepare an annual sales and marketing plan for IPSI detailing its anticipated activities in such regard. IntegraMed shall present the plan to the JOB for its approval at least 45 days prior to the commencement of the Fiscal Year. If the JOB does not agree on the plan or any aspect thereof for any Fiscal Year, the plan, or portion of the plan in disagreement, for the preceding Fiscal Year shall serve as the plan until such time as a plan is the subject of agreement. 4.6 ADDITIONAL COVENANTS OF IPSI AND INTEGRAMED. IPSI hereby covenants that, during the Term of this Agreement, it will not do any of the following: (a) except with the consent of the JOB, enter into any line of business other than the sale of Pharmaceutical Products and Pharmaceutical Services pursuant to this Agreement; (b) incur any indebtedness except as contemplated in this Agreement; or (c) merge, consolidate, liquidate, or sell all or substantially all of its assets. IntegraMed hereby covenants that, during the Term of this Agreement, it will not sell, assign, convey, or transfer its stock in IPSI. Either of IPSI'S or IntegraMed's breach of this Section 4.6 shall be deemed a material breach subject to Section 9.1.2 below. ARTICLE 5 JOINT DUTIES AND RESPONSIBILITIES 5.1 FORMATION AND OPERATION OF JOINT OPERATIONS BOARD. IVP and IntegraMed shall establish a Joint Operations Board ("JOB"), which shall be responsible for developing management and administrative policies for the overall operation of IPSI. IntegraMed and IVP shall each be entitled to elect two members to the JOB, provided, however, that each party shall be allowed only one vote on each matter submitted to the JOB for its vote. The representatives of IntegraMed and IVP on the JOB shall be either directors or executive officers of their respective parties. 5.2 DUTIES AND RESPONSIBILITIES OF THE JOB. The JOB shall have the following duties and responsibilities: 5.2.1 ANNUAL BUDGETS AND MARKETING PLANS. All annual capital and operation budgets prepared by IVP, and all sales, marketing, advertising, and promotions plans prepared by IntegraMed, shall be subject to the review, amendment, approval, and/or disapproval of the JOB. Approval shall not be unreasonably withheld. 5.2.2 CAPITAL IMPROVEMENTS AND EXPANSION. Except as otherwise provided herein, any capital improvements with respect to any Facilities and expansion plans with respect to IPSI shall be reviewed and approved by the JOB and shall be based upon the best interests of IPSI, and shall take into account capital priorities, economic feasibility, productivity and then current market and regulatory conditions. 5.2.3 CAPITALIZATION LOANS. The JOB shall have the sole power to authorize and direct Capitalization Loans. 5.2.4 STRATEGIC PLANNING. The JOB shall develop long-term strategic plans, from time to time. 5.2.5 RETAIL PRICING POLICIES. The JOB shall establish retail pricing policies. 5.2.6 PROVIDER CONTRACT. The JOB shall have veto authority over all managed care, PPO, HMO, Medicare risk and other provider contracts. ARTICLE 6 FEES 6.1 IVP's FEES. IVP shall be paid the following for its Management Services rendered pursuant to this Agreement: 6.1.1 The Cost of Operations; and 6.1.2 An Additional Management Fee, accrued and paid monthly, but reconciled to IPSI'S annual results of operations, equal to 50% of the net income before tax (determined in accordance with GAAP and without reference to the Additional Management Fee), provided, however, that at any time during which Capitalization Loans are outstanding, payment (but not accrual) of the Additional Management Fee shall be limited to Net Available Cash of IPSI. "Net Available Cash" of IPSI shall mean the amount resulting from (a) all Collections and other income actually received during the preceding month; less the sum of (b) all Costs of Pharmaceutical Products; (c) all Cost of Operations for such month; (d) Direct Costs for such month; (e) the payment of interest and the repayment, if any, of the current principal portion of all Capitalization Loans during such month; and (f) a reserve, in an amount determined by the JOB, for anticipated expenses, capital needs, or contingencies of IPSI and for the payment of all applicable income, franchise, property, and payroll taxes of IPSI for such month (calculated after deduction of expenses of the Additional Management Fee). 6.2 PRIORITY OF PAYMENTS. IVP, IntegraMed, and IPSI hereby covenant that all payments from accounts of IPSI shall be paid by IPSI to IVP and IntegraMed in the following order of priority: (a) the payment of Costs of Pharmaceutical Products; (b) the payment of Costs of Operations; (c) the payment of Direct Costs; (d) the payment or reserve for payment of interest accrued on Capitalization Loans to IVP and IntegraMed (or other lender), pari passu; (e) the payment or reserve for payment of the current portion of the Capitalization Loans to IVP and IntegraMed (or other lender), pari passu; and (f) the payment of the Additional Management Fee to IVP and the payment of dividends to IntegraMed (not to exceed the amount of the Additional Management Fee) pari passu. ARTICLE 7 CAPITALIZATION LOANS 7.1 CAPITALIZATION LOANS. 7.1.1 IVP hereby covenants and agrees to lend to IPSI, and IntegraMed covenants and agrees to lend to or to securing financing from another source to lend to IPSI, within five days following the first meeting of the JOB, 50% of the aggregate funds determined by the JOB to be sufficient and necessary to secure the IPSI pharmacy licensure in the States in which the JOB intends IPSI to transact business, to provide initial operating capital, and to finance other start-up costs identified by the Board (the "Initial Loans"). IVP shall have no obligation to transfer such funds to IPSI unless and until IPSI delivers to IVP proof of receipt of a matching amount of funds from IntegraMed or another source. Such Initial Loans shall be evidenced by Promissory Notes substantially in the form of Exhibit 7.1.1 attached hereto. 7.1.2 In the event that, from time to time, the JOB determines that IPSI requires additional capital to finance operating deficits and/or capital expenditures of IPSI, IVP hereby covenants and agrees to lend to IPSI, and IntegraMed covenants and agrees to lend to or to securing financing from another source to lend to IPSI, within five days following the meeting of the JOB authorizing such loans, 50% of the aggregate funds determined by the JOB to be sufficient and necessary to finance such operating deficits and/or capital expenditures ("Subsequent Loans"). IVP shall have no obligation to transfer such funds to IPSI unless and until IPSI delivers to IVP proof of receipt of a matching amount of funds from IntegraMed or another source. Such loan shall be evidenced by Promissory Notes substantially in the form of Promissory Notes representing the Initial Loans. 7.1.3 The Initial Loans and all Subsequent Loans, if any (collectively, the "Capitalization Loans"), shall bear interest at the 30-Year Treasury Note rate, and interest shall be paid by IPSI no less than annually. All Capitalization Loans shall be unsecured obligations of IPSI, without a fixed term, and the principal thereon shall be paid solely out of Net Profits of IPSI. "Net Profits" of IPSI shall mean the amount resulting from the following: (a) all Collections, together with other income actually received, during the preceding Fiscal Year (or other such other period determined by the JOB); less the sum of (b) all costs of Pharmaceutical Products sold to IPSI'S Customers during such period; (c) all Cost of Operations for such period; (d) all Direct Costs for such period; (e) the payment of interest on all Capitalization Loans during such period; (f) the payment of, or reserve for, all applicable income, property, and payroll taxes of IPSI for such period; and (g) a reserve, in an amount determined by the JOB, for anticipated expenses, capital needs, or contingencies of IPSI. ARTICLE 8 EXCLUSIVE MANAGEMENT RIGHT, TERM AND RENEWAL 8.1 IPSI grants IVP the exclusive right to manage IPSI during the Term of this Agreement. 8.2 The term of this Agreement shall begin on the Effective Date of this Agreement and shall expire on the date 10 years after such date (unless this Agreement is renewed from time to time as provided in this Section 8.2) or on any earlier date if this Agreement is terminated pursuant to Article 9 below (the Effective Date through the date of final expiration or termination shall be referred to as the "Term of this Agreement"). This Agreement may be renewed by either party, if within the period of 180 days prior to the date of expiration, one party gives notice to the other of its intention to continue this Agreement under the same terms and conditions as set forth herein or under such different terms and conditions as particularly set forth in the written notice and further providing that the other party has 30 days from the date of notice to accept, reject, or modify the offer. If within 30 days the other party does not respond or by written notice accepts, this Agreement shall continue for an additional 10 years under the terms and conditions as provided in the notice. In the event the offer is not accepted, the parties agree to negotiate, in good faith, a renewal of this Agreement. ARTICLE 9 TERMINATION OF THE AGREEMENT 9.1 TERMINATION. This Agreement may be terminated by any party to this Agreement in the event of the following, provided, however, that no party having the right to terminate this Agreement shall be obligated to exercise such right: 9.1.1 INSOLVENCY. If a receiver, liquidator, or trustee of any party shall be appointed by court order, or a petition to reorganize shall be filed against any party under any bankruptcy, reorganization, or insolvency law, and shall not be dismissed within 90 days, or if any party shall file a voluntary petition in bankruptcy or make assignment for the benefit of creditors, then either of the other parties may terminate this Agreement upon 10 days prior written notice to the other parties. 9.1.2 MATERIAL BREACH. If any party shall materially breach its obligations hereunder, then either of the other parties may terminate this Agreement by providing 30 days prior written notice to the breaching party detailing the nature of the breach, provided that the breaching party shall not have cured the breach within such 30-day period, or, with respect to breaches that are not curable within such 30-day period, shall not have commenced to cure such breach within such 30-day period and thereafter shall not have cured the breach with the exercise of due diligence. It shall be a material breach of the obligation to provide Management Services for IVP to provide Management Services in a manner inconsistent with the generally prevailing standard of care in the delivery of pharmacy services to Customers, or to provide Management Services in a commercially unreasonable manner or in a manner that wastes or destroys the assets or reputation of IPSI. IntegraMed and/or IPSI shall have the burden of proving that IVP has failed to provide Management Services in a commercially reasonable manner or has destroyed the assets or reputation of IPSI in an arbitration proceeding or court of competent jurisdication. 9.1.3 ILLEGALITY. Any party may terminate this Agreement immediately upon receipt of notification by any local, state, or federal agency or court of competent jurisdiction that the conduct contemplated by this Agreement is forbidden by law; except that this Agreement shall not terminate during such period of time as to any party that contests such notification in good faith and the conduct contemplated by this Agreement is allowed to continue during such contest. If any governing regulatory agency asserts that the services provided by any party under this Agreement are unlawful and such assertion is not contested by such party (or if contested, the agency's assertion is found to be correct by a court of competent jurisdiction and no appeal is taken, or if any appeals are taken and the same are unsuccessful), this Agreement shall thereupon terminate with the same force as if such termination date was the date originally specified in this Agreement as the date of final expiration of the terms of this Agreement. Notwithstanding this paragraph, the parties acknowledge that this Agreement serves the interests of all of the parties. For these reasons, the parties agree to make such amendments to this Agreement as are necessary to conform to the opinions, reviews, and/or orders of regulatory and/or administrative agencies of any jurisdiction, such as to preserve the legality of this Agreement, provided that such are not to the material financial detriment of any party. 9.1.4 TERMINATION UPON LOSS OF LICENSE. IPSI may terminate this Agreement upon 10 days prior written notice to IVP should IVP's license to practice pharmacy, in any jurisdiction where Pharmaceutical Services are provided to Customers of Medical Practices, is suspended, revoked, or not renewed. Any loss, revocation, or failure to renew licenses of IVP shall be deemed a material breach of this Agreement by the party or parties whose negligence, fault, or failure to provide necessary information is the primary cause of such loss, revocation, or non-renewal. 9.1.5 TERMINATION UPON UNPROFITABILITY. In the event that, at any time following the date nine months from the Effective Date of this Agreement, IPSI does not have net income determined in accordance with GAAP for any period of six consecutive months, then any party may terminate this Agreement upon 30 days prior written notice to the other parties. 9.1.6 Terminations pursuant to Sections 9.1.1 through 9.1.3 and the second sentence of Section 9.1.4 inclusive shall be deemed termination for cause ("Termination for Cause"), and shall be made by delivering a termination notice, detailing the reasons therefor, to the non-terminating party, and providing the opportunity to cure under the provisions of Section 9.1.2 above. Terminations pursuant to the first sentence of Section 9.1.4 or pursuant to Section 9.1.5 shall be deemed termination without cause ("Termination without Cause"). ARTICLE 10 RIGHTS UPON TERMINATION 10.1 If this Agreement is Terminated for Cause by IPSI or IntegraMed, then: 10.1.1 IPSI shall have the right, but not the obligation, to sell to IVP (and if exercised by IPSI, IVP shall have the obligation to purchase from IPSI) all Dedicated Assets, at their net book value determined in accordance with GAAP as of the date of termination. 10.1.2 IPSI shall have the right, but not the obligation, to assume all leases for Facilities and Dedicated Assets (to the extent that such leases are not in the name of IPSI), or if the assumption is not permitted, to make all payments to IVP called for under such leases and to enjoy uninterrupted use of such Facilities and Dedicated Assets. 10.1.3 IPSI shall elect its course of action, with respect to Sections 10.1.1 and 10.1.2 above, by the service of a written notice on IVP 30 days prior to the date of termination. 10.1.4 Any and all Capitalization Loans payable to IVP, outstanding at the date of termination, shall be deemed paid in full, and no further payments of interest and/or principal shall be due or payable thereon. 10.1.5 The provisions of Articles 11 and 12.1 shall be of no force and effect. 10.1.6 The license granted by Article 13 shall cease, and IPSI shall cease to use any such Tradename and cease to utilize any written materials, for delivery to Customers of Pharmaceutical Products, supplied by IVP. 10.2 If this Agreement is Terminated for Cause by IVP, then: 10.2.1 IVP shall have the right, but not the obligation, to purchase from IPSI (and if exercised by IVP, IPSI shall have the obligation to sell to IVP), all Dedicated Assets at their net book value determined in accordance with GAAP as of the date of termination. 10.2.2 IVP shall have the right, but not the obligation, to assume all leases for Facilities and Dedicated Assets, or if the assumption is not permitted, to make all payments to IPSI called for under such leases and to enjoy uninterrupted use of such Facilities and Dedicated Assets. 10.2.3 IVP shall elect its course of action, with respect to Sections 10.2.1 and 10.2.2 above, by the service of a written notice on IPSI 30 days prior to the date of termination. 10.2.4 Any and all Capitalization Loans payable to IVP, outstanding at the date of termination, shall be paid by IPSI or IntegraMed immediately. 10.2.5 The provisions of Articles 11 and 12.2 shall be of no force and effect. 10.2.6 The license granted by Article 13 shall cease, and IPSI shall cease to use any such Tradename and cease to utilize any written materials, for delivery to Customers of Pharmaceutical Products, supplied by IVP. 10.3 If this Agreement is Terminated without Cause by any party, then: 10.3.1 If IVP is the non-terminating party, then (a) IVP shall be entitled to the immediate payment of any outstanding IVP Capitalization Loans; (b) the provisions of Section 12.1 shall continue to apply for the periods specified therein; and (c) the license granted by Article 13 shall cease, and IPSI shall cease to use any such Tradename and cease to utilize any written materials, for delivery to Customers of Pharmaceutical Products, supplied by IVP. 10.3.2 If IPSI and IntegraMed are the non-terminating parties, then (a) IPSI shall be entitled, as liquidated damages, to an amount equal to the aggregate amount of any and all outstanding Capitalization Loans (other than IVP's Capitalization Loans); (b) the provisions of Section 12.2 shall continue to apply for the periods specified therein; and (c) the license granted by Article 13 shall cease, and IPSI shall cease to use any such Tradename and cease to utilize any written materials, for delivery to Customers of Pharmaceutical Products, supplied by IVP. 10.3.3 The terminating party shall waive the right to payment for any outstanding Capitalization Loans (or if Capitalization Loans are provided by a source other than IntegraMed, a termination by IPSI or IntegraMed shall waive the right to payment for any outstanding Capitalization Loans for such other source). 10.3.4 The terminating party shall bear any (a) accounting and bookkeeping; and (b) severance/vacation costs associated with any Employees which directly result from the termination. 10.4 In the event that this Agreement is terminated for any reason, then IVP shall cease dispensing Pharmaceutical Products to Customers of IPSI as of the date of notice of termination, and IVP and IPSI covenant to utilize their best efforts, for a period 90 days prior to the termination date and 30 days thereafter, or, if the required notice of termination be only 30 days, then for the notice period and 90 days post-termination, to fully cooperate so as to effect a transition of the operation to IPSI, the collection of all accounts receivable earned as of the termination date and the payment of all trade and accounts payable as of the termination date, including, if applicable, Capitalization Loans (the "Transition Period"). For any services provided by IVP during a Transition Period that extend beyond the termination date, IVP shall be paid a reasonable fee to be agreed upon between the IVP and IPSI, but in no event shall such amount be less than the Cost of Operations and Additional Management Fee, if any, that would have been earned by IVP during the Transition Period had the Agreement not so terminated. ARTICLE 11 INSURANCE 11.1 IVP, at its own cost, shall secure and carry insurance, covering itself and its employees providing services under this Agreement in the minimum amount of $1 million per incident, $3 million in the aggregate, for professional negligence and general liability. Such insurance shall name IPSI and IntegraMed as additional named insureds. IVP shall also carry a policy of public liability and property damage insurance with respect to the Facilities under which the insurer agrees to indemnify IPSI and IntegraMed, subject to ordinary deductibles, against all cost, expense, and/or liability arising out of or based upon any and all claims, accidents, injuries, and damages customarily included within the coverage of such policies of insurance available for IVP. The minimum limits of liability of such insurance shall be $1 million combined single limit covering bodily injury and property damage. IPSI and IntegraMed shall be additional named insureds under the terms of such insurance coverages. A certificate of insurance evidencing such policies shall be presented to IPSI within 30 days after the execution of this Agreement. Failure to provide such certificate(s) with such period shall constitute a material breach by IVP hereunder subject to the procedures of Section 9.1.2 above. 11.2 IVP shall provide IPSI with written notice, at least 10 days in advance of the Effective Date, of any reduction, cancellation or termination of the insurance required to be carried by each hereunder. ARTICLE 12 NON-SOLICITATION AND NON-COMPETITION 12.1 During the Term of this Agreement, and for a period of two years after the termination thereof (except as provided in Section 10 above), neither IntegraMed nor IPSI shall, either individually or through an affiliate, (a) enter into any agreement with another independent person or entity, other than IVP, to provide Management Services substantially similar to the Management Services required under this Agreement; (b) market or sell any pharmaceuticals to any end-user patients except through IPSI during the Term of this Agreement; or (c) employ or solicit for employment any employee of IVP, or contact any employee of IVP for the purpose of encouraging such employees to leave the employment of IVP. 12.2 During the Term of this Agreement, and for a period of two years after the termination thereof (except as provided in Section 10 above), IVP shall not, either individually or through an affiliate, (a) market or sell any Pharmaceutical Products to any patients of the Medical Practices except through IPSI (and subject to the terms of this Agreement), provided, however, that this prohibition shall not apply to the Medical Practices identified on Exhibit 12.2 attached hereto who had Customers that had purchased Pharmaceutical Products from IVP prior to the Effective Date of this Agreement; or (b) employ or solicit for employment any Employee of IPSI (other than Employees who are employees of or shared employees with IVP or independent contractors), IntegraMed, or their affiliates ("IPSI Employees"), or contact any IPSI Employees for the purpose of encouraging such employees to leave their employment. ARTICLE 13 Licenses and Confidential Information 13.1 GRANT OF LICENSE. During the Term of this Agreement, IVP hereby grants to IPSI a nonexclusive, personal, nonassignable, nontransferable, royalty-free license to use the "Cycle Kit" tradename ("Tradename") in IPSI'S business. IPSI hereby acknowledges IVP's exclusive ownership of the Tradename. 13.2 TRADE SECRETS, PROPRIETARY AND CONFIDENTIAL INFORMATION. IPSI hereby acknowledges that it shall have access to and become familiar with certain management information systems, trade secrets, and proprietary and confidential information of IVP, as described and scheduled on Exhibit 13.2 ("Confidential Information"). IPSI hereby acknowledges IVP's exclusive ownership of Confidential Information and agrees not to use or disclose such Confidential Information without the prior written consent of IVP, which consent may be withheld by IVP in its sole and absolute discretion. IPSI shall not photocopy or otherwise duplicate any Confidential Information of another party without the prior express written consent of the such other party except as is required to perform services under this Agreement. All such Confidential Information shall remain the exclusive property of IVP and shall be returned to the proprietor immediately upon any termination of this Agreement. ARTICLE 14 MISCELLANEOUS 14.1 FURTHER ASSURANCES. Each party hereto agrees to perform any further acts and to execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement. 14.2 PRIOR AGREEMENTS; AMENDMENTS. This Agreement and the accompanying exhibits represent the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings between the parties as to the subject matter covered hereunder, and this Agreement may not be amended, altered, changed or terminated orally. No amendment, alteration, change or attempted waiver of any of the provisions hereof shall be binding without the written consent of all parties, and such amendment, alteration, change, termination or waiver shall in no way affect the other terms and conditions of this Agreement, which in all other respects shall remain in full force. 14.3 ASSIGNMENT; BINDING EFFECT. This Agreement and the rights and obligations hereunder may not be assigned without the prior written consent of all of the parties, and any attempted assignment without such consent shall be void and of no force and effect. Subject to such limitations on assignment, the provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties' respective heirs, legal representatives, successors and permitted assigns. 14.4 WAIVER OF BREACH. The failure to insist upon strict compliance with any of the terms, covenants or conditions herein shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any right at any one or more times be deemed a waiver or relinquishment of such right at any other time or times. 14.5 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Any and all claims, disputes, or controversies arising under, out of, or in connection with this Agreement or any breach thereof, shall be determined by binding arbitration in Washington, D.C. (hereinafter "Arbitration"). The party seeking determination shall subject any such dispute, claim or controversy to the American Arbitration Association, Washington, D.C., and the rules of commercial arbitration of the selected entity shall govern. The Arbitration shall be conducted and decided by three arbitrators, unless the parties mutually agree, in writing at the time of the Arbitration, to fewer arbitrators. In reaching a decision, the arbitrators shall have no authority to change or modify any provision of this Agreement, including any liquidated damages provision. Each party shall bear its own expenses and one-half the expenses and costs of the arbitrators. Any application to compel Arbitration, confirm, or vacate an arbitral award or otherwise enforce this Section shall be brought only in the Courts of the States of New York or Texas or the United States District Courts for the Southern District of New York or the Northern District of Texas, to whose jurisdiction for such purposes IPSI, IntegraMed, and IVP hereby irrevocably consent and submit. 14.6 SEPARABILITY. If any portion of the provisions hereof shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such portion or provisions in circumstances other than those in which it is held invalid or unenforceable, shall not be affected thereby, and each portion or provision of this Agreement shall be valid and enforced to the fullest extent permitted by law, but only to the extent the same continues to reflect fairly the intent and understanding of the parties expressed by this Agreement take as a whole. 14.7 HEADINGS. Section and paragraph headings are not part of this Agreement and are included solely for convenience and are not intended to be full or accurate descriptions of the contents thereof. 14.8 NOTICES. Any notice hereunder shall have been deemed to have been given only if in writing and either delivered in hand or sent by registered or certified mail, return receipt requested, postage prepaid, or by United States Express Mail or other commercial expedited delivery service, with all postage and delivery charges prepaid, to the addresses set forth below: 14.8.1 If for IPSI: Gerardo Canet, President & CEO IntegraMed Pharmaceutical Services, Inc. One Manhattanville Road Purchase, NY 10577-2100 14.8.2 If for IVP: Von L. Best, President & CEO IVP Pharmaceutical Care, Inc. 2833 Trinity Square Drive Suite 105 Carrollton, TX 75006 14.8.3 If for IntegraMed: Gerardo Canet, President & CEO IntegraMed America Inc. One Manhattanville Road Purchase, NY 10577-2100 Either party hereto, by like notice to the other parties, may designate such other address or addresses to which notice must be sent. 14.9 INDEMNIFICATION. 14.9.1 IVP agrees to indemnify and hold harmless IPSI and IntegraMed, their shareholders, directors, officers, employees and servants from any suits, claims, actions, losses, liabilities or expenses (including reasonable attorney's fees and costs) arising out of or in connection with any act or failure to act by IVP related to the performance of its duties and responsibilities under this Agreement. The obligations contained in this Section 14.9.1 shall survive termination of this Agreement. 14.10.2 IPSI and IntegraMed each agree to indemnify and hold harmless IVP, its shareholders, directors, officers, employees and servants from any suits, claims, actions, losses, liabilities or expenses (including reasonable attorney's fees and costs) arising out of or in connection with any act or failure to act by IPSI or IntegraMed related to the performance of its duties and responsibilities under this Agreement. The obligations contained in this Section 14.9.2 shall survive termination of this Agreement. 14.11 In the event of any claims or suits in which IVP, IntegraMed, and/or IPSI and/or their directors, officers, employees and servants are named, each of IVP, IntegraMed, and IPSI for their respective directors, officers, employees agree to cooperate in the defense of such suit or claim; such cooperation shall include, by way of example but not limitation, meeting with defense counsel (to be selected by the respective party hereto), the production of any documents in his/her possession for review, response to subpoenas and the coordination of any individual defense with counsel for the respective parties hereto. The respective party shall, as soon as practicable, deliver to the other copies of any summonses, complaints, suit letters, subpoenas or legal papers of any kind, served upon such party, for which such party seeks indemnification hereunder. This obligation to cooperate in the defense of any such claims or suits shall survive the termination, for whatever reason. of this Agreement. 14.12 Promptly after the receipt by IPSI or IntegraMed of notice of any claim or commencement of any action or proceeding subject to indemnification delineated in Section 14.9.1 ("asserted liability"), IPSI or IntegraMed, as the case may be, will demand such indemnification from IVP and proffer the defense to IVP. IVP may thereafter, at its option, assume such defense at its own expense and by its own counsel. IVP shall provide written notice to IPSI or IntegraMed, as the case may be, within 20 days, of its assumption or declination of such defense. If IVP shall undertake to compromise any asserted liability, it shall promptly notify IPSI or IntegraMed, as the case may be, of its intention to do so and IPSI or IntegraMed, as the case may be, agrees to cooperate fully and promptly with IVP and its counsel in the compromise and defense of any asserted liability. IVP shall not enter into any non-monetary settlement hereunder without the prior written consent of IPSI or IntegraMed, as the case may be. Notwithstanding the foregoing, IPSI or IntegraMed, as the case may be, shall have the right to participate in the compromise or defense of any asserted liability with its own counsel and at its own expense. 14.13 Promptly after the receipt by IVP of notice of any claim or commencement of any action or proceeding subject to indemnification delineated in Section 14.9.2 ("asserted liability"), IVP will demand such indemnification from IPSI or IntegraMed, as the case may be, and proffer the defense to such party. Such party may thereafter, at its option, assume such defense at its own expense and by its own counsel. Such party shall provide written notice to IVP, within 20 days, of its assumption or declination of such defense. If IPSI or IntegraMed, as the case may be, shall undertake to compromise any asserted liability, it shall promptly notify the IVP of its intention to do so and IVP agrees to cooperate fully and promptly with IVP and its counsel in the compromise and defense of any asserted liability. Neither IPSI nor IntegraMed shall enter into any non-monetary settlement hereunder without the prior written consent of IVP. Notwithstanding the foregoing, IVP shall have the right to participate in the compromise or defense of any asserted liability with its own counsel and at its own expense. 14.14 CONSTRUCTION. Each party and its counsel have participated fully in the review and revision of this Agreement. In construing this Agreement, it shall be deemed to have been drafted jointly. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written. IVP PHARMACEUTICAL CARE, INC. By: /s/Von L. Best ------------------------------- Von L. Best, President and CEO INTEGRAMED PHARMACEUTICAL SERVICES, INC. By: /s/ Gerardo Canet -------------------------------- Gerardo Canet, President and CEO INTEGRAMED AMERICA, INC. By: /s/Gerardo Canet -------------------------------- Gerardo Canet, President and CEO EXHIBIT 0.2 IntegraMed America Inc. Reproductive Science Centers Network 1. Reproductive Science Center of Boston 2. Reproductive Science Associates- Mineola, New York and Stoney Brook, New York 3. Reproductive Science Center of the Bay Area Fertility and Gynecology Medical Group 4. Reproductive Science Associates- Kansas City, Missouri 5. Reproductive Science Center at the Walter Reed Army Medical Center 6. Institute of Reproductive Medicine and Science of Saint Barnabas Medical Center 7. Fertility Centers of Illinois 8. Shady Grove Fertility Centers EXHIBIT 1.1.1 Cost of Operations (% of Net Revenue) -------------------------------------------------------------------------- Monthly Cost Of Net Revenue Operations -------------------------------------------------------------------------- $25,000 Or Below 22.84% $50,000 Or Below 17.15% $100,000 Or Below 14.30% $200,000 Or Below 12.86% $400,000 Or Below 12.16% $800,000 Or Below 11.81% $1,250,000 Or Below 11.68% $1,500,000 Or Below 11.64% EXHIBIT 1.1.2 Cost of Pharmaceutical Products IVP will purchase Pharmaceutical Products and will use its wholesale license to resell to IPSI on a just-in-time basis. IVP will pass along its utilization and market-share rebates to IPSI; however, IVP will not pass along its 2% Gonal F special rebate, its trade discounts received as incentive for timely payment, or its discounts on bulk purchases as defined below. These guidelines yield the following rebate structure as of the Effective Date of this Agreement: Qualifying Rebates (Passed along to IPSI): 1. The variable Serono market-share rebates and the Serono Gonal F Sales Force rebate. 2. The Organon utilization rebates. 3. The Ferring market-share rebates. Non-Qualifying Rebates (Kept by IVP): 1. All rebates given as incentive for timely payment (e.g., 2% 30/ Net 31). 2. The Serono 2% Gonal F special rebate. Other Issues: 1. A few manufacturers, e.g., TAP, do not offer any rebates, and IVP buys at Wholesale Acquisition Cost (WAC). These products will be billed at net invoice +2%. 2. From time to time, IVP may receive additional discounts from manufacturers for committing to bulk purchases. The quantities usually represent a three- to 12-month supply, and the value of the discounts is partially offset by IVP's cost of capital, storage costs, and property taxes. These discounts will not be passed along to IPSI. 3. WAC will be the basis by which all products are sold to IPSI. Qualifying rebates that are taken by IVP at time of payment will be passed to IPSI on IVP's invoice. Qualifying rebates that are received via check from the manufacture at a later time will be estimated and accrued in the IPSI monthly financials. EXHIBIT 1.1.12 Pharmaceutical Products Kept On The Shelf ($15,000 Maximum) 2x2 Nonsterile Gauze Alcohol Prep Pads Amoxil Cap 500mg Aygestin Tab 5mg Climara Dis 0.05mg Climara Dis 0.1mg Clomid 50mg Clomiphene Citrate 50mg Demulen 1/35 28 Tabs Dexamethasone Tab 0.25mg Dexamethasone Tab 0.5mg Dexamethasone Tab 0.5mg Doxycycline Hyclate Cap 100mg Estrace Tab 0.5mg Estrace Tab 1mg Estrace Tab 2mg Estraderm Dis 0.1mg Estradiol Tab 0.5mg Estradiol Tab 1mg Estradiol 2mg Folic Acid Tab 1mg Heparin Sodium DCU Inj 20000ml Heparin Sodium Inj 10000ml Medrol Tab 16mg Medrol Tab 4mg Medrol Tab 8mg Methylprednisolone Tab 4mg Ortho-Novum 1/35 21 Tabs Ortho-Novum 7/7/7 28 Tabs Ovcon 35/21 Tabs Ovu Quick 9 day Ovu Quick 6 day Parlodel Tab 2.5mg Prednisone Tab 10mg Prednisone Tab 20mg Prednisone Tab 5mg Prenate Ultra Tab Serophene Tab 50mg Stuartnatal Plus Tab Plus Synarel Sol 2mg/ml Tetracycline HCL Cap 500mg Vivelle Dis 0.1mg EXHIBIT 3.2.1 [floor plan to be inserted here] EXHIBIT 7.1.1 Form of Promissory Notes Representing Capitalization Loans NON-NEGOTIABLE PROMISSORY NOTE BORROWER: IntegraMed Pharmaceutical Service, Inc. 2833 Trinity Square Drive Suite 170 Carrollton, Texas 75006 LENDER: ________________________________________ ________________________________________ ________________________________________ PRINCIPAL AMOUNT: $150,000.00 INDEX: 30-Year Treasury Bill Rate INITIAL RATE: 5.25% DATE OF NOTE: April __, 1999 PROMISE TO PAY. Borrower promises to pay to Lender, in lawful money of the United States of America, the principal amount of One Hundred Fifty Thousand Dollars and Zero Cents ($150,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance, on December 31, 2009 (the "Maturity Date"), or earlier as provided herein. DESCRIPTION OF NOTE. This Note represents a Capitalization Loan, as defined in that certain Management Agreement dated April ___, 1999, by and among, inter alia, Borrower and Lender (the "Management Agreement"). CHOICE OF USUARY CEILING AND INTEREST RATE. The interest rate on this Note has been implemented under the "Indicated Rate Ceiling" as referred to in Article 5069-1.04(a)(1) of Vernon's Texas Civil Statutes, as amended ("V.T.C.S."). The terms, including the rate, or index, formula, or provision of law used to compute the rate, on the Note, will be subject to revision as to current and future balances, from time to time, by notice from Lender in compliance with Article 5069-1.04(i) V.T.C.S. PAYMENT. Except as provided herein, Borrower shall pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on the Maturity Date. Borrower shall make regular yearly payments of accrued but unpaid interest beginning December 31, 1999, and all subsequent interest payments are due on the same day of each year thereafter. Interest on this Note is computed on a 365/360 simple interest basis; i.e., by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding, unless such calculation would result in a usurious rate, in which case interest shall be calculated on a per diem basis of a year of 365 or 366 days, as the case may be. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. MANDATORY PREPAYMENT. Borrower shall make mandatory prepayments from time to time equal to a portion of the "Net Profits" of Borrower, as defined in Section 7.1.3 of the Management Agreement, for such periods as Borrower and Lender may mutually agree from time to time, such portion to equal the percentage that the outstanding principal amount of the Capitalization Loan represented by this Note bears to the outstanding principal amount of all Capitalization Loans subject to the Management Agreement. This Note is also subject to acceleration, or this Note may be deemed paid in full, upon the occurrence of certain events described in Article 10 of the Management Agreement. OPTIONAL PREPAYMENT. Borrower may pay without penalty all or any portion of the amount owed prior to the Maturity Date. All prepayments will be applied first against accrued but unpaid interest and then against the outstanding principal balance. VARIABLE INTEREST RATE. The interest rate on this Note may be subject to change from time to time based on changes in the coupon rate for new issuances of 30-Year U.S. Treasuries (the "Index"). Lender shall inform Borrower of the current Index rate upon Borrower's request. The interest rate change will not occur more frequently than once in any three-month period. The Index currently is 5.25% per annum. The interest rate to be applied prior to the Maturity Date to the unpaid principal balance of this Note initially will be at a rate equal to the Index, resulting in an Initial Rate of 5.25% per annum, and shall thereafter be equal to the greater of the Initial Rate or the Index, adjusted if necessary for the maximum rate limitation described below. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. For purposes of this Note, the "maximum rate allowed by applicable law" means the lesser of (a) the maximum rate of interest permitted under federal or other law applicable to the indebtedness evidenced by this Note; or (b) the "Indicated Rate Ceiling" as referred to in Article 5069-1.04(a)(1) V.T.C.S. POST-MATURITY DATE RATE. The Post-Maturity Date Rate on this Note is the maximum rate allowed by applicable law. Borrower shall pay interest on all sums due after the Maturity Date at the Post-Maturity Date Rate. DEFAULT. Borrower will be in default, unless waived or deferred by Lender in writing, upon the occurrence of any of the following events: (a) Borrower fails to make any payment when due; (b) Borrower breaches any covenant, obligation, representation, or warranty Borrower has made to Lender, or Borrower fails to perform promptly at the time and strictly in the manner provided in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender, including the Management Agreement; (c) any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect; or (d) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. If any default, other than a default in payment, is curable, it may be cured (and no event of default shall have occurred) if Borrower, after receiving written notice from Lender demanding cure of such default: (a) cures the default within 15 days; or (b) if the cure requires more than 15 days, immediately initiates steps that Lender deems in Lender's reasonable discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER=S OBLIGATIONS; THIRD-PARTY CURE AND SUBSTITUTION. In the event of a default in payment that is not waived by Lender, or any other default by Borrower that is not cured pursuant to the immediately preceding paragraph, Lender shall give written notice to the Company, attention Gerardo Canet, specifying the type and, in the case of a default in payment, amount of such default. The Company shall have the right, within 10 days following such written notice, to cure such default and succeed to all of the rights and obligations of Borrower under this Note. LENDER'S RIGHTS. Upon default by Borrower, Lender may, subject to the Management Agreement, declare the entire indebtedness, including the unpaid principal balance on this Note, all accrued unpaid interest, and all other amounts, costs, and expenses for which Borrower is responsible under this Note or any other agreement with Lender pertaining to this loan, immediately due, without notice, and Borrower must pay such amount. Lender may hire an attorney to help collect this Note if Borrower does not pay, and Borrower will pay Lender's reasonable attorneys' fees. Borrower also will pay Lender all other amounts actually incurred by Lender as court costs, lawful fees for filing, recording, or releasing to any public office any instrument securing this loan; the reasonable costs actually expended for repossessing, storing, preparing for sale, and selling any security; and fees for noting a lien on or transferring a certificate of title to any titled collateral offered as security for this loan, or premiums or identifiable charges received in connection with the sale of authorized insurance. This Note has been delivered to Lender and accepted by Lender in the State of Texas. If there is a lawsuit, and if the transaction evidenced by this Note occurred in Dallas County, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Dallas County, the State of Texas. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. This Note shall be governed by and construed in accordance with the laws of the State of Texas and applicable federal laws. GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the enforceability of the rest of the Note. In particular, this provision means (among other things) that Borrower does not agree or intend to pay, and Lender does not agree or intend to contract for, charge, collect, take, reserve, or receive (collectively referred to herein as "charge or collect"), any amount in the nature of interest or in the nature of a fee for this loan, which would in any way or event (including demand, prepayment, or acceleration) cause Lender to charge or collect more for this loan than the maximum rate allowed by applicable law. Any such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be applied first to reduce the principal balance of this loan, and when the principal has been paid in full, be refunded to Borrower. The right to accelerate all sums due under this Note does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and Lender does not intend to charge or collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of sums due hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full term of the loan evidenced by this Note until payment in full so that the rate or amount of interest on account of the loan evidence hereby does not exceed the applicable usuary ceiling. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees, or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest, notice of dishonor, notice of intent to accelerate this Note, and notice of acceleration of this Note. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker, or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon, or perfect Lender's security interest in the collateral without the consent or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. SECURITY. This Note is unsecured. IN WITNESS WHEREOF, I have set my hand hereto as of the date first written above. BORROWER: /s/Gerardo Canet -------------------------------- Gerardo Canet, President and CEO EXHIBIT 12.2 IVP's Prior Relationships with Medical Practices 1. Reproductive Science Center of Boston 2. Shady Grove Reproductive Science Centers, Inc. 3. Institute of Reproductive Medicine and Science of Saint Barnabas Medical Center EXHIBIT 13.2 IVP's Trade Secrets, Proprietary, and Confidential Information 1. All information related to IVP that is not directly related to IPSI. 2. IVP retail pricing structure. 3. All internal policies and procedures used by IVP. 4. IVP's rebate structure with all pharmaceutical drug manufacturers and distributors. 5. IVP's business plans and strategies. 6. IVP's customer relationships, referral sources, payors, and patients. 7. IVP's dispensing and drug utilization data. 8. IVP's trade names and programs developed for its direct-to-patient distribution services. 9. Any other material, programs, or systems that IVP deems as confidential. EX-27 5 FDS FOR 1999 1ST QUARTER 10-Q
5 1,000 3-mos Dec-31-1999 Jan-01-1999 Mar-31-1999 2,280 0 13,366 1,147 0 15,490 6,036 0 41,194 8,071 0 0 166 53 27,701 41,194 10,532 10,532 8,198 8,198 0 0 135 598 80 518 0 0 0 518 0.10 0.10 PP&E is net of accumulated depreciation.
-----END PRIVACY-ENHANCED MESSAGE-----