THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") is
entered into as of ___________, 1998 (the "Effective Date") by and between
_____________ , a _____________ (the "Medical Group"), and BMJ Medical
Management, Inc., a Delaware corporation (the "Management Company").
RECITALS
--------
A. The Medical Group is engaged in the business of providing
musculoskeletal medical and surgical services and related medical and ancillary
services to the general public (the "Medical Practice"). The Medical Group
desires to devote its time and effort towards its clinical practice and delivery
of patient care and desires to delegate certain administrative and managerial
functions related to the Medical Group's practice.
B. The Management Company is a corporation engaged in the
business of providing management, administrative, financial, information
technology, and related services to Medical Groups and professional medical
organizations.
C. The Management Company and the Medical Group desire to
enter into this Agreement, pursuant to which the Management Company will provide
certain management, administrative, and other services to the Medical Group.
NOW, THEREFORE, the Medical Group and the Management Company
hereby agree as follows:
AGREEMENT
---------
ARTICLE I
RELATIONSHIP OF THE PARTIES
1.1 Retention.
---------
The Medical Group retains the Management Company to provide all of the
management and related services identified or referenced in Section 3 and as
otherwise required by the Medical Group (collectively, the "Management
Services"), and the Management Company accepts such retention and will provide
the Management Services.
1.2 Exclusivity.
-----------
During the term of this Agreement, the Management Company will
exclusively provide all management and administrative services utilized by the
Medical Group; provided, however, that the Medical Group may, at its sole
discretion and cost, enter into contracts for accounting, legal, consulting, or
other professional or advisory services. Such services will be in addition to,
and not in replacement of, the services provided by the Management Company to
the Medical Group.
1.3 Relationship of Parties.
-----------------------
The Management Company and the Medical Group intend to act and perform
as independent contractors, and this Agreement is not intended to create any
partnership, joint venture, or employment relationship between the parties.
1.4 No Referral Obligation.
----------------------
The parties agree that the benefits to the Medical Group hereunder do
not require, are not payment for, and are not in any way contingent upon the
admission, referral or any other arrangement for the provision of any item or
service offered by the Management Company to any of the Medical Group's patients
in any facility or laboratory controlled, managed or operated by the Management
Company.
1.5 Internal Management of the Medical Group.
----------------------------------------
The Medical Group and its members are responsible for matters involving
the internal management, control, or finances of the Medical Group, including
the allocation of the Medical Group's income among the Medical Group Physicians,
tax planning, and investment planning.
1.6 No Practice of Medicine; No Interference with Professional Judgment.
-------------------------------------------------------------------
Notwithstanding the authority granted to the Management Company under
this Agreement, the parties agree that the Medical Group will retain the
authority to direct the medical, professional and ethical aspect of the Medical
Practice. The Management Company will neither exercise control over nor
interfere with the physician-patient relationship, which will be maintained
strictly between the Medical Group Physicians and their patients. The Medical
Group retains full authority over and control of all aspects of its business and
affairs that may not legally be carried on by persons other than natural persons
who are duly licensed to practice medicine or surgery in the State of _________.
To the extent any act or services required of the Management Company by this
Agreement should be construed or deemed, by any governmental authority, agency
or court, to constitute the practice of medicine, the right to perform such act
or service by the Management Company will be deemed waived and unenforceable.
ARTICLE II
OPERATIONS COMMITTEE
2.1 Purpose of the Operations Committee.
-----------------------------------
The Management Company and the Medical Group will establish a committee
(the "Operations Committee") responsible for directing the Management Company in
connection with the development of certain specific management and
administrative policies for the overall operation of the Medical Group. Any
Medical Group Physician or designees of the Management Company may attend
meetings of the Operations Committee. The business of the Operations Committee
will be conducted in accordance with the policies and procedures described in
Section 2.4 hereof.
2.2 Authoritative Functions of the Operations Committee.
---------------------------------------------------
The Operations Committee will have the authority to bind the Management
Company and the Medical Group with respect to the following functions:
(a) Approve the annual budgets for: (i) xxxxxxxx and
Collections; (ii) Medical Group Costs; (iii) Capital Expenditures to be made by
the Management Company in fulfillment of its obligations hereunder; (iv)
Operating Costs (which, in the absence of approval by the Operations Committee,
will be increased by five percent (5.0%) over the total amount approved for the
preceding period);
(b) Approve costs and expenses that exceed the Operating Costs
budget.
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(c) Establish parameters and criteria with respect to the
establishment and maintenance of relationships with institutional providers and
payors and managed care contracts (except with respect to the establishment of
professional fees).
(d) Establish parameters and criteria with respect to certain
activities performed by the Management Company such as billing, claims
submission and collections of fees.
(e)Approve the acquisition, replacement, relocation, or other
disposition of Equipment, approve the integration of new technologies into the
Medical Practice as contemplated by Section 3.11, and approve the renovation and
expansion of any Medical Group office.
(f) Approve the closure or relocation of any Medical Group
office..")"
(g) Approve New Ancillary Services, New Physicians, and New
Medical Offices.
(h) Establish parameters and criteria for off-site storage of
files and records of the Medical Group.
(i) Any other functions that are described in this Agreement
or otherwise assigned by the parties that explicitly grant the Operations
Committee authority to bind the parties.
2.3 Advisory Functions of the Operations Committee.
----------------------------------------------
The Operations Committee will review, evaluate and make recommendations
to the Medical Group and the Management Company with respect to the following
matters:
(a) Identification of Medical Group subspecialties required
for the efficient operation of the Medical Group.
(b) Advice regarding all Medical Personnel employment and
recruitment contracts to be utilized by the Medical Group.
(c) Development of long-term strategic planning plans for the
Medical Group.
(d) Development of community outreach programs.
(e) Establishment of fees for professional services and
ancillary services rendered by the Medical Group in accordance with Section
3.15.
(f) Access and quality issues pertaining to ancillary
services.
(g) Insurance limits and insurance coverage of the Medical
Group and the Management Company, as related to Medical Group operations and
activities.
(h) Development of quality assurance and utilization
management programs.
(i) Any matters arising in connection with the operations of
the Medical Group that are not specifically addressed in this Agreement and as
to which the Management Company or the Medical Group requests consideration by
the Operations Committee.
The recommendations of the Operations Committee with respect to the matters
described in this Section 2.3 are non-binding and are intended for the advice
and guidance of the Management Company and the
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Medical Group. The Management Company and the Medical Group will take such
recommendations into account in good faith in carrying out their respective
obligations.
2.4 Committee Policies and Procedures.
---------------------------------
(a) On Schedule 2.4, the parties have named the committee
members and the Medical Group has designated a Medical Group Physician to act as
Chairman of the Operations Committee, and the Management Company has designated
a person to act as Vice Chairman. The Chairman, if present, will preside at all
meetings of the Operations Committee. In the absence of the Chairman, the Vice
Chairman will preside. Each party may substitute or change its Chairman or Vice
Chairman, as the case may be, at any time upon notice to the other party.
(b) Unless otherwise agreed to by the parties, the Operations
Committee will meet at least once per month. The Operations Committee may hold
meetings without call or formal notice at such times and places as the Chairman
and Vice Chairman may from time to time determine. A meeting of the Operations
Committee also may be called by at least three (3) Medical Group Physicians upon
at least three (3) days' written notice to the Chairman and Vice Chairman. Such
notice requirement will be deemed waived with respect to any member of the
Operations Committee who attends such meeting. The Vice Chairman will keep
minutes of all formal actions taken by the Operations Committee.
(c) All attendees are entitled to participate in the
discussions at any meeting of the Operations Committee, however, in all matters
that come before the Operations Committee, the Management Company will have one
vote, which will be exercised by the Vice Chairman or his/her designee, and the
Medical Group will have one vote, which will be exercised by the Chairman or
his/her designee. The affirmative vote of the Chairman (or his/her designee) and
the Vice Chairman (or his/her designee) is required for the Operations Committee
to act. The Operations Committee may act by written consent without a meeting,
provided that both the Chairman and the Vice Chairman must sign any written
consent.
ARTICLE III
MANAGEMENT SERVICES
3.1 Management Services Generally.
-----------------------------
(a) The Management Company will be the sole and exclusive
manager and administrator of all day-to-day business functions for the Medical
Group. The Management Company will provide all of the management and
administrative services reasonably required by the Medical Group in connection
with the provision of Medical Group Services and the operation of the Medical
Practice.
(b)The Management Company may enter into arrangements with
outside services and suppliers as the Management Company reasonably deems
necessary in connection with the provision of the Management Services. To the
extent permitted by applicable law, such arrangements will be in the name of the
Management Company.
(c) The Medical Group will not, without the approval of the
Operations Committee, reduce its management staff.
3.2 Premises.
--------
(a) As of the Effective Date, the Medical Group leases
premises and provides Medical Group Services at the location(s) set forth on
Schedule 3.2. The Management Company will provide
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management services with respect to such premises including without limitation,
negotiation of leases, arranging for necessary repairs, maintenance and
improvements, and other reasonably necessary or appropriate services related to
the Medical Group's use of the premises. The closing or relocation of any
offices of the Medical Group will be subject to the approval of the Operations
Committee.
3.3 Equipment.
---------
The Management Company will make available to the Medical Group the
furniture, furnishings, trade fixtures, office equipment, and diagnostic and
therapeutic medical equipment reasonably required by the Medical Group as
determined by the Operations Committee (collectively, the "Equipment"). The
Management Company will acquire (or lease), at its cost, the Equipment, and will
retain ownership of (or the leasehold interest with respect to) the Equipment;
provided, however, that the costs of such Equipment will be charged back to the
Medical Group on a depreciated basis over a five-year period and will be
included in Operating Costs. As used herein, the term Equipment does not include
medical equipment, furniture, furnishings, trade fixtures, and office equipment
that is (i) used in connection with a New Ancillary Service or (ii) owned by the
Medical Group after the Effective Date. If the Management Company replaces any
Equipment (whether owned or leased by the Management Company), the replacement
Equipment will be of substantially similar value and quality to the Equipment
being replaced.
3.4 Administration, Finance and Accounting.
--------------------------------------
The Management Company will provide all administrative, financial, and
accounting functions necessary for the operation of the Medical Practice.
3.5 Billing and Collection.
----------------------
(a) Ownership of all accounts receivable (other than those
accrued as of the Effective Date) and other rights to payment arising from the
provision by the Medical Group of Medical Group Services and related services to
the general public during the Term (the "Accounts") will at all times remain the
sole and exclusive property of the Medical Group. The Medical Group appoints the
Management Company as its true and lawful attorney-in-fact for the purposes
described in this section for the term of this Agreement. The Management Company
will create and maintain a depository account in the name of Medical Group with
a banking institution selected by the Management Company (the "Medical Group
Collections Account"). The Medical Group authorizes the Management Company to
make withdrawals from the Medical Group Collections Account, including
withdrawals for payment of the Management Fee. If necessary, additional accounts
in the names of the Medical Group Physicians may be created for the purpose of
collecting payments in compliance with Medicare and Medicaid law. The Medical
Group grants the Management Company, as its attorney-in-fact, the right to (i)
xxxx patients and third party payors in the Medical Group's name; (ii) collect
accounts receivable resulting from such billing; (iii) receive payments and
prepayments from the Medical Group's patients, and any and all other third party
payors (including but not limited to insurers, self-insured employers and
government programs); (iv) take possession of, endorse in the name of the
Medical Group, and deposit into the Medical Group Collections Account any and
all checks, insurance payments, cash, cash equivalents and other instruments
received for Medical Group Services; (v) make payments for accounts payable on
behalf of the Medical Group, including payment of the Management Fee; and (vi)
initiate with the consent of the Medical Group, which consent may be withheld by
the Medical Group in its sole and absolute discretion, legal proceedings in the
name of the Medical Group to collect any Accounts and monies owed to the Medical
Group, to enforce the rights of the Medical Group as a creditor under any
contract or in connection with the rendering of any service, and to contest
adjustments and denials by governmental agencies (or their fiscal
intermediaries) as third-party payors. The Medical Group will immediately
forward to the Management Company for deposit into the Medical Group Collections
Account all checks and other payments received by the Medical Group or by any of
its partners, equity owners or employees from any patient or third party payor
for Medical Group Services rendered during the Term.
5
(b) From time to time at the Management Company's request, the
Medical Group will make available to the Management Company one or more
authorized of the Medical Group to sign any letters, checks, instruments or
other documents on behalf of the Medical Group as may be necessary for the
Management Company to take the actions specified in this Section 3.5 and to
perform its duties under this Agreement.
(c)The Management Company will submit all bills and manage
the billing process on a timely basis in accordance with the terms of this
Agreement and applicable law; provided that the Medical Group meets its
obligations regarding billing and patient encounter information described in
Section 7.3.
(d) The Medical Group hereby grants the Management Company a
security interest in its Accounts to secure all of the Medical Group's
obligations under this Agreement. The Medical Group will execute a financing
statement (the "Financing Statement") for the benefit of the Management Company
necessary for the Management Company to perfect its interest therein. The
Management Company will have the right to grant to any lender (the "Lender") a
lien and security interest in and with respect to the Accounts, together with
all books, records, computer information and other general intangibles relating
thereto (collectively, the "Collateral"), as security for the obligations of the
Management Company to the Lender. The Medical Group acknowledges that the Lender
is a third party beneficiary of the benefits granted to the Management Company
under this Section 3.5(d). The Medical Group will cooperate with the Lender as
reasonably requested by the Lender if the Lender seeks to enforce its rights and
remedies under its agreement with the Management Company, including granting the
Lender access, to the extent permitted by law, to all books and records
associated with the Collateral. Neither the Management Company nor the Lender
will be required to give the Medical Group any notice in connection with any
loan or related financing arrangements affecting the Accounts or other
Collateral.
3.6 Administrative Personnel.
------------------------
The Management Company will retain and provide certain non-medical
personnel necessary for the conduct of the Medical operations (collectively,
"Administrative Personnel"), such as administration, accounting, billing and
collection, and clinic support. The Management Company will determine and pay
the salaries and fringe benefits of the Administrative Personnel, and will
provide other personnel services related to the Administrative Personnel. The
Management Company retains the right to hire and terminate any and all
Administrative Personnel.
3.7 Technical Personnel; Leased Employees.
-------------------------------------
(a) The Management Company will provide to the Medical Group
as leased employees, such Technical Personnel (as defined below) as may
reasonably be necessary for the conduct of the Medical Practice. Technical
Personnel will be leased to the Medical Group through a leased employee
agreement substantially in the form attached hereto as Exhibit A. The Medical
Group will be responsible for all services rendered by Technical Personnel.
(b) For purposes of this Agreement, "Technical Personnel"
means nurses, medical assistants, x-ray technicians, other technicians, and
other personnel who perform diagnostic tests or other services that are covered
by Medicare or by other third party payors when performed by an employee of a
Medical Group under a Medical Group Physician's supervision and whose services
are billable under the name of the supervising physician.
(c) The Medical Group will exercise, such supervision and
control over the activities of the Technical Personnel as may be necessary for
the Technical Personnel to be considered leased employees under the Medicare
program and under applicable law and to enable a Medical Group Physician to xxxx
for the services of the Technical Personnel.
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3.8 Medical Personnel Recruiting.
----------------------------
The Management Company will, upon request by the Operations Committee,
assist the Medical Group in recruiting Medical Personnel. "Medical Personnel"
means (i) physicians (including fellows and residents, if any) providing
professional medical services who are employees or independent contractors of
the Medical Group (sometimes referred to herein as "Medical Group Physicians")
and (ii) physician assistants or extenders, nurse practitioners, and other
health care professionals who provide services that are billable to patients or
third party payors under the name of such health care professional (as
distinguished from services that are billable under the name of the supervising
physician). Expenses incurred in recruiting Medical Personnel will be Medical
Group Costs.
3.9 Inventory and Supplies.
----------------------
The Management Company will order and purchase inventory and supplies
on behalf of the Medical Group, and such other ordinary or appropriate materials
as the Medical Group reasonably deems to be necessary for the Medical Group to
carry out its Medical Group Services. The Management Company will make
reasonable efforts to ensure that adequate inventory and supplies are at all
times available in the Medical Group's office. The Medical Group will remain
ultimately responsible for supervising and owning the medical supplies necessary
for the Medical Practice.
3.10 Taxes.
-----
The Management Company will provide the Medical Group with access to
all information necessary for the Medical Group to prepare its tax returns. The
Management Company will have no responsibility for the payment of the Medical
Group's taxes or the preparation of any income tax returns for the Medical Group
or any Medical Group Physician.
3.11 Information Systems Management.
------------------------------
(a) The Management Company will provide management information
systems software to the Medical Group. The software provided by the Management
Company will provide general ledger, practice management and disease management
programs. The Medical Group will be responsible for the payment of annual or
other additional license fees (if any), maintenance and support fees as required
to maintain the software, and all telecommunications costs associated with the
software and its connection (i) within the Medical Group's facilities and (ii)
to the Management Company. Connectivity and hardware expenses, if any, will be
depreciated back to the Medical Group over three years and included in Operating
Costs. Maintenance and support services for hardware or software may not be
terminated without the approval of the Operations Committee.
(b) Subject to the approval of the Operations Committee, the
Management Company will promote the integration of new technologies into the
professional practice of the Medical Group.
3.12 Community Outreach and Education Programs.
-----------------------------------------
The Management Company will develop and implement community outreach
programs designed to educate the patient population regarding health and
wellness issues, the Medical Group, the availability of its medical services,
and the Medical Group's participation in various managed care programs. The
Medical Group agrees, and will cause Medical Group Physicians to agree, that the
Management Company may use the names, business address, business telephone
number, and available services of the Medical Group and Medical Group Physicians
in such materials.
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3.13 Insurance.
---------
(a) During the Term, the Management Company will, to the
extent permitted by applicable law, procure and maintain for the benefit of
itself and the Medical Group comprehensive professional liability insurance
providing for (a) general liability coverage and (b) medical malpractice
coverage with limits of not less than $__________ per claim and with aggregate
policy limits of not less than $____________ (or such higher amounts as may be
necessary to comply with any regulatory requirement) covering the Medical Group
and each of the Medical Personnel, including coverage for claims made after the
Effective Date relating to events or occurrences at any time prior thereto. The
parties hereto acknowledge that the Management Company is procuring the
malpractice insurance referenced herein to ensure that the Management Company
has protection if it is sued as a result of an act or omission of an employee of
the Medical Group. The Management Company will pay the premiums for such general
and medical malpractice liability coverage, which payments will be Operating
Costs under this Agreement, subject to recoupment by the Management Company
under Section 4.2 hereof. The Management Company will be designated as an
additional insured under all such insurance policies. If the Management Company
procures comprehensive professional liability insurance having the features
described in this Section 3.13 at a cost comparable to the malpractice insurance
covering the Medical Group and the Medical Personnel as of the Effective Date,
the Medical Group and the Medical Personnel will accept coverage under the
insurance so procured by the Management Company. If either (i) applicable law
does not permit the Management Company to procure and maintain comprehensive
professional liability insurance covering the Medical Group and the Medical
Personnel or (ii) the Management Company is unable to procure comprehensive
professional liability insurance having the features described in this Section
3.13 at a cost comparable to the malpractice insurance covering the Medical
Group and the Medical Personnel as of the Effective Date, the Medical Group
hereby covenants to procure and maintain such insurance for the benefit of
itself and the Management Company throughout the term of this Agreement.
(b) The Management Company may, at its option, obtain a
$500,000 life insurance policy for each Medical Group Physician. The Medical
Group will, and will cause each Medical Group Physician to, cooperate with the
Management Company in the procurement of such policies. The Management Company
will be designated as the beneficiary under any such policies. The premiums for
such policies will be paid by the Management Company and will not be included as
Operating Costs or otherwise charged to the Medical Group.
(c) The Medical Group will maintain appropriate levels of
insurance coverage for the premises, equipment, and other assets used in
connection with the Medical Practice. The Operations Committee will determine
the appropriate level and types of coverages, as well as appropriate insurance
carriers.
3.14 Files and Records.
-----------------
(a) Patient medical records will at all times be and remain
the property of the Medical Group and will be kept at a location that is readily
accessible for patient care. To the extent permitted by applicable law, the
Management Company will supervise, manage and maintain custody of all files and
records relating to the operation of the business of the Medical Group. In
accordance with applicable law, the Management Company will preserve the
confidentiality of patient medical records and use information contained in such
records only for the limited purposes necessary to perform the Management
Services. In no event will a breach of such confidentiality be deemed a default
under this Agreement if the Management Company acted reasonably and in good
faith to protect such confidentiality.
(b) All books and records relating to the business operation
of the Medical Practice that are not patient medical records ("Business
Records") will at all times be the property of the Management Company. The
Management Company will maintain custody of the Business Records, and the
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Management Company will provide the Medical Group, upon its written request,
with copies of any of the Business Records relating to the Management Services
performed by the Management Company.
(c) Following the termination of this Agreement, the Medical
Group will allow (to the extent permitted by law) the Management Company to
review and copy the patient medical records and any other pertinent information
regarding the Medical Group during the Term. Prior to accessing such patient
medical records, the Management Company will obtain any required patient
authorization. Following the termination of this Agreement, the Management
Company will provide, upon the Medical Group's written request, photocopies of
the Business Records to the Medical Group.
3.15 Managed Care Contracts.
----------------------
(a) Subject to the Management Company's compliance with
applicable law and upon the request of the Medical Group, the Management Company
will advise the Medical Group with respect to, and negotiate and administer, all
contractual arrangements with third parties for the Medical Group's provision of
Medical Group Services. No contract or arrangement regarding the provision of or
payment for Medical Group Services will be entered into unless the parameters
and criteria established by the Operations Committee are met.
(b) If the Management Company is not then managing a physician
practice group other than the Medical Group in the same market area, the
Operations Committee will make recommendations to the Medical Group regarding
the fees to be charged for Medical Group Services. If the Management Company is
then managing another physician practice group in the same market, the
Management Company will advise and consult with the Medical Group regarding the
fees for Medical Group Services only to the extent that it will be legally
permissible. In such instance, the Medical Group will be solely responsible for
establishing the fees for Medical Group Services and the Management Company will
have no authority whatsoever with respect to the establishment of such fees. In
consulting with the Medical Group, the Management Company may not disclose to
the Medical Group or use as a basis for its recommendations to the Medical Group
any fee or pricing information for any other medical practice in a market area
overlapping in whole or in part with the Medical Group's market area and may not
engage in any conduct or activity which might be construed to constitute price
fixing or collusion.
(c) The Management Company will assist the Medical Group in
developing and implementing utilization management programs, and protocols for
practice management, disease management and delivery of care.
3.16 Budgets.
-------
The Management Company will prepare, for the review and approval of the
Operations Committee, annual operating budgets (the "Budgets") reflecting in
reasonable detail projected xxxxxxxx, Collections, Medical Group Costs, and
Operating Costs (all as hereinafter defined). The Medical Group and the
Management Company agree that the Budget(s) attached hereto as Schedule 3.16 is
(are) the Budget(s) for the Medical Group with respect to the time period(s) set
forth thereon. All Budgets will be on a calendar year basis. The Management
Company will prepare and submit to the Operations Committee all subsequent
Budgets on or before December 15 of the year immediately preceding the calendar
year for which such Budget is applicable.
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ARTICLE IV
COSTS, COMPENSATION, AND OTHER PAYMENTS
4.1 Consideration.
-------------
In consideration of the Medical Group's entering into this Agreement,
the Management Company will pay the Medical Group and to each person identified
on Schedule 4.1 the consideration set forth on Schedule 4.1, the allocation of
which has been determined and apportioned by the Medical Group.
4.2 Management Fee and Compensation of the Medical Group.
----------------------------------------------------
(a) Calculation of Management Fee. The compensation payable by
the Medical Group to the Management Company for the provision of Management
Services under this Agreement (the "Management Fee") will be equal to the sum of
(i) an amount equal to [10-15%] of Collections plus (ii) the total amount of the
Operating Costs plus (iii) an amount equal to sixty-six and two-thirds percent
(66 2/3%) of the Professional Practice Cost Savings (which will be calculated as
described in Exhibit B ) plus (iv) a transition fee of $60,000 per Medical Group
Physician for reimbursement of integration costs incurred during the first month
of the Term, which is payable in amounts no less than $5,000 per month for the
first twelve months of this Agreement plus (v) $500 per Medical Group Physician
per month for payroll services and accounts payable services if requested by the
Medical Group and if the Management Company agrees to provide such services.
Notwithstanding the preceding language of this Section 4.2, the minimum
Management Fee for the first five years of this Agreement will be [85% of
projected Management Fee] per year.
(b) Monthly Payment. On each Payment Date (as hereinafter
defined) during the Term, the Management Company will distribute to the Medical
Group an amount equal to the gross amount of Collections received during the
previous calendar month, less the amount of the Management Fee payable for such
month (the "Medical Group Payment"). The Management Company shall no more often
than quarterly, reconcile the actual Collections, Management Company Costs and
Medical Group Costs since the preceding reconciliation against the Medical Group
Payments and Management Fees paid during such period. Any adjustments resulting
from any such reconciliations will be added to or subtracted from, as
applicable, the next Medical Group Payment.
(c) Medical Group Compensation -- Monthly Draw. On each Draw
Date (as defined below) during the Term hereof, the Management Company shall
distribute to the Medical Group an amount equal to the gross amount of
Collections received during the previous calendar month, less the amount of the
Management Fee payable for such month.
(d) Annual Settlement. On or before January 31 of each year
during the Term, the Management Company shall calculate the amount of the
Management Fee earned by the Management Company for the previous calendar year.
If the total of the Management Fee amounts received by the Management Company
during the previous calendar year exceeds the amount of the Management Fee thus
determined, the Management Company shall pay to the Medical Group, on or before
February 15, an amount equal to such excess. If the Management Fee thus
determined exceeds the total of the Management Fee amounts received by the
Management Company during such year, the Management Company may retain from
current Collections an amount equal to such excess.
(e) For purposes of this Agreement --
(i) "Collections" means, for any applicable period,
all cash or cash equivalents received during such period for Medical
Group Services, including amounts received
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for services rendered prior to the date of this Agreement, and
including any capitation payments received during such period, less any
refunds paid during such period.
(ii) "Draw Date" means the fifth business day after
the last day of each calendar month during the term.
(iii) "Medical Group Services" means the following
services rendered by, through, or on behalf of the Medical Group: all
professional services rendered by or under the supervision of any of
the Medical Personnel (including professional services rendered in
connection with New Ancillary Services); all diagnostic radiology
services rendered by or under the supervision of any of the Medical
Personnel; all diagnostic tests and other services rendered by
Technical Personnel; all other ancillary services (other than New
Ancillary Services); all prosthetics, prosthetic devices, orthotics,
braces, splints, appliances, and other items and supplies that are
billable to patients or to third party payors; and depositions, record
review services, court appearances, independent medical exams, and
athletic team services.
(iv) "Payment Date" means, the fifth business day
after the last day of each calendar month during the Term.
(v) Collections and Medical Group Services do not
include any of the following: New Ancillary Services (excluding
professional services rendered by Medical Personnel in connection
therewith, which professional services are included under Section
4.2(d)(iii) above); interest income; sublease income, if any; royalties
payable to any Medical Group Physician for medical inventions; proceeds
from the sale of any capital assets of the Medical Group; or income
from investments.
4.3 Medical Group Costs.
-------------------
Except as otherwise provided in this Agreement, the Medical Group is
responsible for paying all of the costs specified in this Section 4.3 (the
"Medical Group Costs"). All Medical Group Costs will be incurred in the name of
the Medical Group, and not in the name of the Management Company, and will be
paid from an account of the Medical Group and not from any bank account of the
Management Company. At the Medical Group's request and expense, the Management
Company may coordinate the payment of Medical Group Costs. The Medical Group
Costs are as follows:
(a) compensation of, including any applicable fringe benefits,
all Medical Personnel, including, but not limited to, payroll taxes, workers'
compensation, health insurance (including drug coverage), dental insurance,
disability insurance, life insurance, 401(k) retirement plan, business buy-out
disability insurance and continuing education;
(b) the cost of any items which are not required to be
provided by the Management Company under this Agreement and/or which were
ordered, purchased, or incurred by the Medical Group directly, including but not
limited to the cost of accounting, legal, consulting, or other professional or
advisory services, business meetings, and business taxes.
4.4 Management Company Costs.
------------------------
(a) The Management Company will pay all Operating Costs and
all Excluded Costs (collectively, the "Management Company Costs"). All
Management Company Costs will be incurred in the name of the Management Company,
and not in the name of the Medical Group, except as specifically approved by the
Medical Group. Management Company Costs will not include any costs or expenses
incurred prior to the Effective Date.
11
(b) For purposes of this Agreement, "Operating Costs" means
all costs and expenses incurred in connection with the provision of the
Management Services, other than costs and expenses defined as Medical Group
Costs and any Excluded Costs (as hereinafter defined). If the Medical Group and
the Management Company mutually determine that an expenditure not included in
the Operating Cost budget needs to be incurred in connection with the provision
of Management Services hereunder, such expenditure will be included in Operating
Costs for purposes of this Agreement. "Excluded Costs" means all of the
following costs and expenses incurred in connection with the provision of the
Management Services hereunder:
(i) New Medical Office Start-Up Costs; and
(ii) corporate overhead of the Management Company
("Corporate Overhead") except to the extent that all of the following
conditions are satisfied:
(A) The Corporate Overhead is incurred in
lieu of an expense that would otherwise be part of Operating Costs;
(B) The amount of such Corporate Overhead
does not exceed the amount of the Operating Costs being eliminated; and
(C) The Corporate Overhead is allocated to
the Medical Group and to all other medical groups utilizing such Corporate
Overhead on a pro rata basis.
Any Corporate Overhead that satisfies the conditions set forth in Section
4.4(c)(ii) will be considered Operating Costs.
4.5 New Medical Office Start-Up Costs.
---------------------------------
(a) Upon the approval of the Operations Committee, a medical
office (other than those listed on Schedule 3.2) may be opened (a "New Medical
Office"). The Management Company will create a separate division for purposes of
accounting for the income, costs, profits, and losses of any New Medical Office
("New Medical Office Division"). The Management Company will pay, to the extent
provided herein, all costs associated with the establishment of such New Medical
Office other than Medical Group Costs ("New Medical Office Start-Up Costs").
(b) Beginning on the day the New Medical Office is first
opened for the treatment of patients, the xxxxxxxx, collections, costs and
expenses relating to any New Medical Office will be included in the computation
of Collections and the Management Fee.
(c)If the New Medical Office is profitable (as determined by
the Management Company) as of the end of the New Medical Office Start-Up Period,
at all times thereafter such New Medical Office will be treated as any other
office of the Medical Group. The Management Company, in its sole discretion, may
permanently close any New Medical Office if, as of the end of the New Medical
Office Start-Up Period, the Management Company determines that New Medical
Office is not profitable.
(d) Beginning with the month immediately following the
expiration of the New Medical Start-Up Period, the Management Company will be
entitled to recoup [, out of the profits from the New Medical Office Division,]
all of the New Medical Office Start-Up Costs previously paid by the Management
Company in sixty (60) equal monthly installments of principal, plus interest on
the unrecouped portion of such costs at the actual rate paid by the Management
Company to its senior lender.
(e) All Equipment utilized at any New Medical Office will be
acquired by the Management Company, and will be charged back to the Medical
Group on a depreciated basis over a five-year period and will be included in
Operating Costs.
12
(f) For purposes of this Agreement, "New Medical Office
Start-Up Period" means the period commencing on the date that any costs are
incurred in connection with the establishment of a New Medical Office and ending
on the last day of the twelfth full calendar month after the New Medical Office
first opened for the treatment of patients.
4.6 New Ancillary Services.
----------------------
(a) For purposes of this Agreement, "New Ancillary Services"
means the technical component (but not the professional component) of the
following: (i) physical therapy, (ii) magnetic resonance imaging and/or other
imaging services (except diagnostic radiology); (iii) orthotics; (iv) new
orthopedic technologies; and (v) other revenue-producing services generally
recognized as ancillary services, but excluding outpatient surgery and any
services provided on a regular basis by the Medical Group immediately prior to
the Effective Date. New Ancillary Services do not include the sale or provision
of (or services rendered in connection with) prosthetics, prosthetic devices,
braces, splints, bone densitometry, appliances, crutches, casts, or any other
supplies or similar items which are billable to patients or payors, all of which
are to be included in the scope of Medical Group Services.
(b) New Ancillary Services may be established only upon
approval of the Operations Committee. Such approval will be memorialized in a
written agreement executed by the parties (or in a written amendment to this
Agreement). The Management Company will agree to provide all of the Management
Services in connection with such New Ancillary Service, and will be compensated
as described in Section 4.7 below, except as otherwise agreed by the parties.
The Medical Group will not provide any New Ancillary Services other than through
this Agreement.
4.7 New Ancillary Services Costs.
----------------------------
(a) Any agreement by the parties to establish a New Ancillary
Service will (unless otherwise agreed by the parties) incorporate the following:
(i) The Management Company will create a separate
division ("New Ancillary Division") for purposes of accounting for the
income, costs, profits, and losses of any New Ancillary Service.
(ii) Profits and/or losses of any New Ancillary
Division will be divided equally between the Medical Group and the
Management Company, and all distributions to the Medical Group and to
the Management Company will be made in equal amounts to each from
available cash (after payment of all currently due obligations incurred
in connection with such New Ancillary Division, including, without
limitation, any principal and interest amounts then due and payable
under Section 4.7(a)(iv) below, and after retention of reasonable
reserves) derived from the operation of such New Ancillary Division.
(iii) All diagnostic and therapeutic equipment
utilized in connection with any New Ancillary Service ("New Ancillary
Service Medical Equipment") will be acquired or leased by the
Management Company and will be charged back to the Medical Group on a
depreciated basis over a five-year period and will be included in
Operating Costs.
(iv) The Management Company will pay all of the
Ancillary Service Start-Up Costs. Beginning with the month immediately
following the expiration of the Ancillary Service Start-Up Period, the
Management Company will be entitled to recoup all of the Ancillary
Service Start-Up Costs previously paid by the Management Company in
sixty (60) equal monthly installments of principal, plus interest on
the unrecouped portion of such costs at the actual rate paid by the
Management Company to its senior lender.
13
(v) The Management Company will provide, in
connection with any New Ancillary Service, a full range of management
services for a management fee equal to five percent (5%) of the
collections from the New Ancillary Service(s). Such management fee will
not be included in the calculation used to determine whether the
minimum Management Fee has been paid under Section 4.2.
(vi) The xxxxxxxx, collections, costs and expenses
relating to any New Ancillary Service will not be included in the
computations of Medical Group Compensation, the Management Fee,
Management Company Costs, New Medical Office Start-Up Costs, or Medical
Group Costs.
(b) For purposes of this Section 4.7, "Ancillary Service
Start-Up Period" means the period commencing on the date that any costs are
incurred in connection with the establishment of the New Ancillary Service and
ending on the earlier to occur of (i) the last day of the first period of two
(2) consecutive calendar months for which the New Ancillary Service shows a
profit (as determined by the Management Company) or (ii) the last day of the
twelfth month after the establishment of such New Ancillary Service.
(c) For purposes of this Section 4.7, "Ancillary Service
Start-Up Costs" means the total of all of the following costs incurred in
connection with the establishment of a New Ancillary Service during the
Ancillary Service Start-Up Period (whether such costs would otherwise be
considered Management Company Costs or Medical Group Costs):
(i) All costs of acquiring furniture, fixtures, and
office equipment;
(ii) All initial occupancy costs, if any, including
but not limited to prepaid rent, and tenant improvements;
(iii) All costs related to the acquisition of
materials and supplies related to the provision of such New Ancillary
Service; and
(iv) All ongoing costs directly related to the New
Ancillary Service, including but not limited to personnel (other than
the Medical Personnel) and related benefits, the cost of operating any
equipment utilized in providing the service, supplies, insurance, rent,
repairs and maintenance, outside services, telephone, taxes, utilities,
storage and other ordinary ongoing expenses of providing the New
Ancillary Service. If personnel are providing non-medical services to
the Medical Group in connection with Medical Group Services and New
Ancillary Services, the Management Company will allocate the costs of
such personnel.
4.8 New Physician Compensation Costs.
--------------------------------
(a) Notwithstanding anything contained herein to the contrary,
during the period beginning on the date a New Physician becomes affiliated with
or employed by the Medical Group and ending on the Physician Breakeven Date, the
Management Company will be responsible for the payment of all compensation paid
to a New Physician (the "New Physician Compensation"). In consideration for
paying the New Physician Compensation, the Management Company will receive
sixty-six and two-thirds percent (66-2/3%) (such amount being referred to herein
as the "New Physician Net Collections") of all collections generated by such New
Physician for those Medical Group Services performed by such New Physician. The
remaining thirty three and one-third percent (33 1/3%) of the New Physician's
collections will belong to the Medical Group. The New Physician's collections
will not be included in determining the Medical Group's Collections. From and
after the Physician Breakeven Date, the New Physician Compensation will become a
Medical Group Cost, and all of the New Physician's collections will be
considered Collections of the Medical Group.
14
(b) "New Physician" means, any physician who, at any time
after the Effective Date, has been approved by the Operations Committee and
becomes affiliated with or employed by the Medical Group. A physician will not
be a New Physician for purposes of this Agreement if such physician has entered
into an affiliation arrangement with the Management Company (or an affiliate
thereof) and is placed into the Medical Group for the convenience of the Medical
Group or the Management Company. The Operations Committee will make the final
determination as to whether a physician is a New Physician.
(c) "Physician Breakeven Date" means, with respect to any New
Physician, the date that all New Physician Net Collections (from the date the
New Physician became affiliated with or employed by the Medical Group) first
equal or exceed (i) the aggregate amount of New Physician Compensation paid to
such New Physician through such date plus (ii) the aggregate amount of that
portion of the Medical Group Costs and Management Company Costs associated with
such New Physician and/or the Medical Group Services provided by such New
Physician through such date.
4.9 Outpatient Surgery Centers.
--------------------------
If the parties agree to establish an outpatient surgery center or
similar venture, the Management Company will form a limited partnership or
limited liability company as the joint venture vehicle. In the usual case, the
Management Company will own 50% of the joint venture entity and the remaining
50% will be sold to Medical Group Physicians or other persons. The Management
Company will retain a management fee of 5% of collections from the surgery
center and the net profits from the surgery center will be divided in accordance
with the ownership percentages of the parties.
4.10 Review and Audit of Books and Records.
-------------------------------------
Each of the parties will have the right, during ordinary business hours
and upon reasonable notice, to review and make copies of, or to audit through a
qualified certified public accountant approved by the other party (which
approval will not be unreasonably withheld), the books and records of the other
party relating to the billing, collection, and disbursement of fees, and the
determination of costs, under this Agreement. Any such review or audit will be
performed at the cost of the requesting party. All documents and other
information obtained in the course of such review or audit will be held in
strict confidence.
4.11 Start-Up Period.
---------------
The parties acknowledge and agree that, in order to facilitate the
transition of responsibilities hereunder, certain requirements and procedures
agreed to under this Agreement may be implemented, in whole or in part and at
any time during the period commencing on the Effective Date and ending 90 days
thereafter (subject to extension by agreement of the Operations Committee),
rather than being fully implemented immediately on the Effective Date.
Accordingly, the parties further agree that the Management Fee applicable to
such period of time will be estimated, subject to adjustments. The parties
intend that no material financial advantage or disadvantage will accrue to
either party as a result of implementing such requirements and procedures over
the course of such start-up period rather than immediately on the Effective
Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE MEDICAL GROUP
The Medical Group hereby represents and warrants to the
Management Company, as of the Effective Date, as follows:
15
5.1 Organization; Good Standing; Qualification and Power.
----------------------------------------------------
The Medical Group is a professional corporation duly organized, validly
existing, and in good standing under the laws of ______________________. The
Medical Group has all requisite power and authority to own, lease, and operate
its properties, to carry on its business as now being conducted and as proposed
to be conducted, to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The Medical
Group has delivered to the Management Company a true and correct copy of its
articles of incorporation, its bylaws, and its shareholder agreement (or other
similar agreements) (collectively, the "Governance Documents"), in effect on the
date hereof. The Medical Group will deliver certified copies of such Governance
Documents to the Management Company upon the execution of this Agreement.
5.2 Equity Investments.
------------------
Except as set forth on Schedule 5.2, the Medical Group currently has no
subsidiaries, nor does the Medical Group currently own any capital stock or
other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture, or other entity.
5.3 Authority.
---------
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Medical Group. This
Agreement and the Financing Statement have been duly and validly executed and
delivered by the Medical Group and constitute the legal, valid and binding
obligations of the Medical Group enforceable in accordance with their respective
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally. Neither the execution, delivery or performance of this
Agreement by the Medical Group nor the consummation by the Medical Group of the
transactions contemplated hereby, nor compliance by the Medical Group with any
provision hereof will conflict with or result in a breach of any provision of
the Governance Documents, cause a default (with due notice, lapse of time or
both), or give rise to any right of termination, cancellation or acceleration,
under any of the terms, conditions or provisions of any note, bond, lease,
mortgage, indenture, license or other instrument, obligation or agreement to
which the Medical Group is a party or by which the Medical Group or any of its
properties or assets may be bound (with respect to which defaults or other
rights all requisite waivers or consents will have been obtained at or prior to
the date hereof) or violate any law, statute, rule or regulation or order, writ,
judgment, injunction or decree of any court, administrative agency or
governmental body applicable to the Medical Group or any of its properties or
assets or the Medical Practice. Except as provided on Schedule 5.3, no permit,
authorization, consent or approval of or by, or any notification of or filing
with, any person (governmental or private) is required in connection with the
execution, delivery or performance by the Medical Group of this Agreement or the
consummation of the transactions contemplated hereby.
5.4 Financial Information.
---------------------
Schedule 5.4 contains the Medical Group's internal statement of assets,
liabilities and stockholders' equity of the Medical Practice at _____________,
199__ (the "Balance Sheet"; and the date thereof being referred to as the
"Balance Sheet Date"), and the related internal statements of revenue and
expenses for the ________-month period then ended (including the notes thereto
and other financial information included therein) (collectively, the "Internal
Financial Statements"), and (b) the compiled financial statements of the Medical
Group for the periods ended December 31, 1997, December 31, 1996, and December
31, 1995 (the "Review Financial Statements"). The Internal Financial Statements
and the Review Financial Statements (i) are in accordance with the books and
records of the Medical Practice, (ii)
16
are complete and correct in all material respects and fairly present the
financial position of the Medical Practice as of the dates thereof.
5.5 Absence of Undisclosed Liabilities.
----------------------------------
Except as set forth on Schedule 5.5, as of the Balance Sheet Date, the
Medical Practice did not have any material liability of any nature (matured or
unmatured, fixed or contingent, known or unknown) which was not provided for or
disclosed on the Balance Sheet, all liability reserves established by the
Medical Practice on the Balance Sheet were adequate and there were no loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) which were not adequately provided for or disclosed on the Balance Sheet.
5.6 Absence of Changes.
------------------
Except as set forth on Schedule 5.6, since the Balance Sheet Date, the
Medical Practice has been operated in the ordinary course and consistent with
past practice and there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets (including, without limitation, levels of working capital and
the components thereof), liabilities, operations, results of operations,
earnings, business or prospects of the Medical Practice;
(b) any damage, destruction or loss (whether or not covered by
insurance) in an aggregate amount exceeding $25,000 affecting any asset or
property of the Medical Practice;
(c) any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) created or incurred,
or any transaction, contract or commitment entered into, by the Medical Practice
other than such items created or incurred in the ordinary course of the Medical
Practice and consistent with past practice;
(d) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Medical Practice outside the
ordinary course of the Medical Practice (whether absolute, accrued, contingent
or otherwise and whether due or to become due);
(e) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset of the Medical Practice except
in the ordinary course of the Medical Practice and consistent with past
practice;
(f) any write-off as uncollectible of any accounts receivable
in connection with the Medical Practice or any portion thereof in excess of
$5,000 in the aggregate exclusive of all normal contractual adjustments from
third party payors;
(g) except for all normal contractual adjustments from third
party payors, any account receivable in connection with the Medical Practice in
an amount greater than $10,000 which (i) has become delinquent in its payment by
more than 90 days, (ii) has had asserted against it any claim, refusal to pay or
right of set-off, (iii) an account debtor has refused to pay for any reason or
with respect to which such account debtor has become insolvent or bankrupt or
(iv) has been pledged to any third party;
(h) any cancellation of any debts or claims of, or any
amendment, termination or waiver of any rights of material value to, the Medical
Practice;
(i) any general uniform increase in the compensation of
employees of the Medical Group or the Medical Practice (including, without
limitation, any increase pursuant to any bonus, pension, profit-sharing,
deferred compensation arrangement or other plan or commitment) or any increase
in
17
compensation payable to any officer, employee, consultant or agent thereof, or
the entering into of any employment contract with any officer or employee, or
the making of any loan to, or the engagement in any transaction with, any
officer of the Medical Group or the Medical Practice;
(j) any change in the accounting methods or practices followed
in connection with the Medical Practice or any change in depreciation or
amortization policies or rates theretofore adopted;
(k) any agreement or commitment relating to the sale of any
material fixed assets of the Medical Practice;
(l) any other transaction relating to the Medical Practice
other than in the ordinary course of business of the Medical Practice and
consistent with past practice; or
(m) any agreement or understanding, whether in writing or
otherwise, for the Medical Practice to take any of the actions specified in
items (a) through (l) above.
5.7 Tax Matters.
-----------
(a) Except as set forth on Schedule 5.7, (i) all Taxes (as
hereinafter defined) relating to the Medical Practice required to be paid by the
Medical Group through the date hereof have been paid and all returns,
declarations of estimated Tax, Tax reports, information returns and statements
required to be filed by the Medical Group in connection with the Medical
Practice prior to the date hereof (other than those for which extensions will
have been granted prior to the date hereof) relating to any Taxes with respect
to any income, properties or operations of the Medical Group prior to the date
hereof (collectively, "Returns") have been duly filed; (ii) as of the time of
filing, the Returns correctly reflected in all material respects (and, as to any
Returns not filed as of the date hereof, will correctly reflect in all material
respects) the facts regarding the income, business, assets, operations,
activities and status of the Medical Practice and any other information required
to be shown therein; (iii) all Taxes relating to the operations of the Medical
Practice that have been shown as due and payable by the Medical Group on the
Returns have been timely paid and filed or adequate provisions made to the books
and records of the Medical Practice; (iv) in connection with the Medical
Practice (x) the Medical Group has made provision on the Balance Sheet for all
Taxes payable by the Medical Group for any periods that end on or before the
Balance Sheet Date for which no Returns have yet been filed and for any periods
that begin on or before the Balance Sheet Date and end after the Balance Sheet
Date to the extent such Taxes are attributable to the portion of any such period
ending on the Balance Sheet Date and (y) provision has been made for all Taxes
payable by the Medical Group for any periods that end on or before the date
hereof for which no Returns have then been filed and for any periods that begin
on or before the date hereof and end after such date to the extent such Taxes
are attributable to the portion of any such period ending on such date; (v) no
tax liens have been filed with respect to any of the assets of the Medical
Practice, and there are no pending tax audits of any Returns relating to the
Medical Practice; and (vi) no deficiency or addition to Taxes, interest or
penalties applicable to the Medical Group for any Taxes relating to the
operation of the Medical Practice has been proposed, asserted or assessed in
writing (or any member of any affiliated or combined group of which the Medical
Group or any previous operator of the Medical Practice was a member for which
the Medical Group could be liable).
(b) The Medical Group is not a foreign person within the
meaning of ss.1.1445-2(b) of the Regulations under Section 1445 of the Internal
Revenue Code of 1986, as amended (the "Code").
(c) The Medical Group has provided the Management Company with
true and complete copies of all Federal, state and foreign Returns of the
Medical Group for the calendar years ending December 31, 1997 and 1996.
18
(d) For purposes of this Agreement, "Tax" means any of the
Taxes and "Taxes" means, with respect to any person or entity, (i) all Federal,
state, local and foreign income taxes (including any tax on or based upon net
income, or gross income, or income as specially defined, or earnings, or
profits, or selected items of income, earnings or profits) and all Federal,
state, local and foreign gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, alternative or add-on
minimum taxes, customs duties or other Federal, state, local and foreign taxes,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such person or entity and (ii) any liability
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another person or entity or a
member of an affiliated or combined group.
5.8 Litigation, Etc.
---------------
Except as set forth on Schedule 5.8, there are no (a) actions, suits,
claims, investigations or legal or administrative or arbitration proceedings
pending or, to the best knowledge of the Medical Group, threatened against the
Medical Group or any of its Medical Personnel or in connection with the Medical
Practice, whether at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality or (b) judgments, decrees, injunctions or orders of any court,
governmental department, commission, agency, instrumentality or arbitrator
against the Medical Group, his respective assets or affecting the Medical
Practice. The Medical Group has delivered to the Management Company all
documents and correspondence relating to matters referred to in said Schedule
5.8.
5.9 Compliance; Governmental Authorizations.
---------------------------------------
The Medical Group and the Medical Practice have complied in all
material respects with all applicable material Federal, state, local or foreign
laws, ordinances, regulations and orders. The Medical Group has all Federal,
state, local and foreign governmental licenses and permits, and medical staff
privileges necessary in the conduct of the Medical Practice, the lack of which
would have a material adverse effect on the Medical Group's ability to operate
the Medical Practice after the date hereof on substantially the same basis as
presently operated, such licenses and permits are in full force and effect, the
Medical Group has not received any notice indicating that any violations are or
have been recorded in respect of any thereof, and no proceeding is pending or,
to the best knowledge of the Medical Group, threatened to revoke or limit any
thereof. To the best knowledge of the Medical Group, none of such licenses,
permits and privileges will be affected in any material respect by the
transactions contemplated hereby. Neither the Medical Group nor any of the
Medical Personnel employed by the Medical Group is now or in the last four years
has been the subject of or involved in any investigation by any Federal, state
or local regulatory agency related to its or his Medicare, Medicaid or other
third party payor billing practices.
5.10 Labor Relations; Employees.
--------------------------
(a) Schedule 5.10 contains a true and complete list of the
persons employed by the Medical Group as of the date hereof (the "Employees").
Except as set forth on Schedule 5.10, (a) the Medical Group and the Medical
Practice are not delinquent in payments to any of the Employees for any wages,
salaries, commissions, bonuses or other compensation for any services performed
by them to the date hereof or amounts required to be reimbursed to the
Employees; (b) upon termination of the employment of any of the Employees,
neither the Medical Group, the Medical Practice nor the Management Company will
by reason of anything done prior to the date hereof, or by reason of the
consummation of the transactions contemplated hereby, be liable for any excise
taxes pursuant to Section
19
4980B of the Code or to any of the Employees for severance pay or any other
payments; (c) there is no unfair labor practice complaint against the Medical
Group or in connection with the Medical Practice pending before the National
Labor Relations Board or any comparable state, local or foreign agency; (d)
there is no labor strike, dispute, slowdown or stoppage actually pending or, to
the best knowledge of the Medical Group, threatened against or involving the
Medical Group or Medical Practice; (e) there is no collective bargaining
agreement covering any of the Employees; (f) there is not pending any Equal
Employment Opportunity or other employment-related claim against the Medical
Group; and (g) to the best knowledge of the Medical Group, no Employee or
consultant is in violation of any (i) employment agreement, arrangement or
policy between such person and any previous employer (private or governmental)
or (ii) agreement restricting or prohibiting the use of any information or
materials used or being used by such person in connection with such person's
employment by or association with the Medical Group or the Medical Practice.
(b) Any Employee Pension Benefit Plan (as defined in section
3(2) of the Employee Retirement Income Security Act of 1974, as amended) meets
the qualification requirements of Section 401 of the Internal Revenue Code of
1986, as amended.
5.11 Insurance.
---------
Schedule 5.11 contains a list of all policies of professional liability
(medical malpractice), general liability, theft, fidelity, fire, product
liability, errors and omissions, health and other property and casualty forms of
insurance held by the Medical Group covering the assets, properties or
operations of the Medical Group and the Medical Practice (specifying the
insurer, amount of coverage, type of insurance, policy number and any pending
claims thereunder). All such policies of insurance are valid and enforceable
policies and are outstanding and duly in force and all premiums with respect
thereto are currently paid. Neither the Medical Group nor its predecessor in
interest has, during the last five fiscal years, been denied or had revoked or
rescinded any policy of insurance relating to the assets, properties or
operations of the Medical Group or the Medical Practice.
5.12 Burdensome Restrictions.
-----------------------
Except as set forth on Schedule 5.12, neither the Medical Group nor the
Medical Practice is bound by any oral or written agreement or contract,
restrictive covenants, or covenants not to compete that prohibit or restrict the
Medical Group or any of its Medical Personnel from conducting the Medical
Practice (or any material part thereof) or from pursuing any New Ancillary
Service.
5.13 Managed Care Contracts.
----------------------
Schedule 5.13 contains a list of all managed care contracts and all
provider agreements under which the Medical Group has agreed to provide Medical
Group Services to patients. Except as disclosed on Schedule 5.13, the Medical
Group is not subject to any most favored nations pricing or similar provisions.
Other than the Management Company, the Medical Group has not authorized any
person to enter into contracts on its behalf.
5.14 Disclosure.
----------
Neither this Agreement (including the Exhibits and Schedules attached
thereto) nor any other document, certificate or written statement furnished to
the Management Company by or on behalf of the Medical Group in connection with
the transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. Except as set forth on Schedule
5.14, there have been no events or transactions, or information which has come
to the attention of the Medical Group, which, as they relate
20
directly to the Medical Group or the Medical Practice, could reasonably be
expected to have a material adverse effect on the business, operations, affairs,
prospects or condition of the Medical Group and the Medical Practice.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE MANAGEMENT COMPANY
The Management Company represents and warrants to the Medical
Group, as of the Effective Date, as follows:
6.1 Organization, Good Standing and Power.
-------------------------------------
The Management Company (a) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and (b)
has all requisite corporate power and authority to own, lease and operate its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement, to perform its obligations hereunder, and to consummate
the transactions contemplated hereby.
6.2 Authority.
---------
The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Management
Company. This Agreement has been duly and validly executed and delivered by the
Management Company, and this Agreement is the valid and binding obligation of
the Management Company, enforceable in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally. Neither
the execution, delivery or performance of this Agreement, nor the consummation
by the Management Company of the transactions contemplated hereby, nor
compliance by the Management Company with any provision hereof or thereof, will
(a) conflict with or result in a breach of any provisions of the Certificate of
Incorporation or the Bylaws of the Management Company, (b) cause a default (with
due notice, lapse of time or both), or give rise to any right of termination,
cancellation or acceleration, under any of the terms, conditions or provisions
of any material note, bond, lease, mortgage, indenture, license or other
instrument, obligation or agreement to which the Management Company is a party
or by which it or any of its properties or assets is or may be bound (with
respect to which defaults or other rights all requisite waivers or consents will
have been obtained at or prior to the date hereof) or (c) violate any law,
statute, rule or regulation or order, writ, judgment, injunction or decree of
any court, administrative agency or governmental body applicable to the
Management Company or any of its properties or assets. Except as set forth on
Schedule 6.2, to the best of the Management Company's knowledge, no permit,
authorization, consent or approval of or by, or any notification of or filing
with, any person (governmental or private) is required in connection with the
execution, delivery or performance by the Management Company of this Agreement
or the consummation by the Management Company of the transactions contemplated
hereby.
6.3 Public Filings.
--------------
The Management Company has made available to the Medical Group each
registration statement, report, proxy statement or information statement
prepared by the Management Company since December 31, 1997, including its
prospectus dated February 4, 1998, and the Management Company's Annual Report on
Form 10-K for the year ended December 31, 1997, in the form (including exhibits,
annexes and any amendments thereto) filed with the Securities and Exchange
Commission (the "SEC") (collectively these
21
reports, including any such reports filed subsequent to the date hereof, the
"Company Reports"). As of their respective dates, the Company Reports did not,
and any Company Reports filed with the SEC subsequent to the date hereof will
not, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
Each of the consolidated balance sheets included in or incorporated by reference
into the Company Reports (including the related notes and schedules) fairly
presents, or will fairly present, the consolidated financial position of the
Management Company and its subsidiaries as of its date and each of the
consolidated statements of income and of cash flows included in or incorporated
by reference into the Company Reports (including any related notes and
schedules) fairly presents, or will fairly present, the results of operations,
retained earnings and changes in financial position, as the case may be, of the
Management Company and its subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to notes and normal year-end
audit adjustments that will not be material in amount or effect), in each case
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
ARTICLE VII
OBLIGATIONS OF THE MEDICAL GROUP
The Medical Group will perform the following obligations
during the Term:
7.1 Medical Personnel.
-----------------
The Medical Group will notify the Management Company, upon execution of
this Agreement, of the identities of all Medical Personnel. The Medical Group
will enter into employment agreements or contracts with all Medical Personnel.
All of the Medical Group's employment contracts will include a provision that
binds such Medical Personnel to the applicable provisions of this Agreement. The
Management Company reserves the right to review and approve all new employment
contracts before such contracts are used by the Medical Group. The Medical Group
will promptly provide the Management Company with all executed employment
agreements and any amendments thereto. All Medical Personnel will possess all
necessary and appropriate licenses to provide Medical Group Services and will
meet and maintain the credentialing standards established from time to time by
the Management Company or any third party payor with which the Medical Group has
an agreement to provide Medical Group Services (including without limitation
meeting all applicable continuing medical education requirements). All Medical
Group Physicians must hold staff privileges at one or more hospitals [designated
by the Management Company as participating hospitals]. The Medical Group will,
and will cause all of its Medical Group Physicians to, be participating
providers and accept assignment under Medicare.
7.2 Compliance with Laws.
--------------------
The Medical Group and the Medical Personnel will provide professional
services to patients in compliance at all times with those ethical standards,
laws and regulations to which they are subject, including, without limitation,
Medicaid and Medicare regulations. The Medical Group will monitor the quality of
medical care practiced by Medical Groups and other health care personnel
associated with the Medical Group. If any medical malpractice actions are filed
or any disciplinary or other actions are initiated against the Medical Group or
any Medical Personnel by any payor, patient, state or Federal regulatory agency
or any other person or entity, the Medical Group will immediately inform the
Management Company of such action and its underlying facts and circumstances.
7.3 Billing and Encounter Information.
---------------------------------
The Medical Group and Medical Personnel will provide timely, complete,
accurate and correct patient encounter and any other information requested by
the Management Company for the purpose of
22
submitting bills, resolving disputes and any other business purpose deemed
appropriate by the Operations Committee. The Medical Group's Medical Personnel
will be responsible for providing accurate billing information with the
appropriate current CPT4 coding with respect to the fee tickets prepared by such
Medical Personnel. Such information may include, but not be limited to the name
of the patient, the date of service, the nature and extent of services provided
and any supporting medical information, necessary to obtain payment or
reimbursement for services.
7.4 Use of Facility.
---------------
The term "Facility" means (i) any medical office or laboratory
controlled, managed or operated by the Management Company or (ii) any hospital
at which any Medical Personnel practices medicine or maintains admitting
privileges. The Medical Group will use and occupy any Facility (as defined in
clause (i) above) exclusively for the practice of medicine, and in accordance
with all applicable Federal, state and local rules, ordinances and standards of
medical care. The medical practice(s) conducted at any Facility (as defined in
clause (i) above) will be conducted solely by Medical Personnel associated with
the Medical Group, and no other medical group or medical practitioner will be
permitted to use or occupy any such Facility without the Management Company's
prior written consent, which will not be unreasonably withheld or delayed.
7.5 Physician's Choice of Products, Physicians and Facilities.
---------------------------------------------------------
The Medical Group will have the exclusive control over the choice of
vendors and products utilized with respect to all prosthetics, prosthetic
devices, orthotics, braces, splints, appliances, medical supplies and
allografts. The Medical Group will have exclusive control over the choice of
specific medical groups and facilities to be utilized by the Medical Group with
respect to radiology, anesthesiology, hospitals, physical therapy, MRI, and
other medical professionals and facilities.
7.6 Insurability.
------------
The Medical Group will cooperate with the Management Company in (i)
ensuring that its Medical Personnel are insurable under commercially available
malpractice insurance policies or (ii) instituting proceedings to terminate
within two business days any Medical Personnel who is not insurable or who loses
his or her malpractice insurance eligibility. The Medical Group will notify the
Management Company in writing of any change in the insurance status of any
Medical Personnel within two days after the Medical Group receives notice of any
such change. The Medical Group will require all Medical Personnel to participate
in an on-going risk management program.
7.7 Purchasing.
----------
The Medical Group will use its best efforts to take advantage of
procurement savings for supplies and other materials needed for the provision of
Medical Group Services available through the Management Company's preferred
purchaser arrangements with various vendors. The Management Company will make
available lists of such vendors, available products, and pricing. The procedure
for calculating the Professional Practice Cost Savings is set forth on Exhibit
B.
7.8 Medical Personnel Hiring.
------------------------
The Medical Group will have the ultimate control over and
responsibility for the hiring, compensation, supervision, evaluation and
termination of its Medical Personnel; provided, however, that at the request of
the Medical Group, the Management Company will consult with the Medical Group
regarding such matters.
23
7.9 Change of Control.
-----------------
During the Term of this Agreement, the Medical Group will not enter
into any transaction (or series of transactions undertaken pursuant to a common
plan) involving the admission of new partners or stockholders, the transfer of
ownership interests, or the reorganization or restructuring of the Medical
Group, if any such transaction(s) would transfer a more than 25% of the
ownership interest in the Medical Group, without the Management Company's prior
written consent, which will not be unreasonably withheld.
7.10 Non-Competition.
---------------
In consideration of the Management Company's obligations and the
consideration to be received hereunder, and in consideration of and as an
inducement to the Management Company to consummate the transactions contemplated
by this Agreement, the Medical Group hereby (a) agrees to the non-competition
covenants attached hereto as Schedule 7.10 and (b) agrees to require each of the
Medical Group Physicians to covenant not to compete with the Management Company,
which covenant will be substantially similar to those covenants of the Medical
Group set forth on Schedule 7.10.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Medical Group.
--------------------------------
The Medical Group will indemnify, hold harmless and defend the
Management Company, its officers, directors, shareholders, employees, agents and
independent contractors from and against any and all liabilities, losses,
damages, claims, causes of action and expenses (including reasonable attorneys'
fees and expenses), whether or not covered by insurance, caused or asserted to
have been caused, directly or indirectly, by or as a result of (i) the
performance of Medical Group Services, including without limitation the
performance of such services prior to the Effective Date, (ii) any other acts or
omissions of the Medical Group and its Medical Personnel, including without
limitation any such acts or omissions that occurred prior to the Effective Date,
or (iii) any breach of any term this Agreement (including without limitation,
representations and warranties made herein and covenants undertaken hereby) by
the Medical Group and/or the Medical Personnel and/or their respective agents
and/or subcontractors (other than the Management Company).
8.2 Indemnification by Management Company.
-------------------------------------
The Management Company will indemnify, hold harmless and defend the
Medical Group, its partners, members, officers, directors, stockholders,
employees, agents and independent contractors from and against any and all
liabilities, losses, damages, claims, causes of action and expenses (including
reasonable attorneys' fees and expenses), whether or not covered by insurance,
caused or asserted to have been caused, directly or indirectly, by or as a
result of (i) the performance of Management Services, (ii) any other acts or
omissions of the Management Company and its employees or (iii) any breach of or
failure to perform any obligation under this Agreement (including without
limitation, representations and warranties made herein and covenants undertaken
hereby) by the Management Company and/or its agents, employees and/or
subcontractors (other than the Medical Group).
24
ARTICLE IX
TERMINATION
9.1 Termination by Medical Group.
----------------------------
The Medical Group may terminate this Agreement effective immediately by
giving written notice of termination to the Management Company (a) in the event
of the filing of a petition in voluntary bankruptcy or an assignment for the
benefit of creditors by the Management Company or upon other action taken or
suffered, voluntarily or involuntarily, under any Federal or state law for the
benefit of debtors by the Management Company, except for the filing of a
petition in involuntary bankruptcy against the Management Company which is
dismissed within ninety (90) days thereafter (a "Bankruptcy Event"), (b) if the
Management Company defaults in any material respect in the performance of any
duty or obligation imposed upon it by this Agreement and the Management Company
has not taken reasonable action commencing curing of such default within thirty
(30) days after written notice thereof has been given to the Management Company
by the Medical Group or the Management Company does not thereafter diligently
prosecute such action to completion; or (c) if any of the representations and
warranties made by the Management Company in Article VI is untrue or misleading
in any material respect, provided that the Medical Group has previously given
written notice to the Management Company describing in reasonable detail the
nature of the item in question and the Management Company has not cured such
matter within thirty (30) days of such notice.
9.2 Termination by Management Company.
---------------------------------
The Management Company may terminate this Agreement effective
immediately by giving written notice of termination to the Medical Group (a) in
the event of a Bankruptcy Event relating to the Medical Group, (b) if Medical
Group defaults in any material respect in the performance of any duty or
obligation imposed upon it by this Agreement and the Medical Group has not taken
reasonable action commencing curing of such default within thirty (30) days
after written notice thereof has been given to the Medical Group by the
Management Company or the Medical Group does not thereafter diligently prosecute
such action to completion, (c) if any of the representations and warranties made
by the Medical Group in Article V is untrue or misleading in any material
respect, provided that the Management Company will have previously given written
notice to the Medical Group describing in reasonable detail the nature of the
item in question and the Medical Group will not have cured such matter within
thirty (30) days of such notice, or (d) if the Medical Group is (or a material
number of Medical Personnel are) excluded from the Medicaid or Medicare program
for any reason.
9.3 Termination by Medical Group or Management Company.
--------------------------------------------------
The Medical Group and the Management Company will each have the right
to terminate this Agreement effective immediately by giving written notice of
termination to the other party upon reoccurrence of any of the events described
in Section 12.14 of this Agreement.
9.4 Effect of Termination.
---------------------
(a) Upon the termination of this Agreement in accordance with
the terms hereof, each party will pay in full and satisfy any and all
outstanding obligations of the parties accruing through the effective date of
termination, including those obligations set forth in this section.
(b) Upon the termination of this Agreement, the Management Fee
described in Section 4.2 will be reconciled on or before the end of the fourth
month following the termination date, rather than the date specified in Section
4.2(b), and the computation made under such Section will be made with
25
respect to the portion of the year ending on the termination date (if the
termination date is other than December 31). In making such computation, all
Collections during the three-month period following termination will be
included.
(c) (i) The Medical Group acknowledges that the Management
Company has entered into this Agreement in contemplation that the Management
Company will accrue benefits from this Agreement over the course of many years.
The Medical Group and the Management Company also agree that if this Agreement
is terminated during the first ten years of the Term, the Management Company
will suffer substantial monetary damages and losses, the amount of which will be
extremely difficult or impossible to determine. Accordingly, the parties agree
to the liquidated damages and termination fee provisions set forth in this
Section 9.4(c) if this Agreement is terminated during the first ten years of the
Term.
(ii) In the event of any termination of this Agreement by
either the Medical Group or the Management Company at any time during the first
five years of the Term, the Medical Group will pay to the Management Company, as
liquidated damages and a termination fee, a sum equal to five times the minimum
Management Fee described in Section 4.2(a), which sum the parties hereby agree
is reasonable (the "Liquidated Damages Amount"). In the event of any termination
of this Agreement by either the Medical Group or the Management Company at any
time after the fifth anniversary of the Effective Date but prior to the tenth
anniversary of the Effective Date, the Medical Group will pay to the Management
Company, as liquidated damages and a termination fee, a sum equal to 50% of the
Liquidated Damages Amount. Any sum payable pursuant to the terms of this Section
9.4(c) will be paid in full, in cash, not later than sixty days following the
date upon which notice of termination is given.
(iii) The agreement of the parties to a liquidated damages
or a termination fee in the event of termination of this Agreement during the
first ten years of the Term is not intended to restrict or limit any damages to
which either party otherwise may be entitled in the event of termination after
the first ten years, but prior to the expiration, of the Term. Whether or not
either party may be entitled to damages in any such event will be determined
without reference to or consideration of this Section 9.4(c).
ARTICLE X
NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 Non-Disclosure.
--------------
(a) Neither the Management Company nor the Medical Group, nor
their respective employees, stockholders, consultants or agents may, at any time
after the execution and delivery hereof, directly or indirectly disclose any
Confidential or Proprietary Information relating to the other party hereto to
any person, firm, corporation, association or other entity, nor will either
party, or their respective employees, stockholders, consultants or agents make
use of any of such Confidential or Proprietary Information for its or their own
purposes or for the benefit of any person, firm, corporation or other entity
except the parties hereto or any subsidiary or affiliate thereof. The foregoing
obligation will not apply to any information which a party hereto can establish
to have (a) become publicly known without breach of this Agreement by it or
them, (b) to have been given to such party by a third party who is not obligated
to maintain the confidentiality of such information, or (c) is disclosed to a
third party with the prior written consent of the other party hereto.
(b) For purposes of this Article X, the term "Confidential or
Proprietary Information" means all information known to a party hereto, or to
any of its employees, stockholders, officers, directors or consultants, which
relates to this Agreement, patient medical and billing records, trade secrets,
books and records, supplies, pricing and cost information, marketing plans,
strategies and forecasts. Nothing
26
contained herein will prevent a party hereto from furnishing Confidential or
Proprietary Information pursuant to a direct order of a court of competent
jurisdiction.
ARTICLE XI
TERM
Subject to such start-up procedures as the parties may agree upon for
purposes of facilitating the transition of responsibilities required by this
Agreement, the performance of services under this Agreement will commence as of
__________, 1998 and will expire on the fortieth anniversary of the Effective
Date unless terminated earlier pursuant to the terms hereof (the "Base Term").
The Base Term of this Agreement will be automatically extended for successive
five-year terms (each extension, together with the Base Term, the "Term") unless
either party delivers written notice to the other party of its intent to not
extend the Term of this Agreement. Such notice must be delivered not less than
six (6) months nor more than nine (9) months prior to the expiration of the
then-current Term.
ARTICLE XII
MISCELLANEOUS
12.1 Assignment.
----------
Neither the Management Company nor the Medical Group will have the
right to assign their respective rights and delegate their respective
obligations hereunder without the prior written consent of the other party;
provided, however, the Medical Group's consent will not be required in
connection with any assignment by the Management Company arising out of or in
connection with a sale of all or substantially all of the stock or assets of the
Management Company or the merger, consolidation, or reorganization of the
Management Company.
12.2 Notices.
-------
All notices, requests, consents and other communications hereunder will
be in writing and will be deemed sufficient if personally delivered, telecopied
(with original sent by mail), sent by nationally-recognized overnight courier,
or by registered or certified mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Management Company, to:
BMJ Medical Management, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxx, General Counsel
Telecopier: (000) 000-0000
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
North Point
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Xx., Esq.
Telecopier: (000) 000-0000
27
if to the Medical Group, to:
_________________________
_________________________
_________________________
Telecopier: ( ) - ;
with a copy to:
_________________________
_________________________
_________________________
Attention: ______________
Telecopier:______________
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such notice
or communication will be deemed to have been received (a) in the case of
personal delivery and telecopier, on the date of such delivery, (b) in the case
of nationally-recognized overnight courier, on the next business day after the
date when sent, and (c) in the case of mailing, on the third business day
following the day on which the piece of mail containing such communication is
posted.
12.3 Benefits of Agreement.
---------------------
This Agreement will bind and inure to the benefit of any successors to
or permitted assigns of the Management Company and the Medical Group.
12.4 Severability.
------------
The parties intend and desire that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. Accordingly, if any
particular provision of this Agreement is adjudicated by a court of competent
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, will be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of this Agreement or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it will, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
12.5 Governing Law.
-------------
This Agreement will be governed by and construed and enforced in
accordance with the laws of the State of Delaware without giving effect to the
laws and principles thereof, or of any other jurisdiction, which would direct
the application of the laws of another jurisdiction.
28
12.6 Headings.
--------
Section headings are used for convenience only and will in no way
affect the construction of this Agreement.
12.7 Entire Agreement; Amendments.
----------------------------
This Agreement and the exhibits and schedules hereto contain the entire
understanding of the parties with respect to its subject matter, and neither
this Agreement nor any part of it may in any way be altered, amended, extended,
waived, discharged or terminated except by a written agreement signed by all of
the parties against whom enforcement is sought.
12.8 Attorneys' Fees.
---------------
If a dispute or controversy arises out of or relating to this
Agreement, the prevailing party will be entitled to recover from the other party
all reasonable costs and expenses, including attorneys' fees and accountants'
fees, incurred in connection with such dispute or controversy to the extent
permitted by law.
12.9 Counterparts.
------------
This Agreement may be executed in counterparts, and each such
counterpart will be deemed to be an original instrument, but all such
counterparts together will constitute but one agreement.
12.10 Waivers.
-------
Any party to this Agreement may, by written notice to the other party,
waive any provision of this Agreement. The waiver by any party of a breach of
any provision of this Agreement will not operate or be construed as a waiver of
any subsequent breach.
12.11 Survival of Termination.
-----------------------
Notwithstanding anything contained herein to the contrary, Sections
3.14, 7.10, 8.1, 8.2, 12.2, 12.3, 12.4, 12.5, 12.7, 12.8, 12.11, and Articles IX
and X will survive any expiration or termination of this Agreement.
12.12 Force Majeure.
-------------
The Management Company will not be liable to the Medical Group for
failure to perform any of the services required herein in the event of strikes,
lock-outs, calamities, acts of God, unavailability of supplies, changes in
applicable law or regulations or other events over which the Management Company
has no control for so long as such events continue and for a reasonable time
thereafter.
12.13 Legend on Securities.
--------------------
During the Term of this Agreement, any certificate or similar evidence
representing an equity interest in the Medical Group issued by the Medical Group
will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS
ON TRANSFER CONTAINED IN THE MANAGEMENT SERVICES AGREEMENT EFFECTIVE AS OF
___________________, 1998, BETWEEN ________________ AND BMJ MEDICAL MANAGEMENT,
INC., A DELAWARE CORPORATION."
29
12.14 Change in Law.
-------------
If any state or Federal laws or regulations, now existing or enacted or
promulgated after the date hereof, are interpreted by judicial decision, a
regulatory agency or legal counsel of both parties in such a manner as to
indicate that the structure of this Agreement may be in violation of such laws
or regulations, the Medical Group and the Management Company will amend this
Agreement as necessary to avoid such violation. To the maximum extent possible,
any such amendment will preserve the underlying economic and financial
arrangements between the Medical Group and the Management Company. If an
amendment is not possible, either party will have the right to terminate this
Agreement. Any dispute between the parties hereto arising under this Section
12.14 with respect to whether this Agreement violates any state or Federal laws
or regulations or whether an amendment is possible will be jointly submitted by
the parties and finally settled by binding arbitration in Delaware, pursuant to
the arbitration rules of the National Health Lawyers Association Alternative
Dispute Resolution Service. Arbitration will take place before one arbitrator
appointed in accordance with such rules. The governing law of the arbitration
will be the law set forth in Section 12.5. Any decision rendered by the
arbitrator will clearly set forth the factual and legal basis for such decision.
The decision rendered by the arbitrator will be non-appealable and enforceable
in any court having jurisdiction thereof. The administrative costs of the
arbitration and the arbitrator fees will be equally borne by the parties. Each
party will pay its own legal costs and fees in connection with such arbitration.
BMJ MEDICAL MANAGEMENT, INC.
By:____________________________
Name:
Title:
[MEDICAL GROUP]
By:____________________________
Name:
Title:
Acknowledged and Accepted by the
Medical Group Physicians
-------------------------------
Name:
-------------------------------
Name:
30
-------------------------------
Name:
-------------------------------
Name:
-------------------------------
Name:
-------------------------------
Name:
31
