EXECUTION COPY
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MANAGEMENT SERVICES AGREEMENT
BETWEEN
BMJ MEDICAL MANAGEMENT, INC.
AND
NEW JERSEY ORTHOPEDIC ASSOCIATES, P.A.
Effective as of November 1, 1997
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THIS MANAGEMENT SERVICES AGREEMENT (the
"Agreement") is entered into on November
26, 1997 (the "Signature Date"),
effective as of November 1, 1997, by and
between NEW JERSEY ORTHOPEDIC
ASSOCIATES, P.A., a New Jersey
professional association (the "Medical
Group"), and BMJ MEDICAL MANAGEMENT,
INC., a Delaware corporation (the
"Management Company"), with reference to
the facts set forth below.
A. The Medical Group is engaged in the business (the "Medical Business")
of providing orthopedic medical and surgical services and related medical and
ancillary services to the general public.
B. The Management Company is a corporation engaged in the business (the
"Management Business") of providing management, administrative, financial,
marketing, information technology, and related services to professional medical
organizations.
C. Prior to the Signature Date, the Medical Business was conducted
through Orthopedic Associates of New Jersey, P.A., a New Jersey professional
association whose stockholders also own all of the issued and outstanding
capital stock of the Medical Group ("OANJ").
D. Concurrently herewith, the Management Company and OANJ are entering
into an Asset Purchase Agreement (the "Asset Purchase Agreement"), in the form
of Exhibit A attached hereto, pursuant to which the Management Company is
acquiring substantially all of the assets of OANJ that are used in the Medical
Business as conducted by the Medical Group, except for the accounts receivable
of OANJ or the Medical Group (all of which shall be retained by OANJ or the
Medical Group), as the case may be.
E. The Management Company and the Medical Group desire to enter into this
Agreement, pursuant to which, among other things, the Management Company will
render certain management and administrative services to the Medical Group.
NOW, THEREFORE, the Medical Group and the Management Company hereby agree
as follows:
SECTION 1. Retention of the Management Company.
1.1. Retention.
The Medical Group hereby retains the Management Company to provide all of
the management and related services identified or referenced in Section 3 hereof
and as otherwise required by this Agreement (collectively, the "Management
Services"), and the Management Company hereby accepts such retention and agrees
to provide such services, upon the terms and subject to the conditions set forth
herein.
1.2. Exclusivity.
During the term of this Agreement, the Management Company shall be the
exclusive provider of all management and administrative services utilized by the
Medical Group; provided, however, that the Medical Group may contract directly
with or otherwise engage individuals or companies for the provision of
accounting, legal, consulting, or other professional or advisory services
(provided that such services shall be in addition to, and not in replacement of,
the services to be provided by the Management Company hereunder), all in the
sole discretion of the Medical Group and at the sole cost of the Medical Group.
1.3. Relationship of Parties.
Notwithstanding anything contained herein to the contrary, (a) the
Management Company and the Medical Group intend to act and perform as
independent contractors, and the provisions
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hereof are not intended to create any partnership, joint venture, or employment
relationship between the parties, and (b) the Management Company is hereby
engaged solely to provide management and administrative services to the Medical
Group and shall not interfere with, control, direct, or supervise the Medical
Group or any medical professional employed by the Medical Group in connection
with the provision of professional medical services.
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, purchase, or any other arrangement for the provision of any
item or service to or for any of the Medical Group's patients in or from any
medical facility or laboratory or from any other entity owned, operated,
controlled, or managed by the Management Company.
SECTION 2. Term.
Provided that the Closing under the Asset Purchase Agreement shall have
occurred as provided therein, and 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 shall commence as of November 1, 1997 (the "Commencement Date")
and shall expire on the fortieth anniversary of the Commencement Date unless
terminated earlier pursuant to the terms hereof (the "Base Term"). The Base Term
of this Agreement shall be automatically extended for successive terms (each, an
"Additional Term," and together with the Base Term, the "Term") of five years
each, unless either party delivers to the other party, not less than six (6)
months nor more than nine (9) months prior to the expiration of the then-current
Term, written notice of such party's intention not to so extend the Term of this
Agreement.
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SECTION 3. Management Services.
3.1. Management Services Generally.
(a) The Management Company shall be the sole and exclusive manager and
administrator of all day-to-day business functions for the Medical Group,
subject to the provisions of Section 1.2 hereof. The Management Company shall
provide all of the management and administrative services reasonably required by
the Medical Group in connection with the provision of any and all of the Medical
Group Services (as hereinafter defined) and as otherwise provided in this
Agreement, including without limitation the services described in Sections 3.2
through 3.18 hereof.
(b) Without limiting the generality of the provisions of Section 3.1(a),
and subject to the further provisions of this Agreement, the Management Services
shall include such management and administrative services as may be reasonably
required in connection with (i) all of the offices (including New Medical
Offices, as hereinafter defined) of the Medical Group, and (ii) all professional
services and all ancillary services furnished by the Medical Group.
(c) Additionally, the full range of Management Services as described in
this Agreement shall be applicable with respect to the items identified as
Medical Group Costs in Section 5.6 hereof, except that such Medical Group Costs
shall be paid by the Medical Group rather than by the Management Company.
Accordingly, the Management Company shall provide accounting, bookkeeping, and
related services with respect to all such costs.
(d) The Management Company may enter into such contracts and agreements
with outside services and suppliers as the Management Company shall reasonably
deem necessary in connection with the provision of the Management Services, and,
to the extent permitted by applicable law, such contracts and
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agreements shall, except as otherwise expressly provided in this Agreement, be
in the name of the Management Company. The Management Company shall have no
authority, directly or indirectly, to perform, and shall not perform or enter
into any agreement to perform, Medical Group Services or any other medical
function required by law to be performed by a licensed physician or by any other
licensed health care professional.
(e) The Management Company shall comply in all material respects with all
applicable material Federal, state and local laws, regulations, and ordinances
in connection with the provision of the Management Services hereunder.
3.2. Premises.
(a) The Medical Group, as of the Commencement Date, leases premises and
provides Medical Group Services at the following locations:
Xxxxxxxx Xxxxxx Xxxxx
XXXX 0
0000 Xxxxx 0 Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
(b) A New Medical Office (as hereinafter defined) may be opened only upon
the agreement of the Medical Group and the Management Company. The capital costs
and start-up costs reasonably required in connection with the opening of any New
Medical Office shall be borne as set forth in Section 5.5 hereof. The premises
of any New Medical Office shall be leased by the Management Company, in the
Management Company's name, and the Management Company shall sublease such
premises to the Medical Group pursuant to a sublease (each, an "Office
Sublease"), substantially in the form attached hereto as Exhibit B, in
consideration of the payments to be made by the Medical Group under such
sublease.
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(c) Except as set forth in Sections 3.2(a) or (b) above, the closing or
relocation of any offices of the Medical Group shall be subject to agreement by
the Medical Group and the Management Company.
(d) The services to be provided by the Management Company with respect to
the premises leased in accordance with this Section 3.2 shall include (subject
to the prior approval of the Medical Group) the negotiation and renegotiation of
leases, provision of ongoing liaison with the landlords of the respective
premises, identification of potential new locations for Medical Group offices,
financial analysis relating to the opening, closing, and relocation of any
offices, arrangement of necessary repairs, maintenance and improvements,
procurement of property insurance, arrangement of telephone and other utility
services, and hazardous waste disposal, and all other reasonably necessary or
appropriate services related to all of the offices of the Medical Group.
(e) The Management Company also shall provide all necessary or
appropriate leasehold improvements to each of the premises, subject to prior
approval as provided in Section 8.2 hereof.
(f) The Medical Group acknowledges that the Management Company makes no
warranties or representations, expressed or implied, regarding the condition of
any of the leased premises.
3.3. Equipment.
(a) During the Term, the Management Company shall provide to the Medical
Group the diagnostic and therapeutic medical equipment reasonably required by
the Medical Group in connection with the provision of Medical Group Services
(collectively, the "Medical Equipment"). Except as set forth below, the
Management Company shall acquire (or lease), at its
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cost, all Medical Equipment, and the Management Company shall retain ownership
of (or the leasehold interest with respect to) all Medical Equipment; provided,
however, that if the Management Company fails or refuses to purchase an item of
Medical Equipment after request is made by the Medical Group and the Medical
Group thereafter purchases such item, then such item shall be the sole property
of the Medical Group and shall not be deemed "Medical Equipment" for purposes of
this Agreement. As used herein, the term Medical Equipment shall not include
medical equipment used in connection with a New Ancillary Service (as
hereinafter defined). Notwithstanding anything to the contrary contained in this
Agreement, the Medical Group acknowledges and agrees that the Management Company
shall charge back to the Medical Group the Management Company's depreciation
cost for Medical Equipment purchased pursuant to this Section 3.3(a); provided,
however, that there shall be no charge back of depreciation for Medical
Equipment purchased by the Management Company pursuant to the Asset Purchase
Agreement.
(b) The Management Company also shall provide or arrange for the
provision of all furniture, furnishings, trade fixtures, and office equipment
reasonably required in connection with the provision of Medical Group Services
pursuant to this Agreement (collectively, "FF&E"). Except as set forth below,
the Management Company shall acquire, at its cost, all FF&E, and the Management
Company shall retain ownership of all FF&E; provided, however, that if the
Management Company fails or refuses to purchase an item of FF&E; after request
is made by the Medical Group and the Medical Group thereafter purchases such
item, then such item shall be the sole property of the Medical Group and shall
not be deemed "FF&E" for purposes of this Agreement. The Management Fee payable
to the Management Company under this Agreement is intended to compensate the
Management Company for the provision of FF&E for use by the Medical Group. As
used herein, the term FF&E does not include furniture, furnishings, trade
fixtures, and office equipment used in connection with a
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New Ancillary Service. Notwithstanding anything to the contrary contained in
this Agreement, the Medical Group acknowledges and agrees that the Management
Company shall charge back to the Medical Group the Management Company's
depreciation cost for FF&E purchased pursuant to this Section 3.3(b); provided,
however, that there shall be no charge back of depreciation for FF&E purchased
by the Management Company pursuant to the Asset Purchase Agreement.
(c) The Medical Equipment and the FF&E are sometimes referred to
collectively as the "Equipment." The acquisition, replacement, relocation, or
other disposition of any Equipment by the Management Company shall require prior
approval as provided in Section 8.2 hereof.
(d) The Medical Group's right to use the Equipment shall be subordinate
to the rights of any unaffiliated third party to which the Management Company
elects, in its sole discretion, to grant any security interest, mortgage, lien
or other encumbrance in or on the Equipment. The Medical Group shall use the
Equipment only in connection with its provision of the Medical Group Services,
and the Medical Group shall not alter, repair, augment, or remove the Equipment
from the premises of the Medical Group without the prior written consent of the
Management Company and any lessor thereof, which approval may be granted or
withheld in the Management Company's or such lessor's sole discretion. To the
extent the Equipment is utilized by the Medical Group in the provision of
Medical Group Services, the Medical Group shall have the right to exercise
reasonable control over the use of such Equipment.
(e) From time to time, and as reasonably requested by the Medical Group,
the Management Company shall use reasonable efforts to cause the Equipment
manufacturer or its authorized agent to provide service and maintenance for the
Equipment as needed to maintain the Equipment in an operable condition, so
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that all such Equipment shall function continuously (subject to interruptions
not reasonably avoidable) in accordance with the manufacturer's specifications
and so that all conditions imposed by the manufacturer to maintaining the
continued effectiveness of any warranty on such Equipment shall be satisfied.
The Management Company shall take all reasonable steps to provide that all
necessary service and maintenance is obtained in a prompt and timely manner, so
as to minimize the amount of time that any of the Equipment is not available for
usage by or for patients of the Medical Group.
(f) THE MEDICAL GROUP ACKNOWLEDGES THAT THE MANAGEMENT COMPANY MAKES NO
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER
RELATING TO THE EQUIPMENT PROVIDED TO THE MEDICAL GROUP PURSUANT TO THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE DESIGN CONDITION OF THE EQUIPMENT,
THE CONFORMANCE THEREOF TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE
ORDER RELATING THERETO, OR THE FITNESS OF THE EQUIPMENT FOR ANY PARTICULAR
PURPOSE. Nothing in this Agreement shall be construed to affect or limit in any
way the professional discretion of the Medical Group to select and use any
Equipment acquired by the Management Company in accordance with the terms of
this Agreement insofar as such selection or use constitutes or might constitute
the practice of medicine.
3.4. New Ancillary Services.
(a) For purposes of this Agreement, "New Ancillary Services" means the
technical component (but not the professional component) of the following,
except as set forth in Schedule I:
(i) Physical therapy;
(ii) Magnetic resonance imaging and/or other imaging
services (except diagnostic radiology);
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(iii) Outpatient surgery;
(iv) Densitometry; and
(v) Other revenue-producing services generally
recognized as ancillary services, but excluding
the following:
(A) Any services provided on a regular basis
by the Medical Group immediately prior
to the Commencement Date, including
without limitation (1) plain film and
other diagnostic radiology (if any) and
(2) ultrasound for pediatric patients;
and
(B) Any service performed in connection with
new Medical Equipment acquired to
replace existing Medical Equipment so
long as the new Medical Equipment
performs substantially the same
functions as the replaced Medical
Equipment.
New Ancillary Services do not include the sale or provision of (or services
rendered in connection with) prosthetics, prosthetic devices, orthotics, braces,
splints, 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 agreement of the
Medical Group and the Management Company. Such agreement shall be memorialized
in a written agreement executed by the parties (or in a written amendment to
this Agreement) under which the Management Company agrees to provide all of the
Management Services described in this Section 3 in
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connection with such New Ancillary Service, and for which the Management Company
shall be compensated as described in Section 5.7 of this Agreement, except as
may otherwise be agreed upon by the parties.
3.5. Administration, Finance and Accounting.
The Management Company shall provide or arrange for the provision of all
administrative, financial, and accounting functions necessary for the operation
of the Medical Group, including, without limitation, the following (if
applicable):
(A) Creation and maintenance of bank
accounts.
(B) Deposits of receipts.
(C) Preparing accounts receivable summary
reports, including various analyses of
delinquent accounts.
(D) Receiving appropriate approvals as
required by the Medical Group's
Certificate of Incorporation and By-laws
(the "Governance Documents") prior to
distribution of payments to outside
parties; provided, however, that the
Management Company shall not be
responsible for or liable with respect
to interpretations of the Governance
Documents.
(E) Negotiation of vendor contracts.
(F) Performing monthly accounting functions,
including bank reconciliations,
maintenance of books
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and records, and preparation of
financial statements.
(G) Analyzing financial data as reasonably
requested by physicians.
(H) Analyzing potential New Medical Office
locations, and coordinating all
functions associated with opening New
Medical Office locations.
(I) Preparing monthly financial and medical
practice statistics reports by satellite
office and by physician.
(J) Ongoing day-to-day communication with
the managing stockholder (or other
manager of the Medical Group) and
assisting such person in fulfilling his
responsibilities.
(K) Preparing agendas and information
packages for Medical Group meetings.
(L) Developing budgets and long-term
strategies for the Medical Group.
(M) Coordinating payroll processing and
payroll tax payments.
(N) Providing ongoing personnel FTE
analysis.
(O) Sponsoring employee benefit plans and
providing administrative services
relating thereto for the Medical
Personnel (as hereinafter defined),
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provided that if the Medical Group
elects not to participate in the
employee benefit plans established by
the Management Company, the Management
Company shall not be required to perform
the services set forth in this clause
(O).
(P) Coordinating (1) recruitment, (2)
interviewing, and (3) hiring of new
physicians.
(Q) Implementing fee schedule increases
and/or decreases established by the
Medical Group.
(R) Coordinating depositions and court
appearances.
(S) Assisting in the coordination of call
schedules; provided, however, that final
decisions on all call schedules shall be
made by the Medical Group.
(T) Assisting in the coordination of
coverage of athletic team events.
(U) Acting as liaison to hospital
administration, physical therapy,
surgery center, MRI, and other ancillary
services entities.
(V) Cooperating with outside accountants in
preparing various schedules and
providing other information.
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(W) Interacting with legal counsel as
necessary.
3.6. Billing and Collection.
(a) Ownership of all Accounts (as hereinafter defined) shall at all times
remain the sole and exclusive property of the Medical Group. In order to
facilitate the collection of the Accounts, the Management Company shall continue
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, Blue Cross and Blue Shield
organizations, insurance companies, health care plans, Medicare, Medicaid, HMOs,
and any and all other third party payors; (iv) deposit into such bank (the
"Medical Group Bank") as the Medical Group designates, in an account established
by the Medical Group in the name of the Medical Group (the "Medical Group
Collections Account"), any and all checks, insurance payments, cash, cash
equivalents and other instruments received for Medical Group Services; and (v)
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 shall promptly turn
over to the Management Company for deposit into the Medical Group Collections
Account in accordance with this Agreement all checks and other payments received
by the Medical Group or by any of its stockholders or employees from any patient
or third party payor for Medical Group Services rendered during the Term.
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(b) From time to time at the Management Company's request, the Medical
Group shall make available to the Management Company one or more authorized
signatories (the "Authorized Signatories") of the Medical Group to sign any
letters, checks, instruments or other documents (the "Documents") on behalf of
the Medical Group that are necessary for the Management Company to take the
actions specified in this Section 3.6 and to perform its duties under this
Agreement. If the Management Company notifies the Medical Group that an
Authorized Signatory is not signing the Documents in a timely manner, the
Management Company shall not be liable for any failure to perform its duties
hereunder or for any failure to perform the Management Services to the extent
caused by the failure of an Authorized Signatory to sign the Documents in a
timely manner.
(c) The Management Company shall submit all bills and manage the billing
process on a timely basis in accordance with the terms of this Agreement and
applicable law.
(d) Without limiting the generality of the foregoing, the Management
Company shall xxxx patients, xxxx and submit claims to third party payors,
perform appropriate coding for each xxxx, and collect all fees for professional
and other services rendered and for items supplied to patients by the Medical
Group, all in a timely manner and in accordance with parameters and criteria
established by the Operations Committee (as hereinafter defined). Additionally,
the Management Company shall provide the following services which are currently
being provided by or on behalf of the Medical Group:
(i) Receive and collect from patients at the time of visit
all appropriate payments and pre-payments, including co-pays,
deductibles, payments for non-covered medical services, and deposits
for surgeries (if applicable), and obtain all appropriate insurance
and other information required.
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(ii) Submit claims utilizing electronic billing submission,
whenever appropriate.
(iii) Perform delinquent account collection calls and other
appropriate follow-up mechanics for delinquent accounts of all
insurance classifications, all in a timely fashion as determined by
the Operations Committee.
(iv) Turn over to outside collection agencies all delinquent
accounts satisfying the criteria established by the Operations
Committee. The Management Company shall also follow-up on the
performance of the outside collection agencies and make changes, if
necessary, and shall reconcile each account turned over to the summary
data provided by the collection agency.
(v) Write-off account balances according to criteria
approved by the Medical Group.
(vi) Prepare claim reviews in accordance with criteria
approved by the Medical Group.
(vii) Xxxx workers' compensation medical services at rates
equal to the most recently approved state workers' compensation fee
schedule.
(viii) Apply "insurance only" and other courtesy write-offs
in compliance with Medical Group policy.
(ix) With respect to discounted fee-for-service contracts
with Preferred Provider Organizations (PPOs) and Health Maintenance
Organizations (HMOs), determine that payments from such PPOs and HMOs
are in compliance with their respective contracts with the Medical
Group.
(x) With respect to capitation fee contracts with HMOs:
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(A) Follow-up to ensure that payments to the
Medical Group are made on a timely
basis; and
(B) Review and audit enrollment data
provided by the HMO to ensure that the
capitation payments are based on the
proper number of lives enrolled.
(xi) With respect to lien accounts, the Management Company
shall:
(A) Ensure that appropriate documents are
signed and agreed to initially as
between the Medical Group, attorney and
patient;
(B) Follow-up on a regular basis as to the
status of the account; and
(C) Apply the policies of the Operations
Committee in resolving open account
balances.
(xii) With respect to student athlete accounts, the
Management Company shall coordinate insurance and other information in
compliance with the policy of the Operations Committee.
(xiii) With respect to amounts withheld by payors in
compliance with contracts between the payor and the Medical Group,
follow-up on a timely basis to ensure that withheld amounts are paid,
if warranted, and to ensure that amounts not paid are verified and
audited for appropriateness.
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(xiv) Coordinate the timely payment of refunds to patients
and third party payors when appropriate.
3.7. Administrative Personnel.
(a) The Management Company shall retain and provide or arrange for the
retention and provision of the following non-medical personnel necessary for the
conduct of the Medical Group's business operations (collectively,
"Administrative Personnel"):
(i) Administration;
(ii) Accounting;
(iii) Billing and Collection;
(iv) Secretarial;
(v) Transcription;
(vi) Appointments;
(vii) Switchboard;
(viii) Medical Records;
(ix) Chart Preparation;
(x) Historians;
(xi) Clinic Support; and
(xii) Marketing.
(b) The Management Company shall determine and pay, or arrange for the
payment of, the salaries and fringe benefits of the Administrative Personnel,
and shall provide or arrange for other personnel services related to the
Administrative Personnel, including, but not limited to, scheduling, determining
personnel policies, administering continuing education benefits, and payroll
administration. The salaries, fringe benefits and other costs associated with
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the Administrative Personnel shall be the sole and exclusive costs of the
Management Company and not the Medical Group.
(c) With respect to each applicable new employee in Administrative
Personnel, the Management Company shall, as reasonably necessary, verify, or
arrange for the verification of, educational and employment experience,
licensure, and insurability.
(d) The Management Company shall attempt, consistent with sound business
practices, to honor Medical Group requests with regard to the retention or
assignment of specific Administrative Personnel to the Medical Group. In the
event that the Management Company receives a complaint from the Medical Group
that any of the Administrative Personnel is interfering with or disrupting the
provision of Medical Group Services by the Medical Group, the Management Company
will use reasonable efforts to attempt to promptly remedy any such complaint. If
any such complaint is not remedied to the reasonable satisfaction of the Medical
Group, then the Management Company shall remove such Administrative Personnel,
if requested by the Medical Group, from the Medical Group's facilities, if and
to the extent such action by the Management Company will not violate any
applicable law.
3.8. Technical Personnel; Leased Employees.
(a) Subject to the conditions set forth in this Section 3.8, the
Management Company shall, to the extent permitted by applicable law, employ or
contract with, or shall arrange for, and shall 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 Business. The determination of
whether Technical Personnel is required shall be made by the Medical Group in
its reasonable discretion. The salaries, fringe benefits and other costs
associated with the Technical Personnel shall be the sole and exclusive costs of
the Management Company and not the Medical Group.
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(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 physician under
the physician's supervision; provided that such personnel may be employed by a
business corporation under the laws of the State of New Jersey.
(c) The Medical Group shall have the right to exercise, and shall
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. Without
limiting the generality of the foregoing, the Medical Group shall:
(i) have the right to have any Technical Personnel
terminated from employment;
(ii) furnish the Technical Personnel with the equipment and
supplies needed by the Technical Personnel for their work;
(iii) provide the Technical Personnel with any necessary
training;
(iv) instruct the Technical Personnel regarding their
activities performed for the Medical Group;
(v) establish the hours of work for the Technical Personnel;
(vi) approve vacation time and other time off from work; and
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(vii) provide that degree of supervision as is required by
Medicare and by other third party payors to satisfy applicable
conditions for coverage thereunder.
(d) With respect to each of the Technical Personnel, the Management
Company shall verify, or arrange for the verification of, educational and
employment experience, licensure and insurability, and shall review and provide
the Medical Group with copies of any complaints contained in public files with
applicable state and Federal commissions.
3.9. Medical Personnel Recruiting.
(a) The Management Company shall, upon request by the Medical Group,
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; and
(ii) Physician assistants, 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).
(b) With respect to each of the Medical Personnel, the Management Company
shall verify or arrange for the verification of educational and employment
experience, licensure and insurability, and shall review and provide the Medical
Group with copies of any complaints contained in public files with applicable
state and Federal commissions.
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3.10. Inventory and Supplies.
The Management Company shall order and purchase, or arrange for the order
and purchase of, 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. Such
inventory and supplies shall be purchased and made available in a manner such
that the Medical Business is not materially impaired and, in any case, as soon
as commercially practicable after request by the Medical Group. Inventory and
supplies shall include, but not be limited, to:
(A) Medical supplies;
(B) Office supplies;
(C) Postage;
(D) Computer forms and supplies;
(E) Printing and stationery supplies;
(F) Printer supplies; and
(G) Linen and laundry supplies.
3.11. Taxes.
The Management Company shall provide the Medical Group with access to all
information necessary for the Medical Group to prepare its tax returns. The
Management Company shall have no responsibility for:
(A) The payment of the Medical Group's
taxes; or
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(B) The preparation of any income tax
returns for the Medical Group.
3.12. Information Systems Management.
(a) The Management Company shall, within a reasonable period of time
after the Signature Date, provide or arrange for the provision of management
information systems services to be utilized by the Medical Group. These services
shall include, but not be limited to, ongoing maintenance and enhancement of the
existing information systems used by the Medical Group in connection with the
provision of the following services:
(i) Accounts receivable - Billing/Insurance/
Collections;
(ii) On-line appointment scheduling;
(iii) Internal e-mail;
(iv) On-line transcription;
(v) Faxing subsystem;
(vi) Electronic claims submission;
(vii) Patient flow monitoring system;
(viii) Authorization module;
(ix) Prescription module;
(x) X-ray tracking system;
(xi) Voice mail;
(xii) Paperless medical records; and
(xiii) Bar code chart tracking system.
(b) The services provided by the Management Company shall protect the
confidentiality of patient medical records to the extent required by applicable
law or the Medical
-23-
Group's payor agreements; provided, however, that in no event
shall a breach of such confidentiality be deemed a default under this Agreement
if the Management Company acted reasonably, and without gross negligence or
willful misconduct, and in good faith to protect such confidentiality.
3.13. Use of New Technologies in the Practice of Medicine.
The Management Company shall utilize reasonable efforts to promote the
integration of new technologies into the professional practice of the Medical
Group, including, without limitation, the use of satellite and other
telecommunications services that permit the provision of remote consultations,
virtual operations, and other professional services; provided, however, that the
foregoing shall be subject to the terms of Section 8.2(e) hereof.
3.14. Public Relations; Marketing and Advertising.
The Management Company shall develop and implement community outreach
programs and public relations programs designed to educate the patient
population regarding the Medical Group, the availability of its medical
services, and the availability in terms of any managed care programs in which
the Medical Group participates. The Management Company also shall develop and
implement marketing and advertising programs as reasonably required to promote
and expand the Medical Business, subject to any approved budgets and the
approval of the Operations Committee. These programs shall be developed in such
manner as the Management Company deems practical, and shall be conducted in
compliance with applicable laws and regulations governing advertising by the
medical profession.
3.15. Insurance.
The Management Company shall, to the extent permitted by applicable law,
provide the insurance coverage described in
-24-
Section 12.1, and may obtain the insurance described in Section 12.2 of this
Agreement.
3.16. Files and Records.
(a) To the extent permitted by applicable law, the Management Company
shall supervise and maintain custody of all files and records relating to the
operation of the business of the Medical Group, including, without limitation,
accounting, billing, collection, and patient medical records. The management of
all files and records shall be in compliance with applicable state and Federal
statutes. Patient medical records shall at all times be and remain the property
of the Medical Group and shall be located at a location that is readily
accessible for patient care. The Management Company shall 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 set forth herein; provided, however, that in no event shall a breach of
such confidentiality be deemed a default under this Agreement if the Management
Company acted reasonably, and without gross negligence or willful misconduct,
and in good faith to protect such confidentiality.
(b) The Management Company shall provide all off-site storage of files
and records as required and in conjunction with policies established by the
Operations Committee. The Management Company shall provide the Medical Group
with all requested off-site files and records on a timely basis, consistent with
the policies of the Medical Group in effect immediately prior to the
Commencement Date. Any change in such policies shall be subject to the approval
of the Operations Committee.
(c) In the event of termination of this Agreement, the Management Company
shall deliver to the Medical Group at no charge a copy of the books and records
of the Medical Group in the Management Company's possession. In the event any
physician
-25-
of the Medical Group terminates his affiliation with the Medical Group during
the Term, the Management Company shall, within 30 days after receipt of written
instructions from the Medical Group, deliver to such physician a copy of the
books and records pertaining to the Medical Group Services provided by such
physician during the five years prior to such physician's departure from the
Medical Group; provided; however that the Management Company shall not be
obligated to return any books and records pertaining to Medical Group Services
provided prior to the Commencement Date, if any such books and records are not
in the Management Company's possessions.
3.17. Managed Care Contracts.
The Management Company shall solicit, negotiate and administer all
managed care contracts on behalf of the Medical Group based on parameters and
criteria established by the Operations Committee. Such services shall be
performed by the Management Company as agent of the Medical Group, and all
managed care contracts shall be subject to the Medical Group's prior approval of
any such contract. The Management Company shall prepare cost forecasts and other
analyses as reasonably requested by the Medical Group in order to allow the
Medical Group to make an informed decision with respect to each proposed
contract.
3.18. Budgets.
The Management Company shall 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
Management Company Operating Costs (all as hereinafter defined); provided,
however, that the Medical Group and the Management Company hereby agree that the
budget(s) attached hereto as Schedule II is (are) the Budget(s) for the Medical
Group with respect to the time periods set forth thereon. All other budgets
shall be on a
-26-
calendar year basis. The Management Company shall 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.
3.19. Force Majeure.
The Management Company shall 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.
SECTION 4. Consideration.
In consideration of the Medical Group's entering into this Agreement, the
Management Company shall provide to the Medical Group and to each person
identified on Schedule III attached hereto (the "Eligible Parties") the
consideration set forth on Schedule III, the allocation of which has been
determined and apportioned by the Medical Group.
SECTION 5. Costs, Compensation, and Other Payments.
5.1. Ownership of Accounts.
The Medical Group shall at all times retain ownership of all accounts
receivable and other rights to payment arising from the provision by the Medical
Group of Medical Group Services (as hereinafter defined) to the general public
during the Term (the "Accounts").
5.2. Definitions.
For purposes of this Agreement, the following terms have the meanings set
forth below:
-27-
(a) "Xxxxxxxx" means, for any applicable period, the gross charges of the
Medical Group for all Medical Group Services furnished during such period.
(b) "Collections" means, for any applicable period (regardless of when
Xxxxxxxx are made or Medical Group Services are rendered), all cash or cash
equivalents received during such period for Medical Group Services, including
any capitation payments, less any refunds paid during such period.
(c) "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
plain film and other diagnostic radiology services rendered by or under the
supervision of any of the Medical Personnel; all other ancillary services (other
than New Ancillary Services); all ultrasound for pediatric patients; all
prosthetics, prosthetic devices, orthotics, braces, splints, appliances, and
other items and supplies that are billable to patients or to third party payors;
and independent medical exams; and all other services provided on a regular
basis by the Medical Group immediately prior to the Commencement Date (except as
set forth below).
(d) It is the intent of the parties that Xxxxxxxx, Collections, and
Medical Group Services not include any of the following:
(i) New Ancillary Services (excluding professional services
rendered by Medical Personnel in connection therewith, which
professional services are included under Section 5.2(c) above);
(ii) interest income;
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(iii) royalties payable to any Medical Group physician for
medical inventions;
(iv) fees payable under consulting agreements entered into
by Medical Group physicians;
(v) revenues from presentations, publications, medical
directorships, service as the head of a hospital department, and
endorsements;
(vi) proceeds from the sale of any capital assets of the
Medical Group;
(vii) any income from investments; and
(viii) any fees earned in connection with records, reports
and testimony prepared or performed for any legal action.
Notwithstanding anything to the contrary contained therein, any revenues
received by any Billable Medical Personnel (as hereinafter defined) from any
source set forth in clauses (iv) and (v) above, shall be included in Xxxxxxxx,
Collections and Medical Group Services if the revenues from Medical Group
Services generated by such Billable Medical Personnel during any year are
materially reduced by the Billable Medical Personnel's participation in such
activities.
5.3. Management Fee.
(a) Calculation of Management Fee. The compensation payable to the
Management Company for the provision of Management Services under this Agreement
(the "Management Fee"), shall be equal to the sum of (i) an amount equal to the
Applicable Percentage (as hereinafter defined) of Collections plus (ii) the
total amount of the Authorized Management Company Operating Costs plus (iii) an
amount equal to sixty six and
-29-
two-thirds percent (66-2/3%) of the Professional Practice Cost Savings (as
hereinafter defined) plus (iv) any amounts owed to the Management Company
pursuant to Section 5.10 hereof, if any; provided, however, that in the event
the Applicable Percentage of Collections shall equal an amount that is less than
$240,840 for any calendar year ending on or before December 31, 2002 (excluding
the year ending on December 31, 1997), the Management Fee for such period shall,
notwithstanding anything to the contrary contained herein, equal $240,840 plus
the amounts described in clauses (ii), (iii) and (iv) above (the "Guaranteed
Minimum Fee"); provided further, however, that, for so long as the Medical Group
consists solely of three (3) physicians (collectively, the "Initial Group"), in
the event that the Applicable Percentage of Collections of the Initial Group (on
a collective basis) shall equal an amount in excess of $325,842 for any calendar
year ending on or before December 31, 2002, the Management Fee for such period
shall, notwithstanding any potential calculation to the contrary, equal a
maximum of $325,842 plus the amounts described in clauses (ii), (iii) and (iv)
above (the "Initial Group Maximum Fee"). The Medical Group hereby acknowledges
and agrees that in the event the Medical Group, as of the end of any calendar
year ending on or before December 31, 2002, includes the medical practices of a
total of four or more physicians, then the maximum Management Fee payable for
such calendar year shall equal the Initial Group Maximum Fee plus the Applicable
Percentage of the Collections of those physicians not part of the Initial Group
plus the amounts described in clauses (ii), (iii), and (iv) above. For purposes
of determining those physicians comprising the Initial Group, the parties hereto
agree that those three physicians who first commenced practicing medicine with
the Medical Group (based on the date each such physician became employed by or
began practicing with the Medical Group) shall make up the Initial Group. For
illustrative purposes only, an example of the computation of the Management Fee
is set forth on Schedule VI attached hereto.
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(b) Payment of Management Fee. The Management Fee shall be payable by the
Medical Group to the Management Company every two (2) weeks during the Term. The
Management Company shall deliver to the Medical Group an invoice (the "Fee
Invoice") showing the amount of the Management Fee accrued for each two-week
period. The Medical Group shall pay the total amount of such Fee Invoice on the
business day immediately following that day on which the Management Company
delivers the Fee Invoice to the Medical Group by wire transfer of immediately
available funds to an account of the Management Company at a depository
institution designated by the Management Company.
(c) Reconciliation of Management Fee.
(i) On or before July 15 and January 15 of each calendar
year occurring during the Term, the Management Company shall, at its
cost and expense, prepare a statement (the "Semi-Annual Fee
Statement") reflecting the calculation of each component of the
Management Fee (as described in Sections 5.3(a)(i), (ii), (iii), and
(iv) above) earned for the six-month period ending on the last day of
the prior month; provided that, notwithstanding the foregoing, the
parties hereby agree that the Management Company shall not be
required to deliver a Semi-Annual Fee Statement until July 15, 1998.
Upon completion of the Semi-Annual Fee Statement, the Management
Company shall promptly deliver the same to the Medical Group, together
with supporting documentation therefor. After delivery of the
Semi-Annual Fee Statement and until the Final Determination Date (as
hereinafter defined), the Management Company shall provide the Medical
Group and its advisors with timely access to the employees and records
of the Management Company and the work papers used in connection with
the preparation of the Semi-Annual Fee Statement.
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(ii) Following receipt of the Semi-Annual Fee Statement from
the Management Company, the Medical Group will be afforded a period of
10 business days (the "First 10-Day Period") to review the Semi-Annual
Fee Statement. At or before the end of the First 10-Day Period, the
Medical Group will either (A) accept the aggregate Management Fee (as
set forth in the Semi-Annual Fee Statement) in its entirety, in which
case the aggregate Management Fee for such six-month period will be as
set forth in the Semi-Annual Fee Statement or (B) deliver to the
Management Company a written notice (the "Objection Notice")
containing a sufficiently detailed written explanation of those items
in the calculation of the aggregate Management Fee for such six-month
period (as set forth in the Semi-Annual Fee Statement) which the
Medical Group disputes, in which case the items identified by the
Medical Group shall be deemed to be in dispute. The failure by the
Medical Group to deliver the Objection Notice within the First 10-Day
Period shall constitute the Medial Group's acceptance of the aggregate
Management Fee for the applicable six-month period as set forth in the
Semi-Annual Fee Statement. If the Medical Group delivers the Objection
Notice in a timely manner, then, within a further period of 10
business days from the end of the First 10-Day Period the parties will
attempt to resolve in good faith any disputed items and reach a
written agreement (the "Settlement Agreement") with respect thereto.
Failing such resolution, the unresolved disputed items will be
referred for final binding resolution to an independent
nationally-recognized firm of certified public accountants mutually
acceptable to the Management Company and the Medical Group (the
"Arbitrating Accountants"), the fees and expenses of which shall be
borne equally by the Management Company and the Medical Group. The
actual Management Fee with respect to such six-month period will be
deemed to be as determined by the Arbitrating Accountants. Such
determination (the "Accountants' Determination") shall be
-32-
(A) in writing, (B) furnished to the Management Company and the
Medical Group as soon as practicable after the items in dispute have
been referred to the Arbitrating Accountants and (C) nonappealable and
incontestable by the Management Company, the Medical Group or any
physician stockholder or employee thereof and not subject to
collateral attack for any reason.
(iii) For purposes of this Section 5.3(c), the "Final
Determination Date" shall mean the earliest to occur of (A) the 11th
day following the receipt by the Medical Group of the Semi-Annual Fee
Statement if the Medical Group shall have failed to deliver the
Objection Notice to the Management Company within the First 10-Day
Period, (B) the date on which either the Medical Group or the
Management Company gives the other a written notice to the effect that
such party has no objection to the other party's determination of the
Management Fee for the applicable six-month period, (C) the date on
which the Medical Group and the Management Company execute and deliver
a Settlement Agreement and (D) the date as of which the Medical Group
and the Management Company shall have received the Accountants'
Determination.
(iv) If the Management Fee payable with respect to any
six-month period (as determined in accordance with the provisions of
this Section 5.3(c), (the "Decided Management Fee")) is less (the
"Overpayment Amount") than the sum of the Fee Invoices that were
actually paid by the Medical Group for such period, then the
Management Company shall, within ten (10) business days after the
Final Determination Date, refund to the Medical Group the full
Overpayment Amount. If the Decided Management Fee is more (the
"Underpayment Amount") than the sum of the Fee Invoices that were
actually paid by the Medical Group for such period, then the Medical
Group shall, within ten (10)
-33-
business days after the Final Determination Date, pay the Management
Company the full Underpayment Amount. Notwithstanding anything to the
contrary contained in this Section 5.3(c)(iv), for each calendar year
ending on or before December 31, 2002, if either the Guaranteed
Minimum Fee or the Initial Group Maximum Fee (as described in
paragraph (a) above) shall be applicable, the foregoing amounts shall
be adjusted in accordance therewith.
(d) For purposes of this Section 5.3, the following terms
have the meanings set forth below:
(i) "Applicable Percentage" has the meaning set
forth on Schedule IV; and
(ii) "Professional Practice Cost Savings" means
the cost savings determined in the manner described on
Schedule V.
5.4. Management Company Costs.
(a) The Management Company shall pay all Management Company Operating
Costs and all Excluded Costs (collectively, the "Management Company Costs"). All
Management Company Costs shall 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 shall not include any
costs or expenses incurred prior to the Commencement Date.
(b) The Management Company shall provide to the Medical Group, upon
reasonable request by the Medical Group from time to time, supporting
documentation and other backup detail relating to any or all of the Management
Company Costs.
(c) For purposes of this Agreement, "Management Company Operating Costs"
means all costs and expenses incurred in
-34-
connection with the provision of the Management Services, including, without
limitation, the salaries and benefits payable to Administrative Personnel and
Technical Personnel and those other costs and expenses set forth in the Budget,
except that any costs and expenses defined as Medical Group Costs in Section 5.6
hereof, and any Excluded Costs (as hereinafter defined) shall not be deemed
Management Company Operating Costs. To the extent that the Medical Group and the
Management Company mutually determine that an expenditure not included in the
Budget needs to be incurred in connection with the provision of Management
Services hereunder, such expenditure shall be included in Management Company
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 (excluding
depreciation);
(ii) the rent and any other payments due under any of the
Office Leases;
(iii) the cost of any Medical Equipment owned or acquired by
the Management Company for the use by the Medical Group (excluding
depreciation);
(iv) the cost of any FF&E provided by the Management Company
to the Medical Group (excluding depreciation);
(v) depreciation, amortization, and interest; and
(vi) corporate overhead of the Management Company
("Corporate Overhead") except to the extent that all of the following
conditions are satisfied:
-35-
(A) The Corporate Overhead is incurred in
lieu of a pre-existing Management
Company Operating Cost;
(B) The amount of such Corporate Overhead
does not exceed the amount of the
Management Company 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 with respect to which all of the above conditions are
satisfied shall be considered Management Company Operating Costs.
(d) For purposes of this Agreement, "Authorized Management Company
Operating Costs" means all Management Company Operating Costs incurred in any
year reduced by any or all of the following, as applicable:
(i) any costs that exceed the applicable Management Company
Operating Costs Budget which are not approved by the Operations
Committee;
(ii) any costs with respect to which the Medical Group has
reasonably requested supporting documentation or other backup detail
which has not been furnished by the Management Company or which does
not reasonably establish the appropriateness of such costs; and
(iii) any costs that have been determined pursuant to an
audit under Section 5.8 not to have been
-36-
reasonably incurred in connection with the Management Services
required to be provided under this Agreement.
5.5. New Medical Office Start-Up Costs.
(a) The Management Company shall pay, to the extent provided herein, all
New Medical Office Start-Up Costs incurred in connection with the establishment
of any New Medical Office. The Management Company shall create a separate
division (the "New Office Division") for purposes of accounting for the income,
costs, profits, and losses of any New Medical Office. The Management Company
shall utilize generally accepted accounting principles in determining and
accounting for the profits and losses related to the operations of each New
Medical Office. Notwithstanding anything to the contrary contained herein,
Corporate Overhead shall not be included in determining the costs and expenses
associated with any New Medical Office.
(b) For each New Medical Office, the Medical Group shall open a bank
account (the "New Medical Office Bank Account") separate from the Medical Group
Collections Account, which bank account shall be used to deposit all Collections
received for Medical Group Services rendered at such New Medical Office. The
Medical Group shall instruct the bank at which the New Medical Office Bank
Account is maintained to transfer, on a daily basis during the New Medical
Office Start-Up Period (as hereinafter defined), all funds in the New Medical
Office Bank Account (less the amount necessary to avoid the payment of bank
charges or fees relating to the failure to maintain a minimum balance in the New
Medical Office Bank Account) to a bank designated by the Management Company, for
credit to an account in the Management Company's name.
(c) If the aggregate Collections for such New Medical Office during the
New Medical Office Start-Up Period are equal to or greater than the sum of (x)
the New Medical Office
-37-
Start-Up Costs associated with such New Medical Office and (y) the Management
Fee payable with respect to the Collections of such New Medical Office, in each
case during the New Medical Office Start-up Period, the Management Company shall
pay to the Medical Group the excess of such Collections, if any, and all
Collections received beginning on the day after the end of the New Medical
Office Start-Up Period for such New Medical Office shall be deposited into the
Medical Group Collections Account and shall no longer be deposited into the New
Medical Office Bank Account. Such New Medical Office shall thereafter, for all
purposes of this Agreement, be treated as any other office of the Medical Group.
If the aggregate Collections for such New Medical Office during the New Medical
Office Start-Up Period are less than the sum of (A) the New Medical Office
Start-Up Costs associated with such New Medical Office and (B) the Management
Fee payable with respect to the Collections of such New Medical Office, in each
case during the New Medical Office Start-Up Period, (1) the Management Company
shall be responsible for the deficit, if any, associated with such New Medical
Office; provided that the aggregate amount of Collections received during the
New Medical Office Start-Up Period for such New Medical Office shall belong
solely to the Management Company and (2) the Operations Committee shall
determine whether to maintain such office for the provision of Medical Group
Services, and if such decision is in the affirmative, then the Medical Group
shall be required to fund all costs that fall within the definition of New
Medical Office Start-Up Costs incurred during the period beginning on the day
after the end of the New Medical Office Start-Up Period and, for all purposes of
this Agreement, such New Medical Office shall be treated as any other office of
the Medical Group.
(d) Except to the extent provided in Section 5.5(d) above, the Xxxxxxxx,
Collections, costs and expenses relating to any New Medical Office shall not,
during the New Medical Office Start-Up Period, be included in the computations
-38-
of the Management Fee, Management Company Costs, or Ancillary Services as
described in Sections 5.3, 5.4, or 5.7, respectively.
(e) All Medical Equipment utilized at any New Medical Office shall be
acquired by the Management Company and leased to the Medical Group in accordance
with the terms of Section 3.3 hereof.
(f) For purposes of this Agreement, "New Medical Office" means any office
of the Medical Group other than those offices identified in Section 3.2(a)
hereof.
(g) For purposes of this Agreement, "New Medical Office Start-Up Costs"
means the following costs incurred in connection with the establishment of a New
Medical Office during the New Medical Office Start-Up Period: all Management
Company Operating Costs and all costs associated with the development of such
New Medical Office other than Medical Group Costs.
(h) 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
earlier to occur of (i) the last day of the calendar month in which a period of
twelve (12) months has elapsed from and after the date on which the New Medical
Office first opened for the treatment of patients and (ii) the date on which the
Management Company first determines that the aggregate Collections of such New
Medical Office exceed the sum of the New Medical Office Start-Up Costs and the
Management Fee payable with respect to such office (excluding any Authorized
Management Company Costs, which costs shall be included in the New Medical
Office Start-Up Costs).
5.6. Medical Group Costs.
Except as otherwise provided in this Agreement, the Medical Group shall
pay all of the costs specified in this
-39-
Section 5.6 (the "Medical Group Costs"). All Medical Group Costs shall be
incurred in the name of the Medical Group, and not in the name of the Management
Company, and shall be paid from an account of the Medical Group and not from any
bank account of the Management Company. The Medical Group Costs are as follows:
(a) compensation of all Medical Personnel that (i) are
authorized to directly xxxx patients, Medicare, Medicaid and third
party payors and (ii) are employed directly by the Medical Group (such
persons being referred to herein as the "Billable Medical Personnel");
(b) any applicable fringe benefits for 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;
(c) the cost of prosthetics, prosthetic devices, orthotics,
braces, splints, appliances, allografts, x-ray films, and other items
and supplies that are billable to patients or to third party payors
(the "Billable Items");
(d) all amounts payable for all Medical Equipment under the
Medical Equipment Master Lease Agreement;
(e) any lease payments for New Ancillary Service Medical
Equipment;
(f) all rent amounts payable under the Office Subleases; and
(g) 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
-40-
other professional or advisory services, business meetings, and
business taxes.
Notwithstanding the foregoing, the Management Company shall pay all bills or
other invoices for Medical Group Costs that are submitted to the Management
Company by the Medical Group unless any such xxxx or invoice is disallowed
according to the decision of a majority of the members of the Operations
Committee; provided, however, that under no circumstances shall the Management
Company pay, or be required to pay, any costs or expenses associated with
compensation or health, life or retirement benefits payable to or for the
benefit of Billable Medical Personnel. In the event the Management Company
receives any bills or other invoices for payment pursuant to the previous
sentence, the Medical Group shall be required to reimburse the Management
Company for the full amount thereof. The Management Company shall include any
such amounts being paid by the Management Company on behalf of the Medical Group
in a Fee Invoice delivered to the Medical Group and the Medical Group shall pay
such additional amount in accordance with the provisions of Section 5.3(a)
hereof.
5.7. New Ancillary Services Costs.
(a) Any agreement by the parties to establish a New Ancillary Service as
described in Section 3.4 of this Agreement shall (unless otherwise agreed by the
parties) incorporate the following:
(i) The Management Company shall create a separate division
("Ancillary Division") for purposes of accounting for the income,
costs, profits, and losses of any New Ancillary Service. The
Management Company shall utilize generally accepted accounting
principles in determining and accounting for the profits and losses
related to the operations of each New Ancillary Service.
Notwithstanding anything to the contrary contained herein, Corporate
-41-
Overhead shall not be included in determining the costs and expenses
associated with any New Ancillary Service.
(ii) The Management Company shall pay all of the Ancillary
Service Start-Up Costs (as hereinafter defined) during the Ancillary
Service Start-Up Period (as hereinafter defined). Beginning with the
month immediately following the expiration of the Ancillary Service
Start-Up Period the Management Company shall 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 prevailing prime rate as set forth in the Wall Street Journal or
at the actual rate paid by the Management Company with respect to any
part of such costs that have been financed by the Management Company,
if applicable.
(iii) For each New Ancillary Service, the Medical Group
shall open a bank account (an "Ancillary Service Bank Account")
separate from the Medical Group Collections Account, which bank
account shall be used to deposit all payments received for the
technical component of such Ancillary Service. The Medical Group shall
instruct the bank at which the Ancillary Service Bank Account is
maintained to transfer, on a daily basis, all funds in the Ancillary
Service Bank Account (less the amount necessary to avoid the payment
of bank charges or fees relating to the failure to maintain a minimum
balance in the Ancillary Service Bank Account) to a bank designated by
the Management Company, for credit to an account in the Management
Company's name. The Management Company shall use the funds so
transferred to reduce the balance of the Ancillary Service Start-Up
Costs paid by the Management Company.
-42-
(iv) Profits and/or losses of any Ancillary Division
accruing after the end of the Ancillary Service Start-Up Period shall
be divided equally between the Medical Group and the Management
Company, and all distributions to the Medical Group and to the
Management Company shall 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 5.7(a)(ii) above), and after retention of
reasonable reserves) derived from the operation of such Ancillary
Division. As of the end of the Ancillary Service Start-Up Period, the
Management Company shall, on a quarterly basis, review the books and
records of the Ancillary Division and shall make distributions, if
any, to the Medical Group and the Management Company in accordance
with the foregoing.
(v) All diagnostic and therapeutic equipment utilized in
connection with any New Ancillary Service ("New Ancillary Service
Medical Equipment") shall be acquired by the Management Company and
leased to the Medical Group pursuant to a Medical Equipment Master
Lease Agreement.
(vi) The Management Company shall provide, in connection
with any New Ancillary Service, the full range of management services
described in this Agreement.
(vii) The xxxxxxxx, collections, costs and expenses relating
to any New Ancillary Service shall not be included in the computations
of the Management Fee, Management Company Costs, or New Medical Office
Start-Up Costs, as described in Sections 5.3, 5.4, or 5.5,
respectively.
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(b) As used herein, "Ancillary Service Reimbursement Payment" means an
amount determined by (i) taking the total Ancillary Service Start-Up Costs for
the period ending on the date of determination, (ii) adding an amount equal to
the total of the projected interest payable on such amount during the repayment
term (which interest amount shall be a good faith estimate by the Management
Company) and (iii) dividing the sum by 60.
(c) For purposes of this Section 5.7, "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:
(i) Any lease payments for New Ancillary Service Medical
Equipment;
(ii) All costs of acquiring furniture, fixtures, and office
equipment;
(iii) All initial occupancy costs, if any, including but not
limited to prepaid rent, and tenant improvements;
(iv) All costs related to the acquisition of materials and
supplies related to the provision of such New Ancillary Service; and
(v) All ongoing costs of the New Ancillary Service,
including but not limited to personnel (other than the Billable
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.
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(d) For purposes of this Section 5.7, "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 an Average Profit (as
hereinafter defined) at least equal to the amount of the Ancillary Service
Reimbursement Payment (as hereinafter defined) or (ii) the last day of the
twelfth month after the establishment of such New Ancillary Service.
(e) "Average Profit", at any point during the New Ancillary Start-Up
Period, means the average for any consecutive two month period of the remainder
(as determined in good faith by the Management Company) of the revenues less the
expenses for such New Ancillary Service.
5.8. Review and Audit of Books and Records.
Each of the parties shall 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 shall 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 shall be
performed at the cost of the requesting party. All documents and other
information obtained in the course of such review or audit shall be held in
strict confidence.
5.9. Start-Up Period.
Consistent with the provisions of Section 2 of this Agreement, 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
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implemented, in whole or in part and at any time during the period commencing on
the Commencement Date and ending 90 days thereafter (subject to extension by
agreement of the Medical Group and the Management Company), rather than being
fully implemented immediately on the Commencement Date.
5.10. New Physician Compensation Costs.
(a) Notwithstanding anything contained herein to the contrary, during the
period beginning on the New Physician Start Date (as hereinafter defined) and
ending on the Physician Breakeven Date (as hereinafter defined), the Management
Company shall reimburse the Medical Group on a monthly basis for all New
Physician Compensation (as hereinafter defined) and notwithstanding anything to
the contrary contained in this Agreement, shall receive, in consideration
therefor, 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, and such amounts shall not be included in determining Collections for
purposes of this Agreement. The remaining thirty three and one-third percent (33
1/3%) of such Collections shall belong to the Medical Group, and such amounts
shall not be included in determining Collections for purposes of this Agreement.
As of the Physician Breakeven Date, the New Physician Compensation shall become
the sole responsibility of, the Medical Group in accordance with Section 5.6
hereof, and all of the Xxxxxxxx and Collections generated by such New Physician
thereafter shall be considered Xxxxxxxx and Collections for purposes of this
Agreement.
(b) In order to accomplish the foregoing, on the date that the Medical
Group hires the first New Physician, the Medical Group shall open a bank account
(the "New Physician Account") separate from the Medical Group Collections
Account, which bank account shall be used to deposit all Collections
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received for Medical Group Services performed by any New Physician during the
period beginning on the applicable New Physician Start Date and ending on the
applicable New Physician Breakeven Date. The Medical Group shall instruct the
bank at which the New Physician Account is maintained to transfer, on a daily
basis, all funds in the New Physician Account (less the amount necessary to
avoid the payment of bank charges or fees relating to the failure to maintain a
minimum balance in the New Physician Account) to a bank designated by the
Management Company, for credit to an account in the Management Company's name.
The Management Company shall, pursuant to Section 5.10(a) above, return to the
Medical Group by wire transfer of funds on the second business day of each month
an amount equal to thirty three and one-third percent (33 1/3%) of the
Collections of each New Physician for the prior month. As of the Physician
Breakeven Date with respect to any New Physician, the Medical Group shall no
longer be required to deposit any Collections of such New Physician into the New
Physician Account, but shall deposit such Collections into the Medical Group
Collections Account.
(c) "New Physician" means, any physician who, at any time after the
Commencement Date, becomes affiliated with or employed by the Medical Group;
provided that if such physician becomes affiliated with or employed by the
Medical Group pursuant to a transaction between the Management Company and such
physician or a medical group with which such physician is affiliated in which
the Management Company acquires any assets or accounts receivable from such
physician or such medical group or pays any other consideration to such
physician or such medical group in connection with such physician's affiliation
or employment with the Medical Group and/or the Management Company, then such
physician shall not be deemed to be a New Physician for purposes of this
Agreement.
(d) "Physician Breakeven Date" means, with respect to any New Physician,
the date on which the New Physician Net
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Collections for the period beginning on the New Physician Start Date and ending
on the date of determination first equal or exceed (i) the aggregate amount of
New Physician Compensation paid to such New Physician for the foregoing period
plus (ii) 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.
(e) "New Physician Compensation" means, with respect to any New Physician
and for any period in question, the amount of compensation (wages and otherwise)
payable to such New Physician by the Medical Group.
(f) "Physician Start Date" means, with respect to any New Physician, the
date such New Physician becomes affiliated with or employed by the Medical
Group.
SECTION 6. Representations and Warranties of the Medical Group
The Medical Group hereby represents and warrants to the Management
Company, as of the Signature Date, as follows:
6.1. Organization; Good Standing; Qualification and Power.
The Medical Group is a professional association duly organized, validly
existing, and in good standing under the laws of the State of New Jersey and 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, the Asset Purchase Agreement, the Medical Equipment
Master Lease, the Office Subleases and the Stockholder Non-Competition
Agreements (as hereinafter defined) (collectively, the "Medical Group
Transaction Documents"), to perform its obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and thereby. The Medical
Group has delivered to the
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Management Company true and correct copies of its Governance Documents, in
effect on the date hereof.
6.2. Equity Investments.
Except as set forth on Schedule 6.2, 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.
6.3. Authority.
The execution, delivery and performance of this Agreement and the other
Medical Group Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action on the part of the Medical Group. This Agreement and the other
Medical Group Transaction Documents 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 or any other Medical Group Transaction Document by the Medical Group
nor the consummation by the Medical Group of the transactions contemplated
hereby or thereby, nor compliance by the Medical Group with any provision hereof
or thereof will conflict with or result in a breach of any provision of the
formation documents of the Medical Group, 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
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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 shall 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 Business. Except as provided on Schedule 6.3, to the best
of the Medical Group'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 Medical Group of this Agreement or any other Medical Group Transaction
Document or the consummation of the transactions contemplated hereby and
thereby.
6.4. Financial Information.
Schedule 6.4 contains OANJ's internal statement of assets, liabilities
and stockholders' equity of the Medical Business at June 30, 1997 (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 [nine]-month
period then ended (including the notes thereto and other financial information
included therein) (collectively, the "Internal Financial Statements"), and (b)
the internal financial statements of the Medical Business for the periods ended
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 Business, (ii) fairly
present the financial position of the Medical Business as of the dates thereof
and (iii) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby.
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6.5. Absence of Undisclosed Liabilities.
Except as set forth on Schedule 6.5, as of the Balance Sheet Date, the
Medical Business 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 Business 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.
6.6. Absence of Changes.
Except as set forth on Schedule 6.6, since the Balance Sheet Date, the
Medical Business 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 Business;
(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 Business;
(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 Business other
than such items created or incurred in the ordinary course of the Medical
Business and consistent with past practice;
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(d) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Medical Business outside the
ordinary course of the Medical Business (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 Business except in the
ordinary course of the Medical Business and consistent with past practice;
(f) any write-off as uncollectible of any accounts receivable in
connection with the Medical Business 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 Business 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 Business;
(i) any general uniform increase in the compensation of employees of
the Medical Group or the Medical Business (including, without limitation, any
increase pursuant to any bonus, pension, profit-sharing, deferred compensation
arrangement or other plan or commitment) or any increase in compensation payable
to any officer, employee, consultant or agent thereof, or the entering into of
any employment contract
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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 Business;
(j) any change in the accounting methods or practices followed in
connection with the Medical Business 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 Business;
(l) any other transaction relating to the Medical Business other than in
the ordinary course of the Medical Business and consistent with past practice;
or
(m) any agreement or understanding, whether in writing or otherwise, for
the Medical Business to take any of the actions specified in items (a) through
(l) above.
6.7. Tax Matters.
(a) Except as set forth on Schedule 6.7, (i) all Taxes (as hereinafter
defined) relating to the Medical Business required to be paid by OANJ or 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 OANJ or the Medical Group in connection with the Medical
Business prior to the date hereof (other than those for which extensions shall
have been granted prior to the date hereof) relating to any Taxes with respect
to any income, properties or operations of OANJ or 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,
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activities and status of the Medical Business and any other information required
to be shown therein; (iii) all Taxes relating to the operations of the Medical
Business that have been shown as due and payable by OANJ or the Medical Group on
the Returns have been timely paid and filed or adequate provisions made to the
books and records of the Medical Business; (iv) in connection with the Medical
Business (x) OANJ has made provision on the Balance Sheet for all Taxes payable
by OANJ 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 OANJ or 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 Business, and there are
no pending tax audits of any Returns relating to the Medical Business; and (vi)
no deficiency or addition to Taxes, interest or penalties applicable to OANJ or
the Medical Group for any Taxes relating to the operation of the Medical
Business 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 Business 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").
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(c) The Medical Group has provided the Management Company with true and
complete copies of all Federal and state Returns of the Medical Group for the
calendar years ending December 31, 1996 and 1995.
(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.
6.8. Litigation, Etc.
Except as set forth on Schedule 6.8, 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 OANJ
or the Medical Group, stockholder of the Medical Group, or in connection with
the Medical Business, 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)
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judgments, decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against OANJ or the Medical
Group, their respective assets or affecting the Medical Business. The Medical
Group has delivered to the Management Company all documents and correspondence
relating to matters referred to in said Schedule 6.8.
6.9. Compliance; Governmental Authorizations.
The Medical Group and the Medical Business 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 necessary in the conduct of
the Medical Business, the lack of which would have a material adverse effect on
the Medical Group's ability to operate the Medical Business 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 and permits shall be affected in any
material respect by the transactions contemplated hereby. Neither the Medical
Group, OANJ 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.
6.10. Accounts Receivable; Accounts Payable.
(a) Except as set forth on Schedule 6.10, all of the accounts receivable
owing to OANJ or the Medical Group in
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connection with the Medical Business as of the date hereof constitute valid and
enforceable claims arising from bona fide transactions in the ordinary course of
the Medical Business.
(b) All accounts payable and notes payable by the Medical Business to
third parties arose in the ordinary course of business and, except as set forth
in Schedule 6.10, there is no account payable or note payable past due or
delinquent in its payment.
6.11. Labor Relations; Employees.
Schedule 6.11 contains a true and complete list of the persons employed
by OANJ or the Medical Group as of the date hereof (the "Employees"). Except as
set forth on Schedule 6.11, (a) neither OANJ, the Medical Group nor the Medical
Business is 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 Business 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 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 OANJ or the Medical Group or in connection with the Medical
Business 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 OANJ or the Medical Group or the Medical
Business; (e) there is no collective bargaining agreement covering any of the
Employees; and (f) to the best knowledge of the Medical Group, no Employee or
consultant is in violation of any (i) employment agreement,
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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
Business.
6.12. Employee Benefit Plans.
(a) Schedule 6.12 identifies each 'employee benefit plan', as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other written or oral plans, programs, policies or agreements
involving direct or indirect compensation (including any employment agreements
entered into between the Medical Group or the Medical Business and any Employee
or former employee of the Medical Group or in connection with the Medical
Business, but excluding workers' compensation, unemployment compensation and
other government-mandated programs) currently or previously maintained or
entered into by the Medical Group or in connection with the Medical Business for
the benefit of any Employee or former employee of the Medical Group or in
connection with the Medical Business under which the Medical Group, any
affiliate thereof or the Medical Business has any present or future obligation
or liability (the "Employee Plans"). The Medical Group has provided the
Management Company with true and complete salary, service and related data for
Employees of the Medical Group and in connection with the Medical Business.
(b) Schedule 6.12 lists each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation or
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other forms of incentive compensation or post-retirement insurance,
compensation or benefits currently maintained by the Medical Group or in
connection with the Medical Business.
(c) Except as set forth on Schedule 6.12, (i) each Employee Plan has been
operated and administered in compliance with ERISA, the Code and in accordance
with the provisions of all other applicable Federal and state laws; (ii) all
reporting and disclosure obligations imposed under ERISA and the Code have been
satisfied with respect to each Employee Plan; (iii) no breaches of fiduciary
duty or prohibited transactions have occurred with respect to any Employee Plan;
and (iv) all reporting, disclosure and bonding obligations have been satisfied
with respect to each Employee Plan.
(d) The Medical Group has made available to the Management Company a true
and complete copy of each Employee Plan and a true and complete copy of each of
the following documents, prepared in connection with such Employee Plan; (i)
each trust or other funding arrangement, (ii) the two most recently filed Annual
Reports (Form 5500), including attachments, for each Employee Plan, and (iii)
the most recently received IRS determination letter.
6.13. Insurance.
Schedule 6.13 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 or the Medical Business (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
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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 Business.
6.14. Real Property.
Schedule 6.14 sets forth an accurate and complete legal description of
the entire right, title and interest of the Medical Group in and to all real
property, together with all buildings, facilities, fixtures and improvements
located on such real property, owned or leased by the Medical Group (the "Real
Property"), together with an accurate description of the title insurance policy
or other evidence of title issued with respect thereto, the most current survey
of such real property and a description of the use thereof. Other than the Real
Property, the Medical Group has no other interest (leasehold or otherwise) in
real property used, held for use or intended to be used in the Medical Business.
The Medical Group has a valid leasehold interest in all Real Property leased by
the Medical Group. True and complete copies of all leases to which the Medical
Group is a party or by which the Medical Group leases space have been delivered
to the Management Company.
6.15. Burdensome Restrictions.
Except as set forth on Schedule 6.15, neither the Medical Group nor the
Medical Business is bound by any oral or written agreement or contract which by
its terms prohibits or restricts it from conducting the Medical Group or the
Medical Business (or any material part thereof).
6.16. Disclosure.
Neither the Medical Group Transaction Documents (including the Exhibits
and Schedules attached thereto) nor any other document, certificate or written
statement furnished to the
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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
6.16, there have been no events or transactions, or information which has come
to the attention of the Medical Group, which, as they relate directly to the
Medical Group or the Medical Business, 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 Business.
6.17. Medical Practice.
The Medical Business includes the complete medical practices of Xxxx
Xxxxxxxx, M.D., Xxxxxx Xxxxxx, M.D., and Xxxxx Xxxxxxxxx, M.D., and, except for
those services described in Section 5.2(d), none of such physicians maintains
any medical practice or performs Medical Group Services independently of the
Medical Group.
SECTION 7. Representations and Warranties of the Management Company.
The Management Company represents and warrants to the Medical Group, as
of the Signature Date, as follows:
7.1. 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 and each of the Asset Purchase Agreement, the Restricted
Stock Agreements (as hereinafter defined), the Medical Equipment Master Lease
Agreement and the Stockholder
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Non-Competition Agreements (collectively, the "Management Company Transaction
Documents"), to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby.
7.2. Authority.
The execution, delivery and performance of this Agreement and the other
Management Company Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Management
Company. This Agreement and each Management Company Transaction Document has
been duly and validly executed and delivered by the Management Company, and this
Agreement and each such Management Company Transaction Document is the valid and
binding obligation of the Management Company, enforceable in accordance with its
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 or any other Management Company Transaction Document, nor the
consummation by the Management Company of the transactions contemplated hereby
or thereby, 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 Amended and Restated 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 shall have been obtained at or prior to
the date hereof) or (c) violate any law,
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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 7.2, 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 any other Management Transaction Document or the consummation by the
Management Company of the transactions contemplated hereby or thereby.
7.3. Capitalization.
(a) The total authorized capital of the Management Company consists of
25,000,000 shares of common stock, of which 11,462,459 shares are issued and
outstanding, and 9,233,049 shares of preferred stock, of which (i) 999,999
shares of Series A Convertible Preferred Stock, (ii) 2,000,001 shares of Series
B Convertible Preferred Stock, (iii) 254,999 shares of Series C Convertible
Preferred Stock, (iv) 188,072 shares of Series D Convertible Preferred Stock,
and (v) 741,667 shares of Series E Convertible Preferred Stock are all issued
and outstanding. Each of the outstanding shares of capital stock has been duly
and validly authorized and issued, is fully paid for and non-assessable, and was
issued in compliance with all applicable Federal and state securities laws.
(b) The Management Company has taken all action necessary or appropriate
to duly authorize the creation, issuance and sale of the common stock to be
issued hereunder. Such shares of common stock, when issued, sold and delivered,
as provided for herein and in the Restricted Stock Agreements, will be validly
issued, fully paid and nonassessable, with no personal liability attaching to
the ownership of the shares. The issuance of such
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shares of common stock will not violate any preemptive or similar right of any
person.
7.4. Financial Information.
Schedule 7.4 contains (a) the unaudited statements of assets, liabilities
and stockholders' equity of the Management Business as of the date set forth
therein (the "Management Company Balance Sheet"; and the date thereof being
referred to as the "Management Company Balance Sheet Date"), and the related
unaudited statements of revenue and expenses for the periods then ended
(including the notes thereto and other financial information included therein)
(collectively, the "Unaudited Financial Statements"). The Unaudited Financial
Statements (i) were prepared in accordance with the books and records of the
Management Business, and (ii) fairly present the financial position of the
Management Business as of the dates thereof.
7.5. Absence of Undisclosed Liabilities.
Except as set forth on Schedule 7.5, as of the Management Company Balance
Sheet Date, (a) the Management Business did not have any material liability of
any nature required to be disclosed on a balance sheet (matured or unmatured,
fixed or contingent, known or unknown) which was not provided for or disclosed
on the Management Company Balance Sheet, (b) all liability reserves established
by the Management Business on the Management Company Balance Sheet were adequate
and (c) 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 Management Company Balance Sheet.
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7.6. Absence of Changes.
Except as set forth on Schedule 7.6, since the Management Company Balance
Sheet Date, the Management Business 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, liabilities, operations, results of operations, earnings,
business or prospects of the Management Business;
(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
Management Business;
(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 Management Business
other than such items created or incurred in the ordinary course of the
Management Business and consistent with past practice;
(d) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Management Business outside the
ordinary course of the Management Business (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 material tangible or intangible asset of the Management Business except in
the ordinary course of the Management Business and consistent with past
practice;
(f) any cancellation of any debts or claims of, or any amendment,
termination or waiver of any rights of material value to, the Management
Business;
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(g) any change in the accounting methods or practices followed in
connection with the Management Business or any change in depreciation or
amortization policies or rates theretofore adopted;
(h) any other transaction relating to the Management Business other than
in the ordinary course of the Management Business and consistent with past
practice; or
(i) any agreement or understanding, whether in writing or otherwise, for
the Management Business to take any of the actions specified in items (a)
through (h) above.
7.7. Litigation, Etc.
Except as set forth on Schedule 7.7, there are no (a) actions, suits,
claims, investigations or legal or administrative or arbitration proceedings
pending or, to the best knowledge of the Management Company, threatened against
the Management Company or in connection with the Management Business, whether at
law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
which, if adversely determined, could have a material adverse effect on the
Management Company or (b) judgments, decrees, injunctions or orders of any
court, governmental department, commission, agency, instrumentality or
arbitrator against the Management Company its assets or affecting the Management
Business.
7.8. Compliance; Governmental Authorizations.
The Management Company and the Management Business shall have complied in
all material respects with all applicable material Federal, state, local or
foreign laws, ordinances, regulations and orders. The Management Company has all
Federal, state, local and foreign governmental licenses and permits necessary in
the conduct of the Management Business, the lack of
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which would have a material adverse effect on the Management Company's ability
to operate the Management Business after the date hereof on substantially the
same basis as presently operated, and such licenses and permits are in full
force and effect. To the best knowledge of the Management Company, none of such
licenses and permits shall be affected in any material respect by the
transactions contemplated hereby.
7.9. Employees.
Except as set forth on Schedule 7.9, the Management Company is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other compensation for any services performed by them
through the date hereof.
7.10. Insurance.
The Management Company has obtained such policies of insurance as are
usual and customary for businesses of the type conducted by the Management
Company. All such policies of insurance are valid and enforceable policies, and
all premiums with respect thereto are currently paid.
7.11. Burdensome Restrictions.
Except as set forth on Schedule 7.11, neither the Management Company nor
the Management Business is bound by any oral or written agreement or contract
which by its terms prohibits it from conducting the Management Company or the
Management Business (or any material part thereof).
7.12. Disclosure.
Neither the Management Company Transaction Documents (including the
Exhibits and Schedules attached thereto) nor any other document, certificate or
written statement furnished to the Medical Group by or on behalf of the
Management Company in
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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.
SECTION 8. Operations Committee.
8.1. Formation and Operation of the Operations Committee.
The Management Company and the Medical Group shall establish a committee
(the "Operations Committee") responsible for directing the Management Company in
connection with all of the management and administrative policies for the
overall operation of the Medical Group. The Management Company shall take its
directions from the Operations Committee and not from any officer, employee or
internal committee of the Management Company. The Operations Committee shall
consist of up to six (6) members. The Medical Group shall designate up to three
(3) members of the Operations Committee, each of whom shall be a physician in
the Medical Group, and the Management Company shall designate an equal number of
members of the Operations Committee, not to exceed three (3). The business of
the Operations Committee shall be conducted in accordance with the policies and
procedures described in Section 8.4 hereof.
8.2. Authoritative Functions of the Operations Committee.
The Operations Committee shall perform the following functions, and the
decisions of the Operations Committee with respect to such functions shall be
binding on the Management Company and the Medical Group:
(a) Approve the annual budgets for:
(i) Xxxxxxxx and Collections;
(ii) Medical Group Costs;
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(iii) Capital expenditures to be made by the Management
Company in fulfillment of its obligations
hereunder;
(iv) Management Company Operating Costs (which, in the
absence of approval by the Operations Committee,
shall be increased by five percent (5.0%) over the
total amount approved for the preceding period)
(b) Approve costs and expenses that exceed the Management Company
Operating Costs Budget.
(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:
(i) Xxxxxxxx
(ii) Claims submission
(iii) Collections of fees
(iv) Delinquent account collection policies
(v) Turnover of delinquent accounts to outside
collection agencies
(vi) Write-offs of account balances
(vii) Claim review requests
(viii) "Insurance only" and other courtesy write-off
policies
(ix) Lien account collection policies
(x) Student Athlete account policies
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(e) Approve the acquisition, replacement, relocation, or other
disposition of Medical Equipment and FF&E, approve the integration of new
technologies into the professional practice of the Medical Group as contemplated
by Section 3.13 hereof, and approve the renovation and expansion of any offices
of the Medical Group ("Tenant Improvements"); provided, however, that the
approval of the Management Company also shall be required prior to (i) the
acquisition of any Equipment (including any Medical Equipment, FF&E or other
items relating to or necessary in connection with the integration of new
technologies into the professional practice of the Medical Group) if and to the
extent that the aggregate cost of such items in any calendar year exceeds five
percent (5%) of the Management Fee for the prior year (or, with respect to the
first year of the Term, the projected Management Fee for such year), (ii) the
undertaking of any Tenant Improvements relating to patient care facilities that
cost more than $10,000 in the aggregate at any one of the Medical Group's office
locations in any calendar year, or (iii) the undertaking of any other Tenant
Improvements.
(f) Establish parameters and criteria for off-site storage of files and
records of the Medical Group.
8.3. Advisory Functions of the Operations Committee.
The Operations Committee shall review, evaluate and make recommendations
to the Medical Group with respect to the following matters:
(a) Identification of physician subspecialties required for the efficient
operation of the Medical Group; advice regarding all Medical Personnel
employment and recruitment contracts to be utilized by the Medical Group.
(b) Development of long-term strategic planning objectives for the
Medical Group.
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(c) Public relations, advertising, and other marketing of Medical Group
Services, including design of exterior signs.
(d) The establishment of fees for professional services and ancillary
services rendered by the Medical Group.
(e) Access and quality issues pertaining to ancillary services.
(f) Insurance limits and insurance coverage of the Medical Group and the
Management Company, as such coverage may relate to Medical Group operations and
activities.
(g) 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 8.3 are intended for the advice and guidance of the
Medical Group, and except as provided herein, the Operations Committee does not
have the power to bind the Medical Group. Where discretion with respect to any
matters is vested in the Medical Group under the terms of this Agreement, the
Medical Group shall have ultimate responsibility for the exercise of such
discretion, notwithstanding any recommendation of the Operations Committee. The
Medical Group shall, however, take such recommendations of the Operations
Committee into account in good faith in the exercise of such discretion.
Notwithstanding anything to the contrary in this Agreement, the Medical Group
shall have principal authority with respect to the establishment of policies and
procedures for professionally licensed personnel with respect to the following:
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(i) review and approval of hiring of professional staff;
(ii) medical policies at the offices where Medical Group
Services shall be rendered;
(iii) cleanliness of premises;
(iv) maintenance, registration and inspection of
professional equipment;
(v) recordkeeping as to patient medical records, billing
records, and such other records as may be required by law;
(vi) security, including drug storage, prescriptions pad
control, and confidentiality of patient records;
(vii) periodic audit of patient records and of professional
services to assure quality professional care on premises;
(viii) professional propriety of billing and advertising or
other representations; and
(ix) preparation and maintenance of written list of current
fees for standard services.
8.4. Committee Policies and Procedures.
(a) The Medical Group shall designate one of its members to act as
Chairman of the Committee, and the Management Company shall designate one of its
members to act as Vice Chairman. Each party may substitute or change its
designated Operations Committee members at any time upon notice to the other
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party, and any Operations Committee member may designate his or her own
substitute at any meeting without notice. Each member shall have one vote and
shall have the right to grant his or her proxy to another member of the
Operations Committee. The Chairman, if present, shall preside at all meetings of
the Operations Committee. In the absence of the designated Chairman, the Vice
Chairman shall preside. The only powers of the Chairman and the Vice Chairman
that differ from those of the other members of the Operations Committee shall be
to call and preside over meetings in accordance with this Section 8.4.
(b) The Operations Committee may hold meetings without call or formal
notice at such times and places as a quorum of its members may from time to time
determine. A meeting of the Operations Committee also may be called by at least
two (2) members of the Operations Committee or by the Chairman or Vice Chairman
thereof upon at least three (3) days' written notice to the other members of the
Operations Committee. Such notice requirement shall be deemed waived with
respect to any member of the Operations Committee who attends such meeting.
Meetings may be held in person or by telephone. The Operations Committee also
may act by written consent as provided in Section 8.4(c). Minutes shall be kept
of all formal actions taken by the Operations Committee.
(c) No action of the Operations Committee shall be effective unless
authorized by the vote of a majority of the members of the entire Operations
Committee. A quorum of the Operations Committee shall be a majority of the
members of the Operations Committee, in person, by telephone, or by proxy, and a
quorum must remain for the duration of the meeting. The Operations Committee may
establish such procedures to act by written consent, without a meeting, as the
Operations Committee determines are advisable, provided that all of the members
(in person or by proxy) must sign any written consent. In the event a majority
of the entire Operations Committee does not agree with
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respect to a particular issue presented to, or request made of, the Operations
Committee, then no action shall be taken with respect to such issue or question
and the status quo shall be maintained.
SECTION 9. Obligations of the Medical Group.
The Medical Group shall perform the following obligations during the
Term:
9.1. Compliance with Laws.
The Medical Group shall 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, Medicare and Medicaid
regulations. The Medical Group shall verify, with the assistance of the
Management Company, that each physician and other Medical Personnel associated
with the Medical Group for the purpose of providing medical care to patients of
the Medical Group is appropriately licensed. The Medical Group shall monitor the
quality of medical care practiced by physicians and other health care personnel
associated with the Medical Group. In the event that any disciplinary actions or
medical malpractice actions are initiated against any such physician by any
payor, patient, state or Federal regulatory agency or any other person or
entity, the Medical Group shall immediately inform the Management Company of
such action and its underlying facts and circumstances.
9.2. Use of Facility.
The Medical Group shall use and occupy any Facility (as defined below)
exclusively for the practice of medicine, and shall comply with all applicable
Federal, state and local rules, ordinances and standards of medical care. The
medical practice or practices conducted at any Facility described in clause (i)
of the definition of the term "Facility" shall be conducted solely
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by Medical Personnel associated with the Medical Group, and no other physician
or medical practitioner shall be permitted to use or occupy any Facility
described in clause (i) below without the prior written consent of the
Management Company, which consent shall not be unreasonably withheld or delayed.
The term "Facility" shall mean (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.
9.3. Choice of Braces, Splints, Appliances, Medical Supplies, and Allografts.
The Medical Group shall 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.
9.4. Choice of Radiologists, Anesthesiologists, Hospitals, Physical Therapy,
MRI, and Other Medical Professionals and Facilities.
The Medical Group shall have exclusive control over the choice of
specific physicians and facilities to be utilized by the Medical Group with
respect to radiology, anesthesiology, hospitals, physical therapy, MRI, and
other medical professionals and facilities; provided, however, that the
foregoing shall not be considered New Ancillary Services or New Medical Offices,
as the case may be, unless the parties have agreed thereto in accordance with
Section 3.4(b) or 3.2(b), as the case may be.
9.5. Insurability.
The Medical Group shall 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
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days any Medical Personnel who is not insurable or who loses his or her
malpractice insurance eligibility. The Medical Group shall 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 shall require all Medical Personnel to participate in
an on-going risk management program.
9.6. Medicare.
The Medical Group shall cause all physicians to be participating
providers and accept assignment under Medicare.
9.7. Billing.
The Medical Group's Medical Personnel shall be responsible for providing
the appropriate current CPT4 coding with respect to the fee tickets prepared by
such Medical Personnel.
9.8. Medical Personnel Hiring.
The Medical Group shall 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 shall consult with the Medical Group regarding such
matters.
9.9. Continuing Education.
The Medical Group and its Medical Personnel shall be solely responsible
for ongoing membership in professional associations and continuing professional
education. The Medical Group shall ensure that its Medical Personnel participate
in such continuing professional education as is necessary for such
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physician or professional to remain current in his or her field of medical
practice.
9.10. Clinical Research.
The Medical Group shall have the ultimate control over and responsibility
for any clinical research program pertaining to patients of the Medical Group.
This shall include but not be limited to research personnel interviewing,
hiring, termination, compensation, day-to-day supervision, and assignment of
responsibilities and projects. However, the Medical Group will cooperate with
and take direction from the Management Company in its nationwide efforts to
provide an effective disease management information system and outcome studies
programs.
SECTION 10. Certain Covenants.
10.1. Change of Control.
During the Term of this Agreement, the Medical Group shall not enter into
any single transaction (or group of related 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 in any such case the effect would be to transfer a majority of
the ownership interest in the Medical Group to any physician not actively
practicing medicine, without the prior written consent of the Management
Company, which consent shall not be unreasonably withheld.
10.2. 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
shall bear the following legend:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS ON TRANSFER CONTAINED IN THE MANAGEMENT
SERVICES AGREEMENT EFFECTIVE AS OF NOVEMBER 1, 1997, BETWEEN
NEW JERSEY ORTHOPEDIC ASSOCIATES, P.A., A NEW JERSEY
PROFESSIONAL ASSOCIATION, AND BMJ MEDICAL MANAGEMENT, INC., A
DELAWARE CORPORATION."
Nothing herein shall be construed as requiring the Medical Group to issue any
certificate or other evidence representing an equity interest in the Medical
Group, if such has not been issued prior to the date hereof.
SECTION 11. Records.
11.1. Medical Records.
Upon termination of this Agreement, the Medical Group shall retain all
patient medical records maintained by the Medical Group or the Management
Company in the name of the Medical Group.
11.2. Management Business Records.
All books and records relating in any way to the operation of the
Management Business which are not patient medical records shall at all times be
the property of the Management Company. The Management Company shall maintain
custody of such records, and the Medical Group shall, upon its written request,
be entitled to copies of any such records relating to the Management Services
performed by the Management Company.
11.3. Access to Records Following Termination.
Following the termination of this Agreement, the Medical Group shall
grant (to the extent permitted by law) to the Management Company, for the
purpose of preparing for any actual or anticipated legal proceeding or for any
other reasonable
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purpose, reasonable access (which shall include making photocopies) to the
patient medical records described in Section 11.1 hereof and any other pertinent
information regarding the Medical Group during the Term. Prior to accessing such
patient medical records, the Management Company shall obtain any required
patient authorization.
Following the termination of this Agreement, the Management Company shall
provide to the Medical Group, promptly upon the Medical Group's written request,
photocopies of the Management Business records described in Section 11.2 hereof,
and shall grant to the Medical Group, for the purpose of preparing for any
actual or anticipated legal proceeding or for any other reasonable purpose, any
other pertinent information regarding the Management Company during the Term.
SECTION 12. Insurance and Indemnity.
12.1. Professional Liability Insurance.
During the Term, the Management Company shall, 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 $5,000,000 per claim and with aggregate policy limits of not less than
$7,000,000 (or such higher amounts as may be necessary to comply with any
regulatory requirement and/or contractual requirement to which such Medical
Personnel or the Medical Group may be subject) covering the Medical Group and
each of the Medical Personnel of the Medical Group, including coverage for
claims made after the Commencement 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 in the event it is sued as a result of an act
or omission of an employee of the Medical Group.
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The Management Company shall pay the premiums for such general and medical
malpractice liability coverage, which payments shall be considered Management
Company Operating Costs under this Agreement, subject to recoupment by the
Management Company under Section 5 hereof. The Management Company shall be
designated as an additional insured under all such insurance policies.
12.2. Life Insurance.
The Management Company may, at its option, obtain a $500,000 life
insurance policy for each duly licensed physician partner in or equity owner of
the Medical Group. The Medical Group shall, and shall cause each such partner in
or equity owner of the Medical Group to, cooperate with the Management Company
in the procurement of such policies. The Management Company shall be designated
as the beneficiary under any such policies. The premiums for such policies shall
be paid by the Management Company and shall not be included as Management
Company Operating Costs or otherwise charged to the Medical Group.
12.3. Indemnification by Medical Group.
The Medical Group shall 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 by the Medical Group or OANJ, prior to the
Commencement Date, (ii) any other acts or omissions of the Medical Group, OANJ
or their respective Medical Personnel, including without limitation any such
acts or omissions that occurred prior to the Commencement Date, or (iii) any
breach of or failure to perform
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any obligation under this Agreement or the Medical Group Transaction Documents
(which, for purposes hereof, shall be deemed to include the Restricted Stock
Agreement to be signed by the Management Company and each partner, stockholder
or employee of the Medical Group receiving stock of the Management Company, in
the form of Exhibit C attached hereto (the "Restricted Stock Agreement")) by the
Medical Group and/or the Medical Personnel and/or their respective agents and/or
subcontractors (other than the Management Company) during the Term.
12.4. Indemnification by Management Company.
The Management Company shall 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 or the Management Company
Transaction Documents by the Management Company and/or its agents, employees
and/or subcontractors (other than the Medical Group) during the Term.
SECTION 13. Termination.
13.1. 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
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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) in the event the Management Company shall default in any material respect in
the performance of any duty or obligation imposed upon it by this Agreement and
the Management Company shall not have 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) in
the event that any of the representations and warranties made by the Management
Company in Section 7 is untrue or misleading in any material respect, provided
that the Medical Group shall have previously given written notice to the
Management Company describing in reasonable detail the nature of the item in
question and the Management Company shall not have cured such matter within
thirty (30) days of such notice.
13.2. 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) in the event the Medical
Group shall default in any material respect in the performance of any duty or
obligation imposed upon it by this Agreement and the Medical Group shall not
have 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) in the event that any of the
representations and warranties made by the Medical Group in Section 6 is untrue
or misleading in any material respect, provided that the Management Company
shall have previously given written notice to the Medical Group describing in
reasonable
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detail the nature of the item in question and the Medical Group shall not have
cured such matter within thirty (30) days of such notice, or (d) in the event
the Medical Group is excluded from the Medicaid or Medicare program for any
reason. The Management Company hereby acknowledges and agrees that neither the
death nor the permanent disability of any of the Medical Group's physicians
shall constitute grounds for termination of this Agreement by the Management
Company.
13.3. Termination by Medical Group or Management Company.
The Medical Group and the Management Company shall each have the right to
terminate this Agreement effective immediately by giving written notice of
termination to the other party pursuant to Section 29 of this Agreement.
13.4. Effect of Termination.
Upon the termination of this Agreement in accordance with the terms
hereof, neither party hereto shall have any further obligation or liability to
the other party hereunder, except as provided in Sections 3.16(c), 13.5, 28 and
this Section 13.4, and except to pay in full and satisfy any and all outstanding
obligations of the parties accruing through the effective date of termination,
including, without limitation, payment by the Medical Group of any amounts owed
to the Management Company pursuant to Section 5.3 hereof.
13.5. Repurchase of Assets.
Promptly following termination of this Agreement for any reason, the
Management Company shall sell, transfer, convey, and assign to the Medical
Group, and the Medical Group shall purchase, assume, and accept from the
Management Company, at such price and upon such terms as may be agreed upon by
the parties (or, if the parties are unable to agree, at fair market value,
determined in the manner set forth below) all of the following
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items which are used in connection with the professional practice and related
activities of the Medical Group and which, in the case of items (i), (ii), (iii)
and (iv), are physically located in any of the offices of the Medical Group,
subject to any required consent from any third party having an interest therein
and any lease agreement and lien granted thereunder:
(i) the Medical Equipment owned by the Management Company;
(ii) the furniture, furnishings, trade fixtures, and office
equipment owned by the Management Company;
(iii) the Management Company's rights and interests in any
equipment leased by the Management Company, subject to the Medical
Group's assumption of the obligations accruing thereunder after the
date of termination of this Agreement;
(iv) the supplies owned by the Management Company;
(v) the Management Company's rights and interests under all
of the Office Leases, subject to the Medical Group's assumption of the
obligations accruing thereunder after the date of termination of this
Agreement; and
(vi) the deposits of the Management Company relating to the
Medical Group.
The items described in clauses (i), (ii), and (iv) above shall be transferred
pursuant to this Section 13.5 free and clear of any liens. Fair market value of
the above described assets shall be determined by an independent appraiser
mutually agreed upon by the Medical Group and the Management Company; provided,
however, that if the Medical Group and the Management Company are unable to
agree upon such an appraiser, each of the parties shall select
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an appraiser and the two appraisers thus selected shall select a third
appraiser. All of the appraisers shall appraise the assets, and for purposes of
determining the purchase price, the highest and lowest appraisals shall be
disregarded, and the remaining appraisal shall be used. Notwithstanding anything
contained herein to the contrary, the consideration payable by the Medical Group
to the Management Company under this Section 13.5 shall be reduced by the
aggregate amount, if any, payable by the Management Company to the Stockholders
(as such term is defined in the Restricted Stock Agreements).
13.6. Medical Group's Rescission Option
(a) The Medical Group may, in its sole discretion at any time during the
period beginning October 1, 2004 and ending November 1, 2004 (such 31-day period
being referred to herein as the "Rescission Period"), rescind (the "Rescission
Option") this Agreement and disengage itself from its obligations under this
Agreement. The Medical Group may exercise its Rescission Option during the
Rescission Period by giving written notice (the "Rescission Notice") to the
Management Company and by complying with the other provisions contained in this
Section 13.6. The effective date (the "Rescission Effective Date") of the
rescission shall be that date which is 30 days after the date of the Rescission
Notice; provided that such date shall not be prior to the seventh anniversary of
the Commencement Date. The Medical Group must comply with the provisions set
forth in this Section 13.6 in order to effectively exercise its Rescission
Option.
(b) Effect of Rescission. In the event that the Medical Group exercises
its Rescission Option pursuant to this Section 13.6, the procedures set forth in
Section 13.4 above shall apply.
(c) Repurchase of Assets. Within 30 days following the Rescission
Effective Date the Management Company
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shall, subject to the prior receipt of any required landlord and third party
consents, transfer, convey and assign to the Medical Group, and the Medical
Group shall purchase, assume and accept from the Management Company, the
property described in Section 13.5 above according to the provisions set forth
in such Section.
(d) Repayment of Consideration. In the event that the Medical Group
elects to exercise its Rescission Option, the Medical Group shall cause each
physician receiving capital stock of the Management Company as of the date
hereof to, and each such physician shall, deliver to the Management Company, on
or before the Rescission Effective Date, stock certificates representing that
number of shares of common stock of the Management Company as is set forth
opposite such physician's name on Annex A attached hereto, which shares were
issued to each such physician pursuant to a Restricted Stock Agreement.
Certificates delivered pursuant to this Section 13.6(d) shall be duly endorsed
for transfer to the Management Company. In the event that any portion of the
shares to be returned pursuant to this paragraph shall have been previously
disposed of by any such physician, the Fair Market Value (as defined in the
Restricted Stock Agreement) of such portion, determined as of the Rescission
Effective Date, shall be payable by each such physician to the Management
Company in cash, by cashier's or certified check or by wire transfer of funds
delivered to a depository institution designated by the Management Company.
Notwithstanding anything contained herein to the contrary, the Medical Group
will not be obligated to return to the Management Company any of the cash
consideration received by the Medical Group pursuant to the Asset Purchase
Agreement, except as set forth in paragraph (c) above.
(e) Repayment of Management Fee. Notwithstanding anything contained
herein to the contrary, in the event that the Medical Group exercises its
Rescission Option under this Section 13.6, the Management Company shall not be
required to refund to the Medical Group any portion of the Management Fees paid,
or due
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to be paid, by the Medical Group under the terms of this Agreement for the
period ending on the Rescission Effective Date.
(f) Waiver of Rescission Option. Notwithstanding anything contained
herein to the contrary, the parties hereto expressly agree and acknowledge that
if the Medical Group shall fail to deliver the Rescission Notice prior to the
end of the Rescission Period, then the Medical Group shall be deemed to have
expressly and irrevocably waived its right to rescind this Agreement and to
disengage itself from its obligations hereunder.
SECTION 14. Non-Disclosure of Confidential Information.
14.1. Non-Disclosure.
(a) Neither the Management Company nor the Medical Group, nor their
respective employees, stockholders, consultants or agents shall, 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 shall 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 shall 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 Section 14, the term "Confidential or
Proprietary Information" means all information known to a party hereto, or to
any of its employees,
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stockholders, officers, directors or consultants, which relates to the
Transaction Documents, patient medical and billing records, trade secrets, books
and records, supplies, pricing and cost information, marketing plans, strategies
and forecasts. Nothing contained herein shall prevent a party hereto from
furnishing Confidential or Proprietary Information pursuant to a direct order of
a court of competent jurisdiction.
SECTION 15. Non-Competition.
In consideration of the premises contained herein and the consideration
to be received hereunder, and in consideration of and as an inducement to the
Management Company to consummate the transactions contemplated hereby, the
Medical Group hereby (a) agrees to the Non-Competition covenants attached hereto
as Schedule VII and (b) agrees to require each of the physicians receiving
capital stock of the Management Company as of the date hereof, and each person
who after the date hereof becomes entitled to receive stock (or options to
receive stock) in the Management Company in connection with his or her
performance of services for the Medical Group, to execute a Stockholder
Non-Competition Agreement substantially in the form attached hereto as Exhibit
D. Notwithstanding the foregoing, the noncompetition covenants attached hereto
as Schedule VII shall have no further force or effect following the termination
or rescission of this Agreement by the Medical Group pursuant to Section 13.1,
13.3 or 13.6, respectively.
SECTION 16. Transfer of Management Services.
Each of the stockholders of the Medical Group acknowledges that in the
event such physician elects to practice medicine separately from the Medical
Group, such physician shall enter into a management services agreement with the
Management Company pursuant to which the Management Company will provide
services substantially similar to those set forth in this Agreement for such
physician's new medical practice, and such
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physician shall pay the Management Company a fee equal to ten percent of the
Collections of such new medical practice as compensation therefor.
SECTION 17. Obligations of the Management Company.
17.1. No Practice of Medicine.
The Medical Group and the Management Company acknowledge that certain
federal and state statutes severely restrict or prohibit the Management Company
from providing medical services. Accordingly, during the Term, the Management
Company shall not provide or otherwise engage in services or activities which
constitute the practice of medicine, as defined in applicable state or Federal
law, except in compliance therewith.
17.2. No Interference with Professional Judgment.
Without in any way limiting Section 17.1 hereof, during the Term, the
Management Company shall not interfere with the exercise of professional
judgment by any physician or other licensed health care professional who is a
partner, employee, or contractor of the Medical Group, nor shall the Management
Company interfere with, control, direct, or supervise any physician or other
licensed health care professional in connection with the provision of Medical
Group Services. The foregoing shall not preclude the Management Company from
assisting in the development of professional protocols and monitoring compliance
with policies and procedures that have been instituted in accordance with this
Agreement.
17.3. Covenant to Repurchase Common Stock.
In the event the Management Company has not consummated a public offering
of its common stock under the Securities Act of 1933, as amended, by May 1,
1998, the Management Company shall
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purchase from each physician receiving shares of common stock of the Management
Company pursuant to Section 4 hereof, and each such physician shall sell to the
Management Company, all of such shares of common stock owned by such physician
on such date. The purchase price payable by the Management Company shall equal
$6.50 per share, which amount shall be payable to each such physician on May 4,
1998, by certified or cashier's check or wire transfer of funds upon receipt of
the certificate(s) representing such purchased shares, duly endorsed for
transfer to the Management Company.
17.4. Market Development Limitation.
(a) The Management Company shall not at any time during the period
beginning on the Commencement Date and ending on November 1, 1998 (the
"Exclusivity Period"), without the prior written consent of the Medical Group
(which consent shall not be unreasonably withheld), enter into a management
services agreement substantially similar to this Agreement with any orthopedic
surgeon or group of orthopedic surgeons that practices in the Medical Group
Service Area (as hereinafter defined); provided, however, that notwithstanding
the foregoing restrictions, the Management Company may, without the consent of
the Medical Group, provide contract management services to an independent
physician association. In the event that the Medical Group has assisted the
Management Company to enter into management services agreements pursuant to
which the Management Company provides management services to at least 12
physicians practicing in the Medical Group Service Area (not including any
physician stockholders or employees of the Medical Group) by November 1, 2001,
and in connection therewith the Medical Group does earn 30,000 shares of common
stock of the Management Company pursuant to Schedule III hereof, then the
Exclusivity Period shall extend throughout the Term; provided that if at any
time during the Term the total number of physicians to which the Management
Company provides management services in the Medical
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Group Service Area decreases to less than fifteen (15), the Exclusivity Period
shall terminate as of such date. As used herein, the "Medical Group Service
Area" means and includes the physical land area within a 25-mile radius of the
Medical Group's office set forth in Section 3.2(a) hereof.
(b) Notwithstanding the foregoing, in the event that the Management
Company acquires (the "Acquisition") a company (the "Acquired Company") that
provides management services to orthopedic surgeons (the "Acquired Physicians")
practicing medicine in the Exclusivity Area, the Management Company may enter
into management services agreements or amendments to such existing agreements
with any Acquired Physician, and the Management Company may provide to such
Acquired Physicians management services substantially similar to those provided
to the Medical Group hereunder; provided, however, that the Management Company
shall not, and shall not permit the Acquired Company to, at any time during the
Exclusivity Period solicit any additional orthopedic surgeons in the Medical
Group Service Area after consummation of such Acquisition.
SECTION 18. Assignment.
The Management Company shall have the right to assign its rights and
delegate its obligations hereunder to any affiliate and to assign its rights
hereunder for security purposes or as collateral to any lending institution from
which the Management Company or any affiliate obtains financing. Except as set
forth in the preceding sentence, neither the Management Company nor the Medical
Group shall 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, that after the consummation of an initial public
offering of the Management Company's common stock, the Medical Group's consent
shall 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
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stock or assets of the Management Company or the merger, consolidation, or
reorganization of the Management Company.
SECTION 19. Notices.
All notices, requests, consents and other communications hereunder shall
be in writing and shall 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:
BMJ Medical Management, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx, M.D., President
Telecopier: (000) 000-0000;
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Held, Esq.
Telecopier: (000) 000-0000; and
If to the Medical Group:
New Jersey Orthopedic Associates, P.A.
Xxxxxxxx Xxxxxx Xxxxx
XXXX 0
0000 Xxxxx 0 Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxxxx, M.D.
Telecopier: (000) 000-0000;
with a copy to:
Brach, Eichler, Xxxxxxxxx, Silver, Xxxxxxxxx,
Hammer & Gladstone
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000;
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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 shall 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.
SECTION 20. Benefits of Agreement.
This Agreement shall bind and inure to the benefit of any successors to
or permitted assigns of the Management Company and the Medical Group.
SECTION 21. Severability.
It is the desire and intent of the parties hereto 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 shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall 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 shall, 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.
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SECTION 22. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New Jersey 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.
SECTION 23. Headings.
Section headings are used for convenience only and shall in no way affect
the construction of this Agreement.
SECTION 24. 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.
SECTION 25. Attorneys' Fees.
In the event of any dispute or controversy arising out of or relating to
this Agreement, the prevailing party shall 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.
SECTION 26. Counterparts.
This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such counterparts together
shall constitute but one agreement.
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SECTION 27. 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 shall not operate or be construed as a waiver of
any subsequent breach.
SECTION 28. Survival of Termination.
Notwithstanding anything contained herein to the contrary, Sections
3.3(f), 11, 12.3, 12.4, 13, 14, 15, 19, 20, 21, 22, 24, 25 and this Section 28
shall survive any expiration or termination of this Agreement.
SECTION 29. Contract Modification for Prospective Legal Events.
In the event 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 shall amend
this Agreement as necessary to avoid such violation. To the maximum extent
possible, any such amendment shall preserve the underlying economic and
financial arrangements between the Medical Group and the Management Company. If
an amendment is not possible, either party shall have the right to terminate
this Agreement. Any dispute between the parties hereto arising under this
Section 29 with respect to whether this Agreement violates any state or Federal
laws or regulations shall be jointly submitted by the parties and finally
settled by binding arbitration in New Jersey, pursuant to the arbitration rules
of the National Health Lawyers Association Alternative Dispute Resolution
Service. Arbitration shall take place before one arbitrator appointed in
accordance with such rules. The governing law of the arbitration shall be the
law set forth in
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Section 22. Any decision rendered by the arbitrator shall clearly set forth the
factual and legal basis for such decision. The decision rendered by the
arbitrator shall be non-appealable and enforceable in any court having
jurisdiction thereof. The administrative costs of the arbitration and the
arbitrator fees shall be equally borne by the parties. Each party shall pay its
own legal costs and fees in connection with such arbitration.
* * * *
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IN WITNESS WHEREOF, the parties have duly executed this Management
Services Agreement as of the date first above written.
NEW JERSEY ORTHOPEDIC ASSOCIATES, P.A.
By:
-----------------------------------
Name:
Title:
BMJ MEDICAL MANAGEMENT, INC.
By:
-----------------------------------
Name:
Title:
Acknowledged and Agreed to
(as to Sections 4, 6.17, 9.7, 12.2,
13.4(b), 13.6, 14, 15 and 16):
------------------------------
Xxxx Xxxxxxxx, M.D.
------------------------------
Xxxxxx Xxxxxx, M.D.
------------------------------
Xxxxx Xxxxxxxxx, M.D.
