Exhibit 10.3
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (this "Agreement") is made as of the
19th day of December, 1997 by and between Physician Healthcare Plan of New
Jersey, Inc. ("PHPNJ") and Medigroup of New Jersey, Inc. ("Medigroup").
Explanatory Statement
A. PHPNJ and Medigroup entered into a Management Services Agreement (the
"Original Agreement") dated as of June 26, 1997 pursuant to which Medigroup
agreed to provide certain management services to PHPNJ upon the terms and
conditions described therein, which agreement expires on the Closing Date (as
defined in the Original Agreement).
B. The parties desire to enter into a new agreement pursuant to which
Medigroup will provide certain management services to PHPNJ subsequent to the
Closing Date.
NOW, THEREFORE, in consideration of the Explanatory Statement, which is
deemed a substantive part of this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Services to be Provided. Medigroup shall provide the following services
to PHPNJ, or on PHPNJ's behalf, during the term of this Agreement:
(A) Accounting/Books and Records/Financial Reporting. Medigroup shall
continue to maintain PHPNJ's accounting system and maintain all books and
records with respect to PHPNJ's business, and shall prepare and file on PHPNJ's
behalf all financial reports due during or relating to calendar year 1998 with
any authority or body which requires the filing of such reports; provided
however, that such services shall not include any reporting to the Securities
and Exchange Commission or any related Federal and state reporting required
under the securities laws of the United States or the State of New Jersey.
(B) Collections. Medigroup shall use its best efforts to collect all
monies due PHPNJ and shall deposit the same in the Operating Account
(hereinafter defined).
(C) Licenses. Medigroup shall maintain all licenses, certifications
and permits required by applicable law and regulation in connection with the
management and operation of PHPNJ's business.
(D) Operating Account. Medigroup shall maintain, in the name of
PHPNJ, the operating account with Mellon Bank, N.A. into which Medigroup shall
deposit all monies received for PHPNJ. Medigroup shall not commingle with its
own funds any monies received for PHPNJ. PHPNJ agrees that Medigroup shall have
access to and the right to make withdrawals from the Operating Account
and PHPNJ shall maintain any necessary power of attorney, signature card or
other instrument. PHPNJ authorizes Medigroup to make such endorsements on any
checks, drafts or other instruments to be deposited in the Operating Account as
is necessary to permit their collection. PHPNJ authorizes Medigroup to pay when
due from the Operating Account all amounts payable by PHPNJ. Notwithstanding the
foregoing, Medigroup's authority to withdraw any amounts from the Operating
Account shall cease immediately upon the termination or expiration of this
Agreement, and upon such termination or expiration, Medigroup shall promptly
take all actions required to transfer all amounts on deposit in the Operating
Account in accordance with written instructions provided by PHPNJ.
(E) Financial Statements. Medigroup shall deliver to PHPNJ on a
monthly basis a balance sheet, a profit and loss statement and a disbursement
schedule.
(F) Coordination with PHPNJ's Designee. Medigroup shall use its best
efforts to coordinate its activities with a designee appointed by PHPNJ. As of
the date hereof, such designee is Xxxxx Xxxxxx, whose address is set forth in
Section 10(D).
(G) Reinsurance. Medigroup shall maintain and comply with the terms
of reinsurance arrangements obtained by PHPNJ.
2. Term of Agreement. The term of this Agreement shall commence on the
Closing Date, and shall end on March 1, 1999, unless earlier terminated in
accordance with Section 9 of this Agreement.
3. Payment for Services. During the term of this Agreement, PHPNJ shall
pay Medigroup a management fee (the "Management Fee") of Seventy-Five Dollars
($75) for each hour of time spent by Medigroup personnel or subcontractors in
performing the services required under this Agreement. The Management Fee shall
be paid monthly within ten (10) business days after the receipt of an invoice
therefor.
4. Invoices; Right to Audit. Medigroup shall provide PHPNJ with an invoice
by the tenth (10th) day of each month, indicating in reasonable detail all
services provided during the prior month pursuant to Section 1 of this
Agreement. In no event shall Medigroup charge PHPNJ for personnel time or
overhead utilized in connection with payment of claims. Medigroup shall maintain
records to evidence the performance of such services, and shall calculate the
Management Fee due in good faith. PHPNJ shall have the right to audit
Medigroup's books and records which contain information relating to the
performance of services hereunder, to determine whether services have been
properly performed and the time required to perform such services. In the event
that such audit reveals that Medigroup has overcharged PHPNJ under this
Agreement, Medigroup will, promptly upon written notice from PHPNJ which shall
include the results of the audit, remit to PHPNJ such amount that was
overcharged or PHPNJ shall be entitled to offset such amount against any other
amount due from PHPNJ to Medigroup for services hereunder.
5. Compliance with Law. Each party shall comply with all applicable laws
and governmental rules and regulations.
6. Governing Law. The execution, validity, interpretation and enforcement
of this agreement shall be governed by the laws of the State of New Jersey.
7. Indemnification. Each party shall indemnify and hold harmless the other
party, its affiliates, successors, assigns, directors, officers, employees,
independent contractors and agents, from and against any and all liabilities,
damages, actions, suits, proceedings, claims, demands, losses, costs and
expenses (including reasonable attorneys' fees) that shall or may arise,
directly or indirectly, out of or in connection with any breach or inaccuracy of
any representation, warranty or covenant hereunder, misfeasance, malfeasance,
negligent or intentional act or omissions (collectively, the "Acts") of the
indemnifying party, its affiliates, successors, assigns, officers, directors,
employees, independent contractors or agents in connection with this Agreement;
provided, however, that PHPNJ shall not be liable for or obligated to indemnify
and hold harmless Medigroup with respect to Acts of Medigroup, its affiliates,
successors, assigns, officers, directors, employees, independent contractors or
agents arising from Medigroup's assumption and performance of the Contracts (as
such term is defined in the Agreement dated as of June 26, 1997 between PHPNJ
and Medigroup, as amended to date (the "Definitive Agreement")), and provided,
further, that Medigroup shall not be liable for or obligated to indemnify and
hold harmless PHPNJ with respect to Acts of PHPNJ, its affiliates, successors,
assigns, officers, directors, employees, independent contractors or agents from
and after the Closing Date.
8. Access. During the term of this Agreement, each party shall have
reasonable access to the other party's facilities, personnel, contractors,
consultants, books records, documents and other information in connection with
this Agreement.
9. Termination. This Agreement may be terminated prior to the expiration
of the term set forth in Section 2 upon the occurrence of the following:
(A) The mutual written agreement of the parties.
(B) The failure of Medigroup to perform or observe any of its
obligations under this Agreement, provided that PHPNJ shall give Medigroup
written notice setting forth the nature of the default and Medigroup shall fail
to cure such default within thirty (30) days after receipt of such notice,
whereupon PHPNJ shall be entitled to terminate this Agreement and have all
rights and remedies available at law or in equity.
(C) The failure of PHPNJ to pay or authorize payment of the
Management Fee when due hereunder or, in Medigroup's reasonable good faith
judgment, PHPNJ puts significant barriers in the way of Medigroup assuming or
performing any of its obligations under this Agreement, provided that Medigroup
shall give PHPNJ written notice setting forth the nature of the default and
PHPNJ shall fail to cure the default within thirty (30) days after receipt of
such notice, whereupon Medigroup shall be entitled to terminate this Agreement
and have all rights and remedies available at law or in equity.
10. General Provisions.
(A) Assignment. This Agreement shall be binding upon and inure to the
benefit
of the parties hereto and their respective successors and assigns. Neither party
shall assign this Agreement without the other's prior written consent, which
consent shall not be unreasonably withheld; provided, however, that Medigroup
may, without such prior consent of the other party, assign this Agreement to its
parent, a subsidiary or an affiliate, provided such entity has experience in the
operation and management of HMOs.
(B) Independent Contractors. Nothing in the Agreement shall affect
the separate identity of PHPNJ and Medigroup and their relationship to each
other as independent contractors. Other than as provided in this agreement or
other written agreement, nothing contained in this agreement is intended to
cause either party to be the agent of the other or as limiting in any manner the
parties in the conduct of their respective businesses, ventures or activities.
(C) Entire Agreement. This Agreement and the Definitive Agreement
contain all the terms and conditions agreed upon by the parties hereto with
respect to the matters contained herein and constitute the entire understanding
of the parties. They supersede all other agreements, oral or otherwise,
regarding the subject matter hereof.
(D) Notice. Any notice required to be given pursuant to the terms and
provisions of this Agreement shall be in writing and shall be sent by certified
mail, return receipt requested, postage prepaid:
If to PHPNJ:
C/O The Pace Group, Inc.
00000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx
With copies to:
Xxxxxx X. Xxxxxxxx, M.D., Chairman
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
And
Ober, Kaler, Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. XxXxxxxx, Esquire
If to Medigroup:
Medigroup of New Jersey, Inc.
0 Xxxx Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxx Xxxxxxxxx or Xxxx Xxxxxxx
(E) Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provision of this Agreement.
(F) Waiver. The waiver (which must be in writing) by either party of
any of the terms or provisions of this Agreement shall not be deemed to
constitute a waiver of any of its other terms or provisions. No waiver of a
provision of this Agreement shall be deemed to constitute a continuing waiver
thereof unless otherwise expressly provided herein.
(G) Amendment. This Agreement may be amended, modified or superseded
only by an instrument signed by each of the parties hereto.
(H) Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
(I) Payment of Claims. For so long as PHPNJ is required to pay claims
incurred prior to the Closing Date, as provided in the Agreement between PHPNJ
and Medigroup dated as of June 26, 1997, as amended as of November 26, 1997 (the
"Definitive Agreement"), Medigroup shall pay on PHPNJ's behalf, in accordance
with the provisions of Section 1.9 of the Definitive Agreement, all claims
arising from services provided under the Contracts prior to the Closing Date,
provided that such claims are properly made in accordance with PHPNJ's policies,
and PHPNJ shall reimburse Medigroup as provided in Section 1.9 of the Definitive
Agreement for claims properly paid.
(J) Good Faith Standard; Further Assurances. Each party shall perform
all of its duties and obligations hereunder in good faith. Each party agrees
that upon the reasonable request of the other party and without further
consideration, such party will execute and deliver to the other party such
documents and further assurances and will take such other actions as the other
party may reasonably request in order to carry out the purposes and intention of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
MEDIGROUP OF NEW JERSEY, INC. PHYSICIAN HEALTHCARE PLAN
OF NEW JERSEY, INC.
By: /s/ Xxxxx X. Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx, M.D.
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Xxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxxxx, M.D.
Executive Vice President Chairman
